CDN Market Grows to 28 Providers

There are now 28 different providers offering content delivery network (CDN) services, up from just 15 a year ago.

Rich Miller

September 24, 2007

3 Min Read
Data Center Knowledge logo

There are now 28 different providers offering content delivery network (CDN) services, up from just 15 a year ago, according to Dan Rayburn at the Business of Video, who provides a list of links to all 28. Dan says two or three more companies may enter the space in 2008, and a bunch of players in the CDN market will have significant announcements in the next few weeks. As we've noted before, the expansion of the CDN market has had a positive impact on demand for data center space, as CDN providers typically need colo space in multiple major markets, as demonstrated by EdgeCast's recent expansion at Switch & Data (SDXC).

But will all these providers survive? Or is the growth in the CDN provider market getting ahead of the online video market? Rayburn notes that many of the CDN services differ in their market niche and technology, and predicts short-term growth followed by an eventual shakeout and consolidation. Analysts fear that the entry of new competitors could lead to CDN price wars, a concern that has contributed to a sharp decline in shares of Akamai (AKAM), the leader in the CDN market.

While the CDN market is clearly becoming more competitive, the barrier to entry is much higher than in some of the other Internet infrastructure markets that have become commoditized. There are currently 898 ICANN-accredited domain registrars, and thousands of web hosting companies. That's why domain names are $8 a year and hosting accounts with super-sized specs can be had for $5 a month.

Both the domain and hosting markets were impacted by the emergence of active reseller markets for these services, which provided a key sales channel for large providers but also intensified the downward pressure on pricing. Resellers typically receive discounts, and some eventually began offering resold domains below cost as a way to attract new customers.

There are many differences between the CDN market and the hosting and domain arenas. The CDN market has a much higher cost of entry (at least partly due to the need for multiple data center sites), and while there is some reselling, it isn't a mass-market phenomena. The underlying product isn't likely to get commoditized quickly, but with Akamai holding a dominant market share, there will be great temptation for rivals such as aLevel 3 (LVLT)) to compete on price rather than technology.

Akamai has often acquired newer players in the CDN market. It's possible that Akamai can protect its position by buying the most successful competitors (as VeriSign has historically done in the market for SSL certificates). But with the recent slide in Akamai's share price, it's a fair question what kind of buying power it will have when the eventual consolidation arrives.

So is 28 CDN companies too many? The growth of online video has been described as a tsunami. Like a rising tide, a tsunami can float a lot of boats. But it also moves faster than the usual tidal patterns, which means the coming weeks and months will be an interesting time indeed for the CDN market.

Subscribe to the Data Center Knowledge Newsletter
Get analysis and expert insight on the latest in data center business and technology delivered to your inbox daily.

You May Also Like