For anyone who follows the CDN/cloud services market, it is hard not to notice the flood of new players who have sprung up over the past few years. There are now over 40 different CDNs on the market today, with new ones popping up on a seemingly monthly basis. And it’s hard to blame them. Gartner estimates the CDN market will continue to expand rapidly through 2020 exceeding a market value of $10B+. Not only is the sheer number of global internet users increasing at an incredible pace, but the amount of data they are consuming is as well. As linear TV moves to the web, traditional retail loses more ground to ecommerce, and mobile phones give internet access to users in every corner of the globe, there is certainly a massive need for CDNs to help provide a fast and reliable experience to end users.
But even with this massive growing demand, is there really room for the seemingly endless number of CDN players that are flooding every corner of the market in every niche and every geography? Outside of the big players (Akamai, AWS, Limelight, CloudFlare, Verizon, etc) there are countless regional and niche players fighting over the scraps and driving pricing to zero for everything from basic media delivery to advanced security products… Fastly, MaxCDN, Instant Logic, Highwinds, CDNetworks, and CDN77 are just a few of the smaller niche players who are fighting over that piece of the multi-billion dollar pie. But now, as more massive cloud providers like Google Cloud and Microsoft Azure start entering the CDN space, will these companies be able to survive?
In the past, Akamai used to simply sue and/or acquire anyone who began to threaten their market share. But those days seem to be over, and they have begun shifting their focus toward higher margin products and services for the enterprise like cloud security, FEO, and application optimization, rather than trying to buy out or compete with the never ending caching startups attempting to steal away their SMB clientele. But Akamai also isn’t the only 800lb gorilla in the space anymore.
Outside of Akamai, you have the cloud computing giants like AWS who are gaining massive market share in the CDN world simply by bundling it together with the rest of their IaaS platform. Microsoft and Google are only now beginning to make big moves in this industry as well. With all these gargantuan cloud providers invading the CDN ecosystem with nearly unlimited financial resources and some of the best and brightest engineers in the world at their disposal, do the rest of these smaller players stand a chance? My guess is no.
Over the next 2-3 years, expect to see a major consolidation in the CDN industry, with many of the pure-play CDNs either shutting their doors or being gobbled up by the large IaaS providers. Other than the highly specialized CDNs like CloudFlare or Incapsula who focus and market themselves as cloud security companies rather than CDNs, there is just no way the smaller networks will be able to compete as companies like Google and Amazon continue to drive delivery prices into the ground and pump millions of dollars into infrastructure expansion and new product development. At the end of the day, these giants can and will give away CDN in order to win over other higher value services in their product portfolio. It seems to me that the only chance of survival for the countless CDN startups around the world is to immediately begin merging with competitors that have synergies in their product offering or geographic footprint, or to simply pray that they get acquired by an IaaS giant. Those who choose to go it alone will have a tough road ahead.