Akamai

In: Computers and Technology

Submitted By nitinprakash2007
Words 425
Pages 2
1. Why did Akamai charge content providers and subsidize ISPs?
The fact that Akamai charged content providers and subsidized ISPs suggests that the company is operating in a two-sided market environment. Normally, a content provider in two-sided market should subsidize the sensitive side of the market and charge the side that strongly values growth or need the service of the product. With respect to Akamai, content providers are the “money side” and ISPs are the “subsidy side”. Akamai’s Freeflow technology made sites much faster and protected the content providers from sudden spike in traffic. This also reduced the content provider’s payments to ISP’s for bandwidth, since serving page elements from Akamai’s servers meant that an average less data was sent from the website’s origin servers. This justified charging content providers for the service. On the flip side ISP’s also gained a few benefits as the improved speeds were valued by their subscribers but Akamai needed data center space and bandwidth from the ISP’s. Hence Akamai needed to compensate the ISP’s and subsidizing was a right way to do so.

2. Is the content delivery network business a winner-take-all category?
Akamai is one of the very few publicly traded companies that has its presence in pure-play CDNs. Many telecom giants have entered this industry to fill this highly demanded market and Akamai is definitely not the only business doing what it does. As technology advances, server prices and bandwidth prices will definitely come down. Although this doesn't take market share away from Akamai, its still going to lower the margins, as its pricing power slowly fades away because of the emergence of the new players. As more content owners start making money on the Internet, performance and quality will become even more significant. Customers will not only buy for the price but also for…...

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