The Decentralized-Video market Strategy

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Executive Summary

The content delivery network (CDN) industry is one that is experiencing tremendous growth. Not only is the industry itself growing, there is expectation that the video market segment will face tremendous growth. Combined with low barriers to entry, there is a new wave of competitors entering the market. Akamai has created a unique advantage by differentiating themselves by operating a decentralized network that allows the company to operate on the “edge” of the internet, providing their clients a superior product. IP’s have also been patented to protect them from imitation and direct competition. At the same time, the decentralized network is putting Akamai at a cost disadvantage due to the high costs associated with the maintenance and the continued innovation. The Decentralized-Video Market Strategy works best for Akamai as it allows them to remain competitive, and continue to capitalize on the decentralized system, while at the same time increasing market share. This strategy will allow Akamai to significantly increase market share, and revenues, while at the same time providing quality service to customers. This will provide financial stability for the company and increase the overall net present value (NPV) of Akamai. Akamai displays healthy financials and therefore has the ability to finance this move through capital, profits, and has the ability to finance debt where needed. The growth and increase in profits will however offset the R&D costs required to fund the strategy. This strategy allows Akamai to remain market leaders, and make a strong entry into the new video market, while still taking advantage of their biggest strength being the decentralized network. They will acquire new market share and retain their competitive advantage, assisting them in driving out new competitors.

External Assessment

The online content delivery network (CDN) industry focuses on improving internet content delivery by eliminating lost data and speeding up processes. The industry targets anyone with a website. Operations require: a network of servers to store and process data, software to run servers and network, and bandwidth.

There is an opportunity to expand into the online video market segment (see Exhibit 1). The changes in the environment are expected to bring big growth to the video segment of the market, presenting competitors with the opportunity to capitalize on new market share. One key success factor (KSF) is the ability to invest in R & D on the online video segment, requiring a large capital investment. A second KSF is the ability to deliver content over the internet without delay and congestion, providing optimal end-user satisfaction.

A second opportunity is the CDN market growth. The CDN industry is expected to grow from $1 Billion to $3.5B in the next five years presenting market participants with the opportunity to capitalize through obtaining market share. One KSF is the ability to develop and maintain a competitive advantage through a differentiation strategy. A second KSF is the ability to provide fast, efficient service to consumers. There is a threat of new entrants in the industry. Evolving technologies and software, combined with new market growth and low barrier to entry has attracted many new competitors to the industry. Evidence indicates the number of competitors has increased fivefold over the last two years. One KSF is the ability to deliver value added services that act as a competitive advantage. A second KSF is the investment in R&D combined with the ability to design and develop software, and to continuously evolve this technology to maintain a competitive advantage.

Internal Assessment

Akamai’s core business is online CDN, which is supported by distributed content delivery, distributed computing, and accelerated data communication. They also provide complimentary services such data analysis, online data storage, professional services,...
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