MySpace Dumps Limelight (LLNW) for Akamai (AKAM)

Dan Frommer | August 15, 2007 12:43 PM

More troubles for content delivery network Limelight Networks (LLNW), via their 10-Q, filed yesterday. News Corp.'s MySpace has apparently dropped Limelight as its primary CDN, opting for larger rival Akamai Technologies.

According to Limelight's filing, sales to "CDN Consulting," which resold services primarily to MySpace, represented 21% of Limelight's 2006 revenue, or about $13.5 million.  Last quarter, however, MySpace business dropped to about 2% of Limelight's revenue, or about $424,000 -- that's an annual run rate of $1.7 million. An Akamai rep confirms that Fox Interactive has moved much of MySpace's CDN business to their network. It's not clear if MySpace has terminated its relationship with Limelight; large content companies often keep accounts at multiple CDNs for redundancy or to juggle traffic.  We have not yet determined when, exactly, the transition took place.

Reps for MySpace and Limelight were not immediately available for comment -- we'll update if we get new information.

See Also: Analyzing CDN Pain: What's Next For Akamai (AKAM), Et Al

Disclosure: SAI Chairman Kevin Ryan is CEO and an investor in Panther Express, a NY-based CDN.

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t said:
A follow-up question, Dan, if you don't mind:

Assuming that increasing in-house adaptation of content distribution will be (or, is already?) the trend, does that effectively put a kibosh in the growth prospects of existing cdn firms such as AKAM, LLNW, INAP, etc.? Already, within about the last 2 quarters, there seem to be indications that revenue growth is slowing, especially looking at quarter-to-quarter (e.g., 1Q07 to 2Q07) growth, not only in % terms but also in $ terms.

What do you see as the prospects for the likes of AKAM, LLNW, etc.?

AKAM, getting absolutely killed at the moment (share-price-wise), is now at a fwd P/E of 17 and a PEG ratio of .80. Are these metrics justified based on your (lowered?) expectations of the cdn market?

Thanks again.
t said:
Thank you, Dan.

Do you see this as the trend in the future, more firms, especially those with rich media content, taking their distribution in-house? If so, how are they doing this? Are they actually building out distribution centers at the "edges," contracting with a multitude of other private networks, etc.?

Thanks in advance for your insight.
Dan Rayburn said:
I am under NDA with MySpace, so I can't give exact details, but in Oct. of 2006 MySpace said it was working to move all of it's video in-house over the next year.

Multiple websites talked about it like:
http://www.datacenterknowledge.com/archives/2006/Oct/09/myspace_developing_own_streaming_technology.html
t said:
Dan Rayburn:

What do you mean by "overflow traffic?" What CDN are you suggesting, then, is handling the non-overflow traffic? Are you suggesting that MySpace is handling non-overflow traffic in-house?

Please provide a link to support your claim about the "overflow."
Dan Rayburn said:
This has been widely known and has been talked about publicly for months. Since FOX is already using Akamai for other services, it mad sense for them to include the MySpace content as well so they can get an even better rate. From what MySpace has said, the traffic they are sending to Akamai is overflow traffic. I don't know if Akamai will say how much traffic it is, but it sounds like it's a very small percentage of MySpace's overall traffic.

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