Limelight Networks CEO Jeff Lunsford says his company’s patent war with archrival Akamai — which, so far, it’s losing — hasn’t cost him any business yet.
The litigation has been going on for years, Lunsford said this afternoon at Morgan Stanley’s tech conference in Dana Point, Calif. Since then, the company has doubled its customer base. It’s “ops normal,” Lunsford said. (Live notes from Lunsford’s Q&A below.)
We’re glad to hear Limelight (LLNW) hasn’t lost any business in the last few days, but we’re sceptical about its prospects. An estimated year in legal limbo could be devastating for Limelight’s sales efforts.
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5:47 Describing the company. Office locations, business composition, etc.
5:48 Six weeks or so for final patent ruling. Jury verdict covered some parts of services. Many things LLNW does not covered by verdict. Also, U.S. only.
5:49 What % of business covered? From revenue, somewhere between 50%-75%.
5:50 I don’t want to handicap whether/not injunction. Rest assured, running business in responsible manner. Have plans in place for all those scenarios.
5:50 Advised not to talk about workarounds, etc. How about customers? Customer response was very gratifying. Called us up, said ‘we’re behind ya,’ a lot of emotion around CDNs. Customers want choice, feel they deserve it. We have been “their preferred choice, as an alternative” to Akamai (AKAM). Forward-looking? This litigation has been active since before IPO, etc. Since then, doubled customer base. Grew traffic 90% last year. We think it’s ops normal. Let this play out in the courts.
5:52 More people consuming more content online every day, regardless of economy. What will happen with ad spending, which funds our business? Remember we get funded by online ad sector, which is growing at 25% a year. Secular shift from offline to Web.
5:54 Lots of streaming going on!
5:54 Pared down spending plans/capex because of macro weakness? No. Our spend driven by our traffic growth. Haven’t throttled capex despite economy. Trying to enhance efficiency of platform to be less capital intense.
5:56 Y/Y comps have MySpace, YouTube peaking… then MySpace moved primarily in-house and YouTube going to Google. Top 20 customers about 60% of base. Also some customers now running out of funding, or division of public company shutting down segment (Divx?).
5:57 Frost survey says 25%-30% of content served by CDN? I would want to drill down into what sort of traffic they’re looking at. Cisco report says 1/2 P2P, 1/4 CDN, 1/4 non cached? Need to see analysis, data sources.
5:58 How much is growth opp.? We think opportunity is large. Focus on top 10,000 Web sites, top 2,000 global companies. 1159 customers at end of the year, 2500 at Akamai. Under 4,000 — under 40% penetrated. Had same focus at WebSideStory.
6:00 Competitive advantage of Limelight’s architecture? We built one completely different from 1st gen CDN which has thousands of points of presence. (Like Akamai’s.) Need a different architecture when you have large library of large files. Store entire library at each regional location. Don’t have to try to predict which object to store in cache — they’re all there.
6:02 You wouldn’t be signing up 200 customers a quarter if it didn’t work. It’s not that difficult to switch CDNs.
6:03 Where could you get additional capex efficiencies? Mostly in server performance. How you manage files/process content out of a server is where you can get the best yield from performance standpoint. By end of 2008, we think we’ll be at least 2x where we were in 2007. (Server throughput.)
6:04 How is competition with Akamai evolving? Always been head to head competition. Limelight has always had a different architecture, different target market. Some markets overlap, but we’re also going after a lot of business they’re not interested in. Larger accounts, you definitely compete with them. Also end up working alongside them. Most larger media companies have multiple CDNs.
6:05 You’d rather have redundancy than betting on one company to be a delivery partner. Most of top 20 accounts using multiple CDNs.
6:06 How do you see P2P? Part of the delivery equation. A whole QoS spectrum. At one end is pure CDN and at other end is P2P where you can’t really track QoS. Some will need P2P, others will pay 20 cents/gigabyte to deliver “up here.” I think AKAM said the right answer is a hybrid delivery model. Isn’t enough revenue out there to support P2P pure-plays. Market will evolve to hybrid delivery model.
6:08 A very small revenue potential, but won’t define the business.
6:09 How does multi-CDN strategy work? Either dividing properties or dividing traffic flow.
6:09 Level 3 is publicly stated they’re going to get into the business, acquired old Savvis assets, then below them a whole raft of smaller guys. We think this is a scale game. It’s going to be interesting to see how this plays out. A lot of these smaller guys got their A and B rounds when Akamai was worth $9 billion. If you can’t get to scale now, going to be hard to get those C and D rounds for those smaller guys. I think it probably matures around 3 players: Akamai, Limelight, and Level 3.
6:11 AT&T said they were getting into the business, too. You can’t count them out. There are large companies who tried to be in biz and haven’t done well. We think this is a life science. If you’re not living and breathing CDN, you won’t make it in this business.
6:14 What sort of traffic from mobiles? Lots of activity, files are a lot smaller. Growing rapidly. With more devices, and better wireless network connectivity, going to grow. Off-deck content will trump on-deck content. Small private companies addressing this, big CDNs also have stuff in the lab.
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