June 2, 2014 could have been like any other day but for the fact that the Supreme Court’s judgement on Limelight Networks, Inc. vs. Akamai Technologies, Inc. case was due. The day was a culmination of all events that preceded this event.
It all started as a PhD project for a Massachusetts Institute of Technology (MIT) professor Tom Leighton and his student Danny Levin. The rest is history.
Incorporated in 1998, Akamai had the first mover advantage in a bludgeoning internet world in a pre-bubble internet market. Since the content distribution network (CDN) is cost intensive because hardware usage for caching, Akamai went public pretty much in its nascent stages towards end-1999. In the heydays, the stock prices went through the roof recording a price of over $300.
However, the golden run came to an end with the internet bubble bursting, sending the entire industry into a tailspin. Danny Levin’s death in the 9/11 crash did not help the cause. The impact on Akamai was immense and till late 2003, its stock prices went to as less as 90 cents. However, the company grew from strength to strength through the downturn and captured around 50% of the US CDN market. The graph below illustrates the extreme variations that the company’s stock price has gone through since its inception. The “State of the Internet” report indicates the sheer vantage point that Akamai enjoys in the internet space.
Two supports of the ladder
Akamai’s business strategy has strikingly been on two factors:
1. Acquisition for corporate growth: In the last 15 years, Akamai has acquired 17 companies that have made significant contributions towards the development of CDN technology. These point to Akamai’s aggressive mindset to acquire technology that can fit in with its existing offerings.
Akamai’s acquisition trend offers a clear picture of its business style of powering up its existing offerings with existing complementary technologies in the market. The acquisitions in its earlier days were towards increasing its customer base from existing competitors as well as integrating its infrastructure to provide better service. There was a shift in focus since 2010 when the company adopted the mobile platform to consume content. This coincides with the commercial launch of its Android operating system. The acquisition of Velocitude and Cotendo helped Akamai accelerate its mobile content offerings, while it upped the ante on its security products by taking Prolexic into its fold. The latest acquisition is interesting based on which one can expect the CDN battle to be fought on the IPTV space.
All in all, Akamai follows a strategy where acquisition is the primary factor driving their technology stack and hence the offerings and their topline growth. It does not seem to be effected by the build v/s buy conundrum, as the buy option seems engrained in its corporate DNA.
2. IP enforcement for competitive advantage:
Akamai has 203 patent publications in the US geography and a licensing agreement with MIT on patent publications related to CDN technologies. It has used IP enforcement to its competitive advantage by initiating litigation against multiple competitors. Some of them are as below:
One of the key patents has been the famous ’703 patent (US 6,108,703) which has been under litigation against Limelight Networks. Out of these, it ended up acquiring Speedera Networks and Cotendo, Inc.
One interesting trend to note is that post 2010 the company has not indulged in any litigation, but has accelerated its M&A activity. In its formative years (until 2006) litigation had been used as the tool for competitive advantage. Lately, M&A has been the key avenue for technology enhancement and hence to preserve its status in the internet space.
That brings us back to the case verdict. Would the Supreme Court ruling have an impact on Akamai’s business? Even while the court decides to go en banc to hear this case of “induced infringement” that Limelight is accused of? Probably not, as Akamai has divested its technologies in other verticals like mobile content acceleration and security. In addition, the purpose of the litigation was expected to be able to assert its dominance in the industry and flex its IP strength during the formative years of the CDN industry and to get a competitive advantage.
But with the advent of new disruptive technologies in the CDN space like Instart Logic and lack of IP protection in the security space and the lack of innovation in the CDN space may be the chinks in the armour that Akamai is better off without.
(Feature image source: https://pixabay.com/en/lines-network-internet-social-1285342/)