Why Amazon’s CDN Offering Is No Threat To Akamai, Limelight or CDN Pricing

As expected, I've already read half a dozen posts this morning from those who are saying Amazon's new CloudFront CDN offering is either going to challenge CDNs such as Akamai and Limelight for business or will force CDNs to cut their pricing in the market. This assumption could not be further from the truth and people should look at the facts of what the Amazon service is and how that compares to Akamai or Limelight.

For starters, have any of these writers spoken to Amazon about their offering? Because if you ask Amazon directly, even they agree that they are not trying to compete directly with Akamai or Limelight. Today, they are going after different sized customers with very specific needs, who only need HTTP delivery. Sure, there are a lot of those kinds of customers out in the market but that is not who the major CDNs are going after. Akamai is not interested in your business unless you are doing a few grand a month. Limelight's minimum is a bit lower, but again, is not targeting a thousand dollar a month customer. That's not to say that Amazon won't sign up larger customers, but that's not who the service is targeting.

This is a great service for smaller customers who have very specific needs but it won’t challenge any of the major CDNs for years to come. Amazon would have to add so much additional functionality to the service that it would take years just to build and deploy it. Too many people are under the wrong assumption that all you have to do is deploy a bunch of boxes and turn them up and then all of a sudden you can then compete with the major CDNs. It takes a lot more than just a ton of boxes and bandwidth to compete with Akamai or Limelight in terms of size, scale and functionality, not to mention revenue. Which is proven by the fact that after Limelight, the next closest company in terms of CDN revenue is doing less than half of Limelight's total revenue for this year.

Even Amazon's own video on demand service isn't using CloudFront. Today, they still use Limelight Networks to deliver all of their videos since they are delivered in the browser using streaming protocols. And the notion that Amazon's new CDN service is somehow going to put pressure on the major CDNs to reduce their pricing is so laughable it's not even funny. For starters, Amazon is more expensive when it comes to large volume but those that are writing about pricing would not know that as they don't have any idea what the major CDNs charge. Limelight, CDNetworks, BitGravity and others are half of what Amazon's lowest pricing is at for large volume deals. The fact that Amazon's sliding scale of usage only goes to 150TB gives you an indication of what some of their average sized deals will look like. The major CDNs have customers doing three or four times that much volume and have a sliding scale that goes to 800TB a month or more.

When Amazon announced they would offer this service, many rushed to write headlines saying it would challenge the major CDNs. Now with the service out, again people are rushing to use generic phrases on how this spells doom and gloom for Akamai or Limelight. Yet, in none of these articles that I have seen have the authors provided any analysis or insight into why they think Amazon will challenge the major CDNs. Where is the reasoning behind this thought? BMW and Hyundai are both car manufacturers. Does that mean they compete with each other? Of course not. Yes, Amazon now has a CDN offering, but that does not mean that they now automatically compete with every other CDN in the market.

If you think otherwise, I'd love to hear your thoughts on why in the comments section.