By Rick Aristotle Munarriz
September 18, 2008
The inevitable has happened. After spending the past few years winning over techies with its suite of server-tethered services, Amazon.com (Nasdaq: AMZN) is going for the corporate kill with its plunge into the icy content-delivery-network waters.
GigaOm details the launch, including aggressive and transparent usage-based pricing, no long-term contracts, and integration simplicity.
Traditional players like Akamai (Nasdaq: AKAM) and Limelight Networks (Nasdaq: LLNW) knew this day was coming. It doesn't mean that they aren't chewing their fingernails in concern, though.
Amazon isn't the type to tiptoe quietly into the shallow end of the pool. It's going to holler its way down the diving board, then tuck up its knees for the mother of all cannonballs.
Market leader Akamai will survive. Weaker server jockeys will not. Limelight, which earlier this year counted on Amazon as a customer, will take a hit. Smaller, privately held companies, and perhaps niche-nibblers like Level 3 (Nasdaq: LVLT), are most likely to slip onto the endangered-species list. Ultimately, the entire sector will suffer in a pricing war, until the shakeout is complete and prices stabilize.
Will they stabilize, though? Akamai has had the luxury of snapping up fast-growing competitors in the past. Three years ago, all it had to do was print the equivalent of $130 million in Akamai stock certificates to take over its largest rival at the time, Speedera. It can't pay the tab to buy Amazon out. If anything, Amazon seems more likely to acquire Akamai.
If there's a weak spot in Amazon's attack, it's that some of the Web's juiciest file and webpage pushers, like Apple (Nasdaq: AAPL), Netflix (Nasdaq: NFLX), and Microsoft (Nasdaq: MSFT), may not want to sleep with the enemy. Apple is unlikely to hand over money to Amazon when the two companies are punching it out in digital music and video. Netflix and Amazon are all about moving movies, and Amazon has tried to ape the Netflix model in the past. Microsoft may not appear to so conflicted, but it's also trying to make its mark as a comparison-shopping site -- with a cash-rebate twist -- these days.
This doesn't mean that Akamai's new sales pitch will be "we're not Amazon." However, a new sales pitch will be necessary. When Amazon shakes the tree, all the leaves rattle.
Other chapters in this neverending story:
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