Can Akamai Make Good On Promise Of Faster Internet?
Last Friday, when shares of Internet technology company Akamai skyrocketed 450 percent in its Wall Street debut, the event confirmed what many industry observers already knew.
We need a faster Internet.
The Cambridge, Massachusetts-based Akamai closed Friday at $145.19 (US$) after initially pricing at $26 per share, but opened at $100 per share.
By the end of the day, Akamai had sold 9 million shares, which raised more than $1.3 billion.
Not bad for a company that lost $28.3 million on revenue of $1.3 million over the first nine months of this year.
Immense Need For Its Service
Nonetheless, analysts were not surprised by Akamai's spectacular performance, given the increasing congestion on the Internet.
In fact, according to a recent study by Northeast Consulting Resources, Inc., e-commerce could be substantially hindered if the Internet remains slow or continues to get slower. The slowdown is due to the soaring number of users coming online every day, more graphic content, and an overall increase of Web site construction.
"It is clear that the World Wide Web won't fulfill its promise unless the right design decisions are made," said Peter Sevcik, the senior analyst who conducted the study.
The Internet slowdown is why Akamai products are so important to e-commerce. They act as Internet traffic cops by using complicated mathematical algorithms to speed Web pages from the closest server to a customer's location -- thereby passing through fewer router hops. This process also helps to eliminate Internet gridlock.
"Today, caching and content distribution is the only practical way to reduce network delay," Sevcik added.
How It Works
To provide the service, Akamai owns a global network of 1,475 servers and leases space on them to such giant portals as Yahoo!, CNN and Go Network. These sites use the servers to store graphic-rich information closer to Internet users' computers and circumvent Web traffic jams.
However, Akamai does not have a corner on the market, as New York-based Edgix and Laurel, Maryland-based SkyCache, Inc. both use satellites to store and offer an inventory of highly-used Web sites.
Not A Cure All
While Akamai and other companies that provide such caching services definitely seem to have a bright future, I think there are some basic gaps in their ability to circuit-break an already clogged Internet.
One shortcoming is the fact that only the most popular Web sites and portals are most likely to be cached. Therefore, any e-commerce surfer that happens to deviate from the most popular sites could be caught in gridlock.
Additionally, more bandwidth does not necessarily guarantee more speed than a standard dial-up modem. I recently signed up with a national cable provider for high-speed Internet service, only to find that it is sometimes slower than my discarded dial-up.
The speed not only depends upon how many people are using the local area network at any given point in time, but also on the speed of the server downloading any given Web site.
Problem Must Be Addressed
My belief is that if some industry-wide initiatives are not put into place quickly to address this cyberspace congestion, it could seriously stunt future e-commerce growth.
I have no problem with companies like Akamai and others that raise billions by sprinkling sunshine and promising relief from Web gridlock. However, 12 months from now, when a critical mass of consumers finds themselves unable to quickly download what they want from the Internet, that sunshine could be interpreted as false promises.
What do you think? Let's talk about it.