Akamai 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

22% revenue growth aint bad

“As Tom outlined, Q3 revenue came in above the high end of our guidance range at $498 million, up 26% year-over-year and up 5% or $22 million sequentially. This result marks our first quarter of year-over-year growth of over $100 million and represents our highest Q2 to Q3 sequential growth ever.”

Lots of growth over the last 15 years

“15 years ago, on October 29, 1999, Akamai began trading as a public company. At the time of our IPO, we had 350 employees, 50 network partners and 1,400 servers in 20 countries, delivering peak traffic of 1 gigabit per second for a total of 100 customers. In the fourth quarter of 1999, we generated less than $3 million of revenue and a substantial net loss.

Today, Akamai has nearly 5,000 employees, 1,300 network partners and over 150,000 servers in 95 countries, supporting peak traffic of more than 26 terabits per second for 5,000 customers worldwide.”

The internet has grown a lot too

“Akamai has come a long way over the past 15 years, and so has the Internet. The global population of Internet users has multiplied more than tenfold from 280 million, which was less than 5% of the world population in 1999, to nearly 3 billion people today. And the number of websites has grown from about 3 million to over 1 billion. The annual e-commerce volume has grown from less than $100 billion in 1999 to a projected $1.5 trillion this year. ‘

Accelerating growth of the internet places stress on the infrastructure

“The accelerating growth of online usage and cloud services is placing significant stress on an Internet infrastructure that was not designed to accommodate the rapidly growing demands for scale, speed, reliability and security. As a result, congestion is increasing at major peering points, which degrades video quality and slows down Web applications. Performance is also hampered by the increasing complexity of Web applications. In the past 2 years, the typical size of a Web page has more than doubled. The number of third-party domains on a typical page is up 56%, and the average amount of JavaScript on a page has grown by 40%. The net result is that the average time to download a Web page from an origin has increased by more than 60% in just 2 years.”

Attacks generate hudreds of gigabits per second of traffic

“We are now seeing attacks with many tens of gigabits per second of traffic on a daily basis, and some attacks generate hundreds of gigabits per second of traffic, far exceeding what the vast majority of websites can handle using traditional defenses.’

Some people try to do it themselves, but its actually pretty complicated

“Delivering high-quality video at scale is much more complicated than most people realize. And despite our many competitors and the do-it-yourself efforts by large content owners and service providers, Akamai is differentiated by our success in streaming high-quality video at scale through our unique platform of servers in thousands of locations close to end users.”

Scale enabled by telco partners

“Our tremendous scale is achieved in part through close cooperation with the many networks that comprise the Internet. We locate our servers inside nearly 1,300 networks, and we are forming much deeper relationships with the world’s largest carriers. Recently, we were very pleased to announce new strategic partnerships with SingTel and China Telecom, which we expect will further expand our capabilities and capacity in the Asia Pacific region for both local and global customers.”

DIY is our greatest competitor

“DIY is our biggest competitor. The very biggest media companies, pretty much all of them have had a DIY effort, and I think that’s going to continue to be the case in the future. Our job is to invest in research and development and figure out how to do it better at greater scale and at lower cost.”

There’s a lot of competitors out there

“I think, the CDN competitive climate has been challenging for the last 15 years and will continue to be so. There’s a lot of competitors, and we work very hard to do a better job of it, be more reliable, higher scale, better performance, better video quality and to be affordable for our customers. And I think we’ve had a lot of success. If there’s been a change per se, I would say that our success in working with the major carriers has been a helpful change. Many of the carriers were competing with Akamai, and you’re seeing in the last year to 2 years, several of the big carriers now converting to the Akamai platform, and working together with us. And I think, that’s been a fundamental shift that’s been helpful to us, but there’s a lot of competitors out there.”

Revenue is driven by traffic

“again, revenue is the product of traffic and price when it comes to video and media. And traffic’s growing, obviously, at a substantial rate.’

You can imagine a world with 25,000 terabits a second

“you could imagine a future world with 2.5 billion people that go home at night, in prime time, watch a show…if you have that world with 2.5 billion people at 10 megabits a second, and you multiply that, that’s 25,000 terabits a second. Now that’s a big number. Just to put it in context, Akamai is now delivering at north of 25 terabits a second, and we’re a pretty big portion of the Internet. And so you look at 25-plus today, you can imagine a future world with 25,000”