Every week the Opus team picks a news story or topic or idea that is relevant to the entrepreneurs and businesses we partner with.

RSS Feed

Archives

Verizon acquires Edgecast

Ajit Deshpande - - 0 Comments

Last week, telecom giant Verizon announced the acquisition of CDN startup Edgecast Networks for a price that is rumored to be in the $390 million range. Edgecast is a six year old, Los Angeles based, profitable startup that has annual revenues of more than $100 million and more than 6,000 customers.

From a monetization leverage standpoint, the CDN business might be one of the toughest out there. As an entity that hosts content and delivers it optimally, yet does not own the content itself, a CDN sits smack in the middle of the Telco/infrastructure vs content owner/OTT debate. CDNs have no subscribers to call their own like the Telcos do, and so their revenues mainly accrue from the OTT players, the largest of which, including Amazon, Google and Netflix, are already building their own CDNs. Against that backdrop, the acquisition of Edgecast works well in that the CDN gets a parent with deep pockets and the telco boosts its content delivery capabilities while getting thousands of new customers. While the acquisition itself was also great for investors ($74 million total in so far), the exit was curious in that Edgecast had just recently raised $54 million, yet despite the money, the revenue growth and the profitability, Edgecast’s acquisition revenue multiple of 2-4x is much lower than market leader Akamai’s own current revenue multiple of approx. 5.5x. The reasons for this could be various: founders wanting to cash out after six years of solid effort, a long ongoing M&A process culminating in a deal, revenue being ‘lower quality’ (read lower margins) due to a higher services component, or just the realization within the company that standalone pure-play CDN wasn’t long term feasible. Irrespective, the field of pure-play CDNs is now a bit narrower, and one more reasonably successful infrastructure exit is in the books.

« Back to Blog
Also on the Opus Blog

Flickr Turns 10!

February 21, 2014
Ajit Deshpande - Photo-sharing site Flickr last week celebrated its 10th anniversary. Acquired by Yahoo in 2005 for 35 million, Flickr currently has 92 million users across 63 countries that...

MotoX and Google Now

August 8, 2013
Ajit Deshpande - Last week, Google announced its latest smartphone, the MotoX. The device, which was developed by the Google’s Motorola Mobility unit over the past year, offers a number of...

Smart Devices from Mozilla and Foxconn

June 6, 2013
Ajit Deshpande - When it comes to smartphones and tablets, the OS market is quite concentrated, with Android and iOS together owning a 92.3% market share for smartphones, and a 96.1% share for...

Point-of-Sale integrated Check-ins, from PayPal

December 3, 2013
Ajit Deshpande - The payments industry has seen significant evolution over the past three years. Continued rapid growth in ecommerce and online payments, the emergence of payment dongles, and...