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

Instagram bests Twitter in Mobile Engagement

October 1, 2012
Ajit Deshpande - Earlier this past week, comScore reported that Facebook-owned photo-sharing site Instagram had surpassed Twitter in terms of daily active users for their respective smartphone apps...

Atlassian builds its marketplace

March 6, 2014
Ajit Deshpande - For more than a decade now, Sydney, Australia based company Atlassian has been offering tools that are widely used by software developers and project managers. The company offers...

Dropbox, the killer app!

February 20, 2013
Ajit Deshpande - Dropbox, one of today’s leaders in cloud-based file storage, syncing and backup, last week announced an update to its iOS app to provide easier PDF viewing capabilities, push...

Security is the biggest unsolved problem for Containers

August 24, 2015
Preeti Rathi - Container security is not a well-solved problem today. While containers can isolate several areas of the underlying host from the containerized application, it is well known that...