Wednesday - October 18, 2000

Content Delivery Network Services in Demand

The Internet is getting crowded, and the demand from Web-site owners for accelerated delivery of online operations, such as content, transactions, and applications, to Web users has created a lucrative space for content delivery networks (CDNs). According to IDC, the U.S. content distribution market will increase at a compound annual growth rate of 150%, from $10 million in 1999 to nearly $1 billion in 2004.

"The business models of all content delivery networks revolve around exploiting the inefficiencies of the Internet as it now exists," said Melanie Posey, research manager for IDC's Business Network Services program. "One way content delivery networks exploit Internet congestion is to reduce content commuting time by pulling content out of centralized datacenters and placing it closer to the end user."

According to IDC, different types of companies participate in the content delivery space with CDNs, including equipment suppliers, technology developers, Internet backbone operators, and hosting service providers (HSPs). Despite the competition, enough room presently exists for everyone in this space.

"CDNs, HSPs, and backbone network providers will coexist relatively peacefully in the short term," Posey said. "However, the survival of standalone CDNs in the longer term is another question."

IDC says the most speculative and inaccurate claim about this new class of service providers is that it will completely displace centralized hosting centers.

"CDNs have neither the interest to become full-blown Web hosters nor the storage capacity," Posey said.

The Failure of Venture Capitalist Backed Sites
According to Fortune:

"Jay Hoag is a pretty smart guy. At least that's what his fellow partners at the Palo Alto venture capital firm Technology Crossover Ventures will tell you. Hoag persuaded them to make investments in companies like Ariba, CNET, and Real Networks, ultimately netting oodles of money for the firm and its investors. But for a smart guy, Hoag has been making some pretty dim moves. During the past two years he has invested in ten consumer Internet companies, a category now considered to hold less promise than the presidential campaign of Ralph Nader.

Among the casualties in Hoag's portfolio are Petopia, a "pet portal" that has laid off employees. Other investments, such as AutoWeb and iVillage, earned him decent returns--before crashing on the public markets. Hoag is also an investor in GreatEntertaining.com, a company selling balloons, birthday cakes, and kids' Halloween costumes that is now trying to survive by repositioning itself as a provider of party supplies to businesses..."

Click here for the full story

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