Limelight Networks Combines with Edgecast to Expand its CDN Network

Content Delivery Network (CDN) company Limelight Networks announced its acquisition of Yahoo’s Edgecast group for approximately US$300 million in an all-stock transaction. Edgecast reportedly generated US$285 million in 2021, which puts the deal roughly one times the amount of the company’s annual revenue; combined, the two companies generated over US$500 million in 2021. The combined entity will be called Edgio, with Yahoo receiving 72.2 million shares of Limelight common stock, which put Yahoo’s ownership of Edgio at just under 32% (and could acquire an additional 12.7 million shares three years after closing for a total of 35.5% of Edgio). Apollo Funds, which owns Yahoo (acquired from Verizon), also contributed a US$30 million investment into Edgio via its ownership of Yahoo.

Combined Edgio’s network covers over 300 Points of Presence (PoPs) and an excess of 200 Tbps of capacity. Limelight networks, which had started to branch out into edge computing (after pushing ultra-low latency as a differentiator), will accentuate its current solutions (security included) with the acquisition and gain a broader product portfolio from Edgecast, which also brings a video platform and broader expertise in media workflows.  

Companies that have a foundation as a CDN operator have been adapting to changing market needs, some of which were accelerated by the global pandemic. The push to hybrid workforces for example greatly increased the demand for enterprise security, which is being added to pre-existing network security and content protection services—security as a whole is a growth driver for many of the larger CDN companies. The broader shift to direct-to-consumer and globalization of streaming media in the consumer space has created demands for specific regional support, both in terms of content delivery and handling/processing of content (i.e., adhering to privacy laws, content localization, etc.). Limelight Networks acquisition of Edgecast speaks to these expanded opportunities and the need to adapt and evolve. Other companies like Cloudflare have launched services that compete directly with hyperscalers (i.e., R2 storage) and pushed significantly into new markets like enterprise security. Akamai is a prime example here, with recent acquisitions Guardicore (September 2021) and Inverse (February 2021), both targeting Zero Trust security.

As conversations shift to the metaverse, many of these preexisting trends and shifts in product portfolio will become increasingly important for CDN companies as these new market opportunities come online and expand. The shift to hybrid workforces creates new opportunities for virtual collaboration and communication, which serves as a significant milestone to build towards the metaverse. Remote work and collaboration will create increased demands for content storage, processing, and delivery, for example, recording video calls/meetings, adding metadata for training and analytics, storing the content, and making it searchable and accessible.

On the consumer front, while advertising and personalization have not yet entered the metaverse picture in a significant way, it will play an enormous role as individuals spend more time in virtual spaces and experiences push increasingly into the public domain. The arrival of mainstream level smart glasses in particular (expected to start in earnest in the 2025 timeframe) will push more user experiences out of the home/office, which will greatly increase the potential user touchpoints and demands made by applications at the network edge. All of these market changes will relatedly drive opportunities and demand for edge compute and network connectivity (i.e., 5G advanced and later 6G).

With regards to Edgio, it is currently unclear how much is any synergies the combined entity will be able to leverage from Yahoo. If Yahoo’s expertise in advertising remains part of Edgio’s core competencies, this will position the company well for the buildup to the metaverse. If Yahoo becomes a silent investor, the deal could be viewed as a strong play for the near-term market demands and growth opportunities but will leave room for additional work as areas like personalization become more critical to the business.

CDN network expansions are part and parcel to the industry to keep pace with growth in content consumption; new growth therefore will come from areas like security and increasingly compute. CDN companies will need to continue investing into these new markets and track the development made on the metaverse front, which will greatly increase the demands for cloud and edge computing. The buildup will take time, so significant investments are not critical today, but the hyperscalers (which also operate CDNs) have an inherent advantage over traditional CDN players by already tackling workflow (and data) migrations to the cloud. This explains why companies like Cloudflare, which have expanded well beyond content delivery, want to shed the CDN moniker. We can also point to companies like Intel and NVIDIA who have highlighted the computational needs the metaverse will engender as another indicator of the opportunities CDN companies will have with edge computing. This doesn’t mean the CDN designation should be dropped, it just needs to speak to a broader market opportunity.

The area that is often lacking on many CDN companies’ radar is personalization and ad tech. This was a reason the combination of Yahoo and Edgecast was an alluring pairing that ideally will continue with Edgio. It is still early days here and most ad tech companies (and advertisers) have yet to truly look into the opportunities associated with the metaverse. This will change, however, and all cloud platforms and networks will need to prepare to address the needs and demands of users who will have dramatically different behaviors and channels for accessing and consuming content and services. Personalization has become increasingly complex, which creates an opportunity for CDN and cloud companies to help their customers navigate these waters. Expertise and trust developed in these coming years will position these players well to take advantage of the future opportunities generated by the buildup to the metaverse.