Peter Kafka

Recent Posts by Peter Kafka

Special Delivery: Web Utility Limelight Networks Buys Ad Platform Eye Wonder

deliveryHow do you break through in a no-growth industry? Try a different industry. That appears to be the thinking behind this one: Content delivery network Limelight Networks (LLNW) is shelling out $110 million in cash and stock for Eye Wonder, a video ad platform.

Even if you don’t follow this stuff, you may have heard of Limelight’s much bigger rival, Akamai (AKAM), which moves a good portion of the Web’s data.

This was supposed to be a booming business, but it hasn’t panned out in recent years. The problem: Big Web players are putting more and more stuff online, but the prices content delivery networks charge to bring it to your desktop keep dropping lower and lower.

So you’re left with a fast-moving industry that doesn’t actually go anywhere, at least in terms of revenue. Citi’s (C) Mark Mahaney, citing industry analyst Dan Rayburn, figures that volume increased around 35 percent this year, but that pricing dropped by the same amount.

Limelight’s most recent financials illustrate the dilemma quite nicely: Third-quarter revenue of $32.5 million was up just one percent from the previous quarter and down slightly from the $33.1 million the company generated the previous year. Its losses, at least, are shrinking.

So diversification couldn’t hurt, right? And this makes sense on paper: Privately held Eye Wonder specializes in selling video and “rich media” ads–the kind of data-intensive stuff that was supposed to help the likes of Limelight grow in the first place.

[Image credit: kamshots]


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