CDN Madness Cometh?

One industry that is seeing positive fallout of the Google-YouTube deal is the business of content delivery networks. Akamai, the perennial leader of the CDN business has been on fire lately, prompting venture capitalists and private equity investors to pump in millions of dollars into rivals at insane valuations. A little hint of the CDN froth is reflected in digital media deal of the day: Internap’s decision to buy Vitalstream for $217 million. That is pretty steep price – nearly eight times 2006 (projected) revenues for Vitalstream and a big gamble.

“The new Internap will offer turnkey digital media broadcasting solutions for web users of all sizes. By uniting our two organizations, customers will have a complete solution to realize the full on-line potential of their digital assets.” Jack Waterman, chairman and chief executive officer of VitalStream.

Bunch of takeaways from this deal: the content distribution network space is consolidating quite rapidly, and all comers are going after Akamai, which continues to stay on top. How long it can stay there? I am not even going to try and guess. Another thing which I must say is that Internap is trying to be network and CDN, a combo with mixed results in the past. Will it work this time?