Amazon Launches Content Delivery Network. Rivals, Watch Out!

[qi:080] It was a matter of when, not if, that Amazon (s AMZN) would launch a content delivery business in addition to its current suite of web services that include S3 storage service and EC2 on-demand computing. The Seattle-based company has announced its intention to offer a content delivery service that could shake the very nature of the industry and pose a serious challenge to not only dozens of CDN upstarts but also become a thorn in the side of existing giants such as Akamai Technologies (s AKAM) and Limelight Networks (s LLNW).

In an email to its customers today, Amazon said that the service will be available later this year and will utilize the company’s points of presence in North America, Europe and Asia.

This new service will provide you a high-performance method of distributing content to end users, giving your customers low latency and high data transfer rates when they access your objects. The initial release will help developers and businesses who need to deliver popular, publicly readable content over HTTP connections.

Ironically, Amazon was beaten to the CDN punch by New York-based Voxel, which started offering CDN services based on Amazon’s S3 service. “We are announcing this right now because we want to give a heads up to our customers,” said Adam Selipsky, VPr of product management and developer relations for AWS. It’s more like putting their competition on notice, but Adam was too polite to say that. “It is a more horizontal and broad offering.” In other words, while it is not going to replace Akamai tomorrow, it is going to make CDNs affordable even for the tiniest startup, without major cash outlays.

Why is this service disruptive? Amazon is going to bring a level of transparency to a business that has a sales model much like a brokerage firm in the 1980s. Amazon wants to make buying CDN services as simple as buying a book. Amazon executives told me that company is going to be charging its customers on usage instead of the long-term contracts current players foist on their clients.

In addition, the company will publish its prices on the web — most importantly it is going to be inexpensive. And that will make the service even more attractive to hundreds of small companies who are already using Amazon Web Services for their web operations, who don’t want to sign long contracts with CDN operators. When I asked Tal Saraf, general manager of the AWS Content Delivery Service, if the company expected the video-delivery to be one of the most used service, he said the company expected to delivery all sorts of content, including web objects (images, JavaScripts etc.)

You’ll start by storing the original version of your objects in Amazon S3, making sure they are publicly readable. Then, you’ll make a simple API call to register your bucket with the new content delivery service. This API call will return a new domain name for you to include in your web pages or application. When clients request an object using this domain name, they will be automatically routed to the nearest edge location for high performance delivery of your content. It’s that simple.

Amazon executives declined to talk about the pricing. “We will talk about the pricing when we launch the service,” Selipsky said. He declined to comment on the impact the pricing will have on their competitors -– nearly two dozen content delivery networks –- and how much their business is going to suffer. Dow Jones Venture Source estimates that from 2005 through the second quarter of 2008, almost $980 million was invested in content delivery companies.

If Amazon delivers what it is promising -– a simple, API-based CDN – then it would put then not only ahead of all CDN players, but also force rivals to meet the rules (and pricing) set by Amazon. There is a good chance that it’s going to drive weaker players right out of the game.

My final take on this news: Akamai is less likely to be impacted in the near term, but it further commoditizes the CDN business and forces a big shakeout in the industry, taking down the small and the weak. Akamai has been focusing on value-add services, as a way to stay ahead of the commoditization of the basic CDN services.

Read Amazon CTO Werner Vogels take on the news on his blog.