Thus far, merger-watchers eyeing the rumored bidding for Cotendo seem to be asking: Why this high a valuation compared to the rest of the CDN industry? Who are the potential suitors and why? What if anything does Cotendo offer that other CDNs don’t? How do the various dynamic offerings in the market compare? Who else might be ripe for acquisition? What is the general trend of M&A activity in the CDN industry going forward? Do I agree with Dan Rayburn’s commentary on this deal?

However, for various reasons, I am not currently publicly commenting further on Twitter or my blog, or really in general with non-Gartner-clients, regarding the potential acquisition of Cotendo by Akamai (or AT&T, or Juniper, or anyone else who might be interested in buying them).

If you are a Gartner client, and you want to discuss the topic, you may request a written response or a phone call through the usual mechanisms for inquiry.

There’s one thing in particular that tends to make Akamai customers “sticky” — the amount the customer uses professional services. The more professional services a customer consumes from Akamai, the less likely it is they’ll ever switch CDNs. In short: The more of a pain it’s been for them to integrate with Akamai’s CDN (usually due to the customer having a complex site that violates best practices related to content cacheability), and the more they have to use recurring professional services every time they update their site, the less likely it is that they’re going to move to another CDN. That’s for two reasons — one, because it’s difficult and expensive to do the up-front work to get the site onto another CDN, and two, because most other CDNs don’t like to do extensive professional services on a recurring basis. That makes the use of professional services a double-edged sword, since it’s not really a business with great margins, and you’re vulnerable if the customer eventually goes and builds a site that isn’t a great big hairy mess.

But there’s one Akamai product (delivered as a value-added additional service) that’s currently sufficiently compelling that customers and prospects who want it, won’t consider any other CDN that can’t offer the same. (And since it’s currently unique to Akamai, that means no competition, always a boon in a market where pricing is daily warfare.) I’m suddenly seeing it frequently quoted, which makes it likely that it’s a significant sales push, though it’s not a brand-new product. It’s a very effective attach.

Can you guess what it is?

(You may feel free to speculate on my blog, but if you want the answer, and you’re a Gartner client, make an inquiry request through the usual means.)

Dan Rayburn’s blg post about the Akamai/Netflix relationship seems to have set off something of a firestorm, and I’ve been deluged by inquiries from Gartner Invest clients about it.

I do not want to add fuel to the fire by speculating on anything, and I have access to confidential information that prevents me from stating some facts as I know them, so for blog purposes I will stick to making some general comments about Akamai’s delivery performance for long-tail video content.

From the independent third-party testing that I’ve seen, Akamai delivers good large-file video performance, but their performance is not always superior to other major CDNs (excluding greater reach, i.e., they’re going to solidly trounce a rival who doesn’t have footprint in a given international locale, for instance). Actual performance depends on a number of factors, including the specifics of a customer’s deal with Akamai and the way that the service is configured. The testing location also matters. The bottom line is that it’s very competitive performance but it’s not, say, head and shoulders above competitors.

Akamai has, for the last few years, had a specific large-file delivery service designed to cache just the beginning of a file at the very edge, with the remainder delivered from the middle tier to the edge server, thus eliminating the obvious cache storage issues involved in, say, caching entire movies, while still preserving decent cache hit ratios. However, this has been made mostly irrelevant in video delivery by the rise in popularity of adaptive streaming techniques — if you’re thinking about Akamai’s capabilities in the Netflix or similar contexts, you should think of this as an adaptive streaming thing and not a large file delivery thing.

In adaptive streaming (pioneered by Move Networks), a video is chopped up into lots of very short chunks, each just a few seconds long, and usually delivered via HTTP. The end-consumer’s video player takes care of assembly these chunks. Based on the delivery performance of each chunk, the video player decides whether it wants to upshift or downshift the bitrate / quality of the video in real time, thus determining what the URL of the next video chunk is. This technique can also be used to switch sources, allowing, for instance, the CDN to be changed in real time based on performance, as is offered by the Conviva service. Because the video player software in adaptive streaming is generally instrumented to pay attention to performance, there’s also the possibility that it may send back performance information to the content owner, thus enabling them to get a better understanding of what the typical watcher is experiencing. Using an adaptive technique, your goal is generally to get the end-user the most “upshift” possible (i.e., sustain the highest bitrate possible), and if you can, have it delivered via the least expensive source.

When adaptive streaming is in use, that means that the first chunk of videos is now just a small object, easily cached on just about any CDN. Obviously, cache hit ratios still matter, and you will generally get higher cache hit ratios on a megaPOP approach (like Limelight) than you will with a high distributed approach (like Akamai), although that starts to get more complex when you add in server-side pre-fetching, deliberately serving content off the middle tier, and the like. So now your performance starts to boil down to footprint, cache hit ratio, algorithms for TCP/IP protocol optimization, server and network performance — how quickly and seamlessly can you deliver lots and lots of small objects? Third-party testing generally shows that Akamai benchmarks very well when it comes to small object delivery — but again, specific relative CDN performance for a specific customer is always unique.

In the end, it comes down to price/performance ratios. Netflix has clearly decided that they believe Level 3 and Limelight deliver better value for some significant percentage of their traffic, at this particular instant in time. Given the incredibly fierce competition for high-volume deals, multi-vendor sourcing, and the continuing fall in CDN prices, don’t think of this as an alteration in the market, or anything particularly long-term for the fate of the vendors in question.

Matthew Sacks has blogged Keynote performance test results for Akamai via Distribution Cloud.

There are other Akamai resellers out there, but Distribution Cloud posts its prices publicly, starting at 50 GB for $150 per month ($3/GB), and going up to 1 TB for $2,200/month ($2.20/GB), with storage at $15/GB. That’s 10x the cost of Limelight with a Rackspace Cloud Files origin ($0.22/GB, no commit) — definitely not a commodity price, so it’s really the low commit that makes this interesting.

But the blog post got me wondering: Who is Distribution Cloud, anyway? Their website lists a phone number and the fact they’re in Cambridge, MA, but no address or anything else that indicates who the company is. A search on the phone number turns up that it’s registered to a David Reisfeld at 94 Rice St, phone service courtesy of Level 3. LinkedIn and Naymz have listings for a person who seems to match: a senior director, product management, CDN streaming services, at Level 3 — formerly a senior product manager at Akamai.

But that only deepens the mystery. Did Reisfeld run a reseller (since 2002, the site claims) while employed at Akamai, with the blessing of his employer? Is he fronting for a buddy? Is he still doing it while employed at a competitor, or is the name for the phone listing not current? If it’s not his company, whose is it?