Akamai expands its advertising solutions

Akamai made an advertising-related announcement today, introducing something it calls Advertising Decision Solutions, and stating that it has agreed to aquire acerno for $95 million in cash.

acerno (which seems to belong to the e.e. cummings school of brand naming) is a small retailer-focused advertising network, but the reason that Akamai acquired it is that they operate a data cooperative, wherein retailers share shopping data. This data in turn is used to create a predictive model — i.e., if a customer bought X, then it’s likely they will also be shopping for Y and Z and therefore you might want to show them related ads.

Although Akamai states they’ll continue to operate the acerno business, don’t expect them to really push that ad network; Akamai knows where its bread is buttered and isn’t going to risk competing with the established large ad networks, which number amongst Akamai’s most significant customers. Instead, Akamai intends to use the acerno data and its data cooperative model to enhance the advertising-related capabilities that it offers to its customers.

This complements the Advertising Decision Solutions announcement. Basically, it appears that Akamai is going to begin to exploit its treasure-trove of user behavior data, as well as take advantage of the fact that they deliver content on behalf of the publishers as well as the ad networks, and therefore are able to insert elements into the delivery, such as cookies (thus enabling communication between cooperating Akamai customers without those customers having to manually set up such cooperation with their various partners).

This expansion of Akamai’s product portfolio is a smart move. With the cost of delivery dropping through the floor, Akamai needs new, high-value, high-margin services to offer to customers, as well as services that tie customers more closely to Akamai, creating a stickiness that will make customers more reluctant to switch providers to obtain lower costs. Note, however, that Akamai already dominates the online retail space; the new service probably won’t make much of a difference in a retail customer’s decision about whether or not to purchase Akamai services. It will, however, help them defend and grow their ad network customers, and help them maintain a hold on core website delivery for the media and entertainment space. (This is true even in the face of video delivery moving to low-cost CDNs, since you don’t need to deliver the site and the video from the same CDN.)

I think this move signals that we’re going to see Akamai move into adjacent markets where it can leverage its distributed computing platform, its aggregated data (whether about users, content, systems, or networks), or its customer ecosystem. Because these kinds of services will tend to be decoupled from the actual price of bit delivery, they should also help Akamai broaden its revenue streams.

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Posted on October 21, 2008, in Industry and tagged , . Bookmark the permalink. 1 Comment.

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