Copyright 2000 by Robert Wood and Akamai 10110 Korklan DO ... · Copyright 2000 by Robert Wood and Akamai DO NOT DISTRIBUTE 21 10110 Korklan DO NOT DISTRIBUTE Market Opportunity:

Copyright 2000 by Robert Wood and Akamai

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10110 KorklanDO NOT DISTRIBUTE

Sharpening the Edge

Robert WoodDirector of Business Development

University of Virginia

October 31, 2000

DARDENDARDEN

Akamai is on a Mission…To Deliver a Better Internet

Networks(Partners)

Content Providers (Customers)

Technology (Proprietary Platform with APIs)

SuperiorFinancialReturns


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The Market We Are In

Great Early Success…Room To Grow

Huge Market Opportunity

Explosive Top Line Growth

On The Path To Profitability

Agenda

What Is Akamai?We Deliver - From the EDGE…

…the market share leader

…providing managed edge services to Content Providers

…operating a global network of servers deployed

at the edges of the Internet

…developing highly complex, proprietary mathematical

algorithms and patented technology

…partnering with third-party application developers via open APIs


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Internet

The InternetLooks Simple on the Outside…

ContentProviders

EndUsers

NAP

NAP

The 4 Bottlenecks:…but Its Much More Complex…

UUNet

NTT

1. First Mile 2. Peering 3. Backbone 4. Last Mile

DeutscheTelekom


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The 4 Bottlenecks:…Being Addressed by Many Players

1. First Mile 3. Backbone 4. Last Mile2. Peering

The 4 Bottlenecks:Akamai’s Addresses 1, 2 & 3

4. Last Mile

UUNet

NTT

NAP

NAP

UUNet

NTT

DeutscheTelekom

1. First Mile 3. Backbone2. Peering


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Agenda






Akamai ExecutionStrong Business Momentum

Services 2 8

Customers (Recurring) 49 1,115Customers (Total) 49 2,800

Servers 1,475 6,060Networks 55 336Countries 24 54

Employees 227 1,229

Channel Partners -- 30Alliance Partners 21 155

3Q (Sept 2000)

IPO(Oct 1999)


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Customers:9 of the Top 10 Search Sites

Customers:200 Leading E-commerce Companies


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Customers:Top Financial Sites

Customers:Leading Internet Video Companies


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Customers:Major Media Companies

Customers:Software Downloads


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Akamaizing Customers: Over 895 With Recurring Revenue

Akamaizing Customers: Over 895 With Recurring Revenue

…Just ½% …Just ½% penetration of penetration of the 200,000 the 200,000 customer customer targetstargets


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Customers Winning Value Proposition

• Speed & reliability with global reach

• Peak demand capacity

• Richer content

• Content provider controls the content

• Real-time reporting

• Unparalleled customer services

Customers Aggressive International Expansion

• Launched Akamai Europe in 2000

- Munich (HQ), Paris, and London

- Wolfgang Stäehle, President

- 16 Experienced Sales Managers

- 50+ Professionals by Year-End 2000

• Plans for local offices in Asia and Latin America


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Akamai-powered:Content Delivery Service Providers



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Networks:Servers in All Major Tier 1 Backbones…


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Networks:..Large Hosting Networks, Universities…

OARNet

MIT

Harvard

University of Houston

Networks:…Broadband Networks…

OARNet

MIT

Harvard



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Networks:…and Major International Networks

OARNet

MIT

Harvard


Networks:…and Major International Networks

…over …over 6,000 servers 6,000 servers

deployed in more deployed in more than 336 networks than 336 networks

in 54 countriesin 54 countries


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Networks:Winning Value Proposition

• Deliver world’s most popular content locally

• Improve performance for subscribers

• Cut backbone expenses and capital costs

• Valued-added services revenue opportunity

• No complex integration or development

• No operational and engineering burden

Technology: Market-leading Service Offerings

1. FreeFlowSM Content Delivery – Flagship service– Akamai is market leader

2. FreeFlowSM Streaming– Live/On-demand audio/video streaming media– Akamai is market leader

3. FirstPointSM

– Global Traffic Management– First hit to optimal distributed site


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Technology: Market-leading Service Offerings

• Akamai Labs: Over 350 people in R&D (55 Ph.D.’s) of the leading mathematicians, computer scientists, and engineers

• Content Delivery Partners:

• Streaming Partners:

• Storage Partners:

• New Services Partners:

Technology: Extending EdgeAdvantageTM Platform


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Technology: Winning Value Proposition

• Share in the Akamai EdgeAdvantage platform

– To reach the largest number of Content Providers

– To reach the largest number of Network Providers

– To be integrated via open interfaces (APIs)

The Akamai Balanced Value Chain

- Improved ROI

- Unparalleled Customer Service

- Scalability & control

- Reporting Tools

Customers

- RevenueOpportunities

- Access toContentProviders

- Access toNetworkProviders

TechnologyPartners


- ImproveCustomerRelationships

- No complexIntegration

ChannelPartners


- ImproveSubscriberExperience

-ReduceNetworkExpenses

NetworkPartners


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Agenda






Market Opportunity:Target Customers

• Any company with a Website that wants to deliver graphics, video, applications, or other rich media with a solution that is:

– Fast…within seconds

– Scalable…to billions of hits

– Reliable…never crashes

– Cost-effective…less expensive

• Out of the 7 million Websites that exist, Akamai believes its initial target market is over 200,000 Websites today (initially 3% of total websites!)


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Content Delivery $125 $4,000

Streaming $220 $6,650

Load Balancing $260 $1,000

Total $605 $11,650

US$ in Million

Market Opportunity: First Three Services Alone are a Huge Market

20031999

Source: Internet Research Group, Paul Kagan, Veronis Suhler, Gar tner, IDC

138%

CAGR

134%

40%

110%

• Web pages grow from 3 billion today to 13 billion in 2003 – 60% CAGR• 50% of all Web pages will contain streaming media by 2003

Market Opportunity: Generated Interest From Others


Selling to NetworksSelling to Networks


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Market Opportunity: Caching, Switches, Servers – Only Pieces to the Puzzle

Integrated End-to-End Solution

Local Load Balancing

Caching

LAN Fault Tolerance

Distributed Software

Configuration

Authentication Real-TimeData Collection Encryption Storage

ScalableBilling


Deployment

Real-TimeCode

Configuration

Object Invalidation

Scalable Log Collection


Management

Scalable Log Processing

Security

Real-Time Code Configuration Open APIs

ProcessMonitoring

LANManagement

NetworkMonitoring

CapacityMonitoring

DemandMonitoring

UsageMonitoring

ServerMonitoring

WANManagement

WAN Fault Tolerance

ContentPlacement

NOCMonitoring

LiveStreaming

% ofNetworkTraffic

# of Networks (+7,000)

Market Opportunity: Target Networks

#1 – 10< 25%

99% of the eyeballs!

#11 – 5,50074%

• Largest network in the world is only 6% of access traffic

• Top 10 networks in the world are less than 25% of access traffic

• Need to have servers in over 5,500 networks to reach 99% ofaccess traffic without crossing peering and backbone bottlenecks


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Market Opportunity: Target Services

• Akamai offers 8 services today, a tiny percentage of potential services

• There are dozens of categories of potential services that can be outsourced and moved to the edge of the Internet, including:

- Content delivery - Streaming- E-Broadcasting- Load balancing- Traffic analysis- Geographic profiling- Bandwidth profiling

- On-line gaming- Stress testing- E-commerce- Web serving- Publishing- Managed Storage - Managed Security

- Content management - Dynamic Page Assembly- User personalization- Ad-insertion- Performance monitoring- Content syndication- Third-party applications

Agenda







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$0.4 $0.8$2.7

$7.2

$18.1

$27.2

Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00

Top Line GrowthStrong Acceleration in Short History

Akamai Quarterly Revenues(US$ in Millions)

Top Line Growth:Customer Revenue Drivers

Committed monthly revenue from snapshot

customer set as of Jan. 1st 2000

increased over 30%by September 2000

•• More HitsMore Hits•• Richer ContentRicher Content•• Broadband Broadband

IncreasedUsage

New Services

•• 4 New Services 4 New Services launched Q2launched Q2


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NewCustomers

Top Line Growth:Customer Revenue Drivers

•• More HitsMore Hits•• Richer ContentRicher Content•• Broadband Broadband

IncreasedUsage

New Services

•• 4 New Services 4 New Services launched Q2launched Q2

•• Direct SalesDirect Sales•• ResellersResellers•• Channel PartnersChannel Partners

Recurring revenuecustomer base

grew 400%227 to 1,115in 9 Months (Jan-Sept)

Top Line Growth:Network & Technology Revenue Drivers

• Enabling Content Delivery Service Providers to sell Akamai service offerings – Content delivery– Streaming– Load balancing

• Enabling third party application developers to integrate via open APIs with EdgeAdvantage – Access to EdgeAdvantage platform – Access to Content Providers – Access to Network Providers


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Agenda






Path to Profitability:Attractive Financial Model

• Recurring revenue– Long-term revenue after one-time

customer acquisition cost

• High operating leverage– High margins from new services to existing

customers

• Low capital expenditures– Free cash flow quickly follows net income


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Path to Profitability:Customer Profit Drivers

Increased Increased ROI for ROI for

Content ProvidersContent Providers

Increased Increased Revenues Revenues for Akamai for Akamai

Leads to

• Historically, Content Providers have bought the raw materials to improve website performance– Bandwidth, servers and personnel

• Akamai has taken the raw materials and created value-added services– Content delivery, streaming, load balancing, etc.

• Akamai service offerings create real ROI for Content Providers leading to customer “stickiness”

Path to Profitability:Network Profit Drivers

• Large volume purchasing power

• Bandwidth costs declining with new fiber and technology

• Network partnerships improve connectivity and lower cost

• Increasing amount of bandwidth for free

• Higher utilization driving margin expansion

• New, non-bandwidth services are high margin Bandwidth

Costs

Network Utilization


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Path to Profitability:Network Profit Drivers

• Gross margin positive today– Reached in less than

1 year of selling services

• Server payback is fast and improving– server payback =

Less than 9 month payback

• Network utilization remains low as we build out network– Fixed cost build-out is

focus of 2000 and 2001 Q4 99 Q1 00 Q2 00 Q3 00

Cash

Non-Cash

Akamai Gross Margin

52.4%

30.4%

-22.8%

-65.6%

30.3%

8.1%

56.0%

33.0%

Path to Profitability:Technology Profit Drivers

• Monetizing the EdgeAdvantage platform

• An increasing number of partners pay Akamai:– For access to the EdgeAdvantage platform – For access to our Content Providers– For access to our Network Providers

• Non-bandwidth services with 90% gross margin


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Path to Profitability:Target Financial Model

Long-term Targetas % of Revenue

Revenue 100%

Cash Gross Margin 65-70%

SG&A 15-20%

Engineering & Development 15-20%

EBITDA 30-40%

Capital Expenditures 3-5%

Investor Highlights

Market Leader - First Mover Advantage


Largest Global Server Network

Blue-Chip Customer Base

Experienced Management Team

Proprietary, Open API Platform

Attractive Financial Model


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Delivering a Better Internet

Documents

Copyright 2000 by Robert Wood and Akamai 10110 Korklan DO ... · Copyright 2000 by Robert Wood and Akamai DO NOT DISTRIBUTE 21 10110 Korklan DO NOT DISTRIBUTE Market Opportunity: