Akamai Charges into the Online Ad Space with acerno Acquisition

| Oct 27, 2008 | Internet/Managed Services - U.S. | Competitive Intelligence Report

| Analyst: Amy DeCarlo

Current Perspective: Positive
Vendor Importance: Moderate
Market Impact: Moderate

Event Summary

October 21, 2008 -- Akamai Technologies, Inc. and acerno announced that they have signed a definitive agreement for Akamai to acquire acerno in a merger transaction. The transaction, which is subject to customary closing conditions, is anticipated to close later this quarter. The acquisition of acerno, an online service which models shopping and purchase data for more specific ad targeting, will be integrated with Akamai's Advertising Decision Solutions, a new product line also being launched. These new Akamai solutions aim to make it easier for online advertising businesses to recoup their online marketing investments by driving smarter advertising decisions based on relevant audience segments.

Analytical Summary

• Current Perspective: Positive on Akamai’s pending acquisition of online consumer behavioral modeler acerno and the content delivery network (CDN) provider’s launch of its new Advertising Decision Solutions business because the company can integrate acerno’s shopping analytics technology with other new and existing media distribution solutions and its own knowledge of Internet browsing habits to accurately target and deliver advertising to appropriate customers. This integrated solution can reduce development and deployment times for new marketing campaigns while helping publishers better monetize content and advertisers get a better return on their online investments by reaching the right consumers.

• Vendor Importance: Moderate to Akamai because the company is using the acerno purchase to move beyond the traditional confines of CDN services to enter the advertising business. If the company is successful in this space, Akamai will not only be able to tap a new revenue stream but also bolster its core content delivery business by promoting more growth in that sector.

• Market Impact: Moderate on the CDN segment because Akamai is upping its game by providing new advertising solutions that have the potential to differentiate a company that is already a dominant player in the space even further. If the company is able to demonstrate tangible returns to advertisers from their online campaigns, Akamai could help drive more companies to deliver rich media via CDNs including its own.

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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Recommended Competitor Actions

• While no firm in the ad targeting space needs to respond directly to Akamai’s entrance into the market, all online ad networks including Google, which operates AdSense, can use the acerno acquisition as an opportunity to draw attention to their own capabilities and successes.

• Other CDN providers such as Mirror Image and Limelight Networks should emphasize to customers that their focus remains solidly on content delivery. Rival CDN providers can play Akamai’s designs on the advertising space as a distraction from the company’s core business which demonstrates Akamai may be losing focus.

• Level 3, which sold off its advertising business associated with its Vvyx broadcast arm late last year, can note that it exited the advertising sector to concentrate its content markets business on delivery. The CDN provider can imply Akamai risks diluting its effectiveness as a CDN provider by shifting resources to the ad space, particularly during such rocky economic times.

Recommended Competitor Actions

• Advertisers and publishers should watch Akamai closely, seeking more details about the company’s advertising solutions once the acerno acquisition is finalized later this quarter. Once Akamai successfully integrates acerno’s capabilities with its own, the new solutions will have real potential in this space.

CLIENTS ONLY

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