Ooyala Gets Exclusive With Akamai

Written by Ryan Lawler

Tuesday, July 21. 2009 at 06:50 PM EDT 8 comments

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Online video platform provider Ooyala is eschewing its previous strategy of working with several content delivery networks (CDNs), and has decided instead to use Akamai Technologies Inc. (Nasdaq: AKAM) for the vast majority of its video delivery. UPDATED 7/24

Ooyala, which had previously devised a means of load balancing and traffic shaping bits across multiple CDNs, "flipped the switch" and became a one-CDN shop in March or April, says CTO Sean Knapp. According to him, the decision to settle on Akamai was due primarily to an overall better performance that his company saw with the CDN.

"We were doing load balancing across multiple CDNs, and we built an internal dashboard to track every CDN for performance," Knapp says. "And what we found was that Akamai's performance was always the best."

While the decision to switch to one CDN or another isn't terribly groudbreaking in and of itself, there are a few reasons we find this move interesting.

From a technical standpoint, the decision to use Akamai exclusively goes against one of Ooyala's early selling points, which was to provide video services by tapping multiple providers for delivery. Having multiple CDNs was one way that the company could lower delivery costs, by arbitraging price and performance among up to 10 different providers.

With Akamai serving all of its content, Ooyala no longer has that same cost advantage. Without going into specifics, Knapp says that the price was competitive enough to make Ooyala switch over. More importantly, he says that pricing for customers remains unchanged -- and that the new price Ooyala pays for content delivery shouldn't drastically hurt the company's margins.

"We still have an incredibly healthy business," Knapp says. "This deal still makes a lot of sense for us."

Ooyala isn't the only video platform company that has pledged its business to Akamai lately. Last month Kit Digital announced a strategic partnership in which it would resell Akamai CDN services in exchange for referrals among some of the company's enterprise customers.

Earlier this year, VMIX Media Inc. said it was going to exclusively provide Akamai CDN services and expanded that agreement with deeper Flash streaming integration in June. VMIX CEO Mike Glickenhaus has frequently spoken of the opportunity a partner like Akamai could offer his company, by connecting VMIX with some of its customers.

Although Ooyala confirmed that it has more or less gone exclusive with Akamai, the company wouldn't comment on the possibility of a more strategic partnership that could help funnel business its way. Obviously Akamai will benefit from customers that the video platform provider signs up on its own, but Ooyala no doubt hopes its close ties to the CDN will prompt Akamai to refer customers its way, or perhaps even resell its services outright.

It's not clear how Akamai makes referrals, or on what basis it recommends partner providers -- and the CDN itself was mum on implications of a tie-up that might stem from the deal. In an email, an Akamai spokesperson writes:

"Akamai views our digital media partners as a way to augment our offerings that we bring to market. We listen to, and work closely with, our customers to make available to them as many of the offerings that they require. Ooyala is an important part of our robust ecosystem, and we look forward to collaborating with them."

One final bit of scuttlebutt that might be of interest -- Contentinople has heard that the deal was brokered by Eric Morris, formerly a business development guy at Akamai and now vice president of sales at Ooyala. According to Ooyala's management team page, Morris built Akamai's "global channel revenue over the course of seven years, directly impacting the annual revenue from $135 million per year to over $800 million per year." So even in his new position, Morris has helped to increase Akamai's channel revenue by striking the deal that makes it Ooyala's default CDN.

UPDATE: Akamai director of corp comm Jeff Young points out that $800 million per year is Akamai's total revenue, not just channel revenue. As a result, we've updated the last paragraph with the full quote from the Ooyala management team page, rather than the paraphrase we had previously used.