First, the cold. Limelight Networks was meant to be the New Akamai, which made its June IPO one of the most anticipated of the year. Content delivery networks like this, which bring high levels of reliability to routing data across the internet, should be big beneficiaries of the growth of online video. They are also good barometers of the health of the broader online media industry.
If Limelight executives are to be believed, the rise of online video is turning out to be far from smooth. The company today gave a very downbeat revenue forecast for this quarter, in the process triggering a 35 per cent drop in its share price. Jeff Lunsford, chairman and chief executive officer, blamed it on seasonality: apparently demand for Web video drops off as the regular TV seasons end for the summer. He also pointed out that many online media businesses are still searching for a business model. The costs of delivering online video are soaring before the revenues start to come in, leading media companies to demand lower prices from companies like Limelight.