Mid-Year Reflection: Insights from Edgio’s CEO

The past six months at Edgio have proven to me and the team that there is a path forward despite the challenges we’ve faced over the last two years. Initially when I stepped in to lead the company, it was heavily reliant on outdated CDN for revenue, burdened with administrative challenges, encumbered by complex debt structures, and lacking transparency in decision-making processes. However, beneath the surface, I saw significant opportunities: a vast untapped market potential, capable and motivated engineering and sales teams, creditors willing to collaborate, and a renewed focus on profitability through data-driven analysis and efficient unit economics. Now, after six months as CEO, I’m confident that the public perception of Edgio doesn’t fully capture its true potential. We have two high-margin businesses in the Apps/Security and Media sectors where we’ve established strong product market fit; each business is distinguished by our high-performance Edgio network, which we’re continuously optimizing to maximize AEBITDA.

Since the Layer0 and Edgecast acquisitions, our Apps/Security team has dedicated countless hours to rearchitecting our platform to service customers who expect the fastest websites and apps imaginable. Our platform is inherently secure, covering all attack surfaces continuously. Traditionally security has been viewed as a tradeoff for speed and performance, but not with Edgio’s next-generation Applications v7 platform. We understand that our customers require a tightly integrated DevSecOps platform that combines exceptional speed and developer velocity with security throughout the entire SDLC lifecycle, and we achieve this by implementing AI models that learn from hundreds of global customers facing billions of exploit attempts on their applications. Edgio protects the entire web application stack, made possible by the visibility provided by our Attack Surface Management (ASM), recently launched at RSA. We anticipate ASM becoming a significant success and the first of many initiatives to enhance our customers’ Continuous Threat Exposure Management (CTEM) programs.

This is well in line with our continued observations of a shift towards security platforms. While some legacy security companies might argue that a platform-centric strategy may lead to vendor lock-in, lack of flexibility, or compromise on the depth and specialization of individual security products, others advocate for a modular approach. This allows customers to choose and integrate specific security tools that best suit their needs, even if they come from different vendors. However, a platform strategy enables customers to have greater synergies and efficiency in implementing effective defense-in-depth. Leveraging the power of AI to correlate all security data within a platform while automating prioritization and mitigation can serve as a potent force multiplier for SOC teams. It improves organizations’ mean time to detect (MTTD) and mean time to respond (MTTR) to security issues while reducing vendor sprawl and non-functional requirements (NFR) when securing their businesses. With Edgio, we offer the best of both worlds. Customers rely on us for our globally distributed Web Application and API Protection (WAAP) solution, encompassing WAF, Bot Management, DDoS protection, API Security, and a global SOC to safeguard end-to-end applications. Additionally, customers can integrate our ASM into their existing AppSec, SASE/SSE stack, and vulnerability management program to prevent emerging threats. Our approach has garnered support from customers and prospects alike, as evidenced by our 12 competitive take-outs thus far in 2024 from the likes of Cloudflare, Akamai, AWS, Fastly, and Vercel, as well as a recent partnership announcement with Vercara, who is OEM’ing our security offering to their global 5000 customer base.

How about our Media ambitions? I continue to believe that the global streaming market is ripe for disruption, and Edgio is poised to lead the charge. Even the largest streaming services today hemorrhage billions collectively, grappling with a fragmented landscape of niche and legacy players. While our competitors tackle a slice of the streaming puzzle, we aim to develop comprehensive solutions. Media was abandoned by Akamai and other CDNs, and treated opportunistically by hyperscale companies like AWS, whose Elemental service excels through innovation and financial muscle. However, I see the market clamoring for a managed service capable of end-to-end management for Live and VOD workflows as either a one-stop shop or best of breed and accommodating preferred vendors inclusive of CDNs. The market needs live sports, cable broadcast, VOD, and digital native streaming. From my perspective, the industry is still in day 1.

The emergence of Venu – a sports streaming joint venture by Disney, Fox, and Warner Bros. Discovery – threatens established players with its coverage of major sports leagues and events, including the NFL, NBA, MLB, NHL, UFC, and various college sports. It poses a real challenge to competitors like Amazon Prime Video, YouTube TV, and DAZN, not to mention satellite providers who have already become litigious. Today our Uplynk product powers over 35,000 live events annually, serving hundreds of millions of ads monthly, and managing hundreds of thousands of VOD assets. We’ve already skated to where the puck is headed, and we’re looking at the win column.

Lastly, the CDN business as a standalone entity has faced price compression for two decades, while the underlying costs have decreased at a far slower pace. The largest CDN consumers persist in seeking the lowest prices, compressing rates by about 15% per year. Meanwhile, expenses related to space and transit are decreasing less rapidly, and power is moving in the other direction. I like to say that if we were selling Big Macs, our customers would be getting a Happy Meal for $0.99 versus the $12 it costs today. This misalignment is why I’m calling an end to the race to the bottom, at least for Edgio. We are in the process of notifying customers who don’t meet our gross margin thresholds that while we value their business and genuinely wish to serve them on terms beneficial to both parties, there are regional startups and publicly traded companies willing to pursue scale at any cost who can close the gap. Of note, we are doubling down on our Open Edge platform, offering a 2RU appliance for edge cache (50GB and up) on revenue-sharing terms with ISPs. The aim is to optimize our ‘regions’ and eliminate underutilized PoPs in unprofitable areas. Ultimately, this will prove advantageous for our customers, who will seek cost savings throughout their supply chain, and for Edgio and our shareholders, who prioritize fiscal discipline.

Execution is the name of the game. Looking ahead to the latter half of the year, our sales teams are firing on all cylinders, fueled by our confidence in the product market fit for our Apps/Security and Uplynk businesses. The momentum we’re seeing across the board is edifying. Throughout the summer, we’ll host a series of webinars with customers and partners, and we’ll gear up for IBC in Amsterdam in September, where we’ll unveil the next generation of Uplynk. In the meantime, I remain grateful for the ongoing support from our customers, partners, shareholders, and incredibly dedicated employees as we work together to disrupt the Apps/Security and Media sectors.