The big cloud providers invest more money every day in servers, storage and networking equipment than companies like Fastly spend in a year. Yet CEO Joshua Bixby thinks big businesses don't want to put all their eggs in one basket, especially when it comes to content.
Bixby, who became Fastly's second CEO in February 2020, saw the traffic that the 10-year-old company handled surge in 2020 during the extended stay-at-home orders forced by the pandemic. Fastly, which went public in 2019 and is now worth $8.5 billion, has built a global network of servers and networking equipment that helps businesses reach their customers more quickly than they would using just the public internet, and it is expanding that network to include edge computing equipment.
A lot of smart people think edge computing is the future of enterprise computing: Microsoft CEO Satya Nadella told Ignite attendees this month that "we are at peak centralization right now," and forecasted a future in which software will need to run closer to end users than remote cloud data centers allow.
Bixby would agree, but he is betting that just like in the data center era, when companies bought network gear from networking companies and servers from server companies, they won't want to buy networking and edge services from Big Cloud. In a recent interview with Protocol, he outlined the history of the CDN market and the opportunity at the edge.
This interview has been edited for clarity and brevity.
It's been a little over a year since you took over the CEO spot, and obviously it's been a pretty unique 12-month period in the history of both this industry and the country in general. What have you learned over your time running Fastly?
Well, my 30/60/90-day plan, I have to tell you, was not implemented as I would have expected.
For many years, I have been with Artur [Bergman, chief architect and co-founder] making really important decisions, being in the room where it happens — getting into a position where my title and Artur's title made a little bit more operational sense. I was not a founder of the business, but I've been here for a very long time and through much of its growth.
[As the pandemic hit,] it was very clear that we needed to continue to communicate with our customers. When we looked at the spike in traffic that happened at the end of mid-March [and] April, and that has to some extent continued, it was unprecedented.
This has become a more competitive market in recent years: There's not just some of the traditional competitors in CDN and adjacent fields, but also the cloud providers who are moving in on this space as well. Are you competing on pricing versus features versus network performance?
I think this market is not extremely well understood in that dynamic. If I step back and look at this market, there is one very highly-competitive portion of this market, which is the media market, particularly the commoditized side of the media market. So you have video bits that are very difficult to monetize, and so you're very, very concerned about price and you are playing one vendor off the other. That is a highly competitive market.
And it's not one that Fastly spends a lot of time in, because we offer a product of tremendous value. If you can't make money in your business doing what you do, then Fastly doesn't make a lot of sense.
There's another side to that media business, which is the high-value side. So imagine Tiger Woods walking down to the 18th green at the Masters, or "Game of Thrones" all getting put out on the same day: Those viewing experiences are well-monetized and they're incredibly high-value. In fact, I would argue over the pandemic, those types of experiences — because we didn't have the normal array of in-person experiences — became even more important, even more valuable. Those are experiences where the value of that experience is so important that you want to pay for quality.
Now if you look to the other side of this and you say "OK, if I am a brand — an ecommerce brand or a high-tech brand — what am I looking at?" That market has historically had almost no competition.
Five years ago, even 10 years ago, if you look at the top high tech and the top educational organizations, financial services, insurance, basically everything else but media, you would have seen one player: Akamai.
[Akamai is] a fascinating study of an industry because I think you'd be hard-pressed to find a company that 20 years into its tenure has 70% or 80% of its market at 95% market share. It kind of goes under the radar. I think there's going to be some really interesting studies of this market at some point in a Harvard Business Review or something where somebody says, "How is that possible with extremely high gross margins?"
Now you talked about the large central cloud providers, and I think that's an interesting dynamic to also get into and how that plays out.
If you think about this market through that historical view of just CDN, it has one framing. If you look at it in its modern incarnation, which I'm going to call the edge cloud — security, end-to-end delivery and compute and everything that comes in on the transport layer — you see a totally different dynamic. And given our perspective, in which CDN is just a part of our business, we look at it from the latter lens.
Every device that used to sit in a data center, from your Cisco edge router all the way back to your web server, needs a place to go in the cloud. I was just talking to a longtime customer, and he said, "Listen, here's the way I look at it. For every $1,000 I spent in my data center, I spent $950 with Dell and HP in order to get lots of servers. I spent $50 or $100 on Cisco and F5, so that I could have a choice for the commoditized side of this business. I had my F5s, I had my Radwares, I had my Arbors, and all of those devices that sit in front of my web server were actually devices that helped me commoditize the core compute elements."
On Fastly and the edge in general, his comment was: "I see exactly the same dynamic playing out. The modern edge is an onramp to the central clouds, and I want a multicloud world. I know that if I'm completely locked in to Amazon, or completely locked into Google or Microsoft, that is not good for me. I need to see them like Dell and HP in the same way as I saw them. So the reason I invest in Fastly and the edge cloud is because I want one place for my web application firewall configuration, because I don't want to do it three times in the three clouds."
For me, what you see is in a multicloud world, there is a neutral third party, an independent network that you want to centralize in order to have an onramp to the central cloud. What I hear over and over again is that customers do not want one vendor for everything, especially in the enterprise. They've learned that lesson many, many times.
It's the reason Cisco blade servers and an entire Cisco ecosystem from your edge to your database did not take hold, because it's not what customers want. We believe, regardless of the investments organizations make with the central cloud players, there is a place for neutrality. For every $100 that's spent for your central cloud, you're going to spend $5 to $10 on security, and you're gonna spend $5 to $10 on delivery, you're probably gonna spend $5 to $10 on edge compute. And that's still to be played out, but if you think it through, then really our market is actually just correlated to the growth of the central cloud.
In terms of what people actually want to do with edge compute, what are the types of things that customers are looking to use those types of services to accomplish?
Let me take an industry that I think has really always been ahead of the curve on this stuff, which is ecommerce.
I go back 10 or 12 years ago, and I see these seminal moments. One was when Walmart and Google decided to slow down their websites. When you slow down your website intentionally, you're trying to quantify, "How valuable is speed?"
What they realized is that 10 milliseconds and 100 milliseconds is a massive difference in the conversion rate. So in that case, everyone knows speed matters. What's interesting in that case, is that what they also know from experimenting is that personalization deeply matters. I can give you a really fast site, but it doesn't tell you about what you bought previously and it doesn't give you hints at what you should buy.
The challenge with personalization today, as it's built out, is that it has to be done with a tremendous amount of compute. So some of the most interesting use cases I've seen for edge compute in ecommerce is to take away this conundrum that is facing developers for like 15 years, which is, "I could make it fast but then I can't personalize it as much."
Correction: An earlier version of this story misstated Fastly co-founder Artur Bergman's current title. He is chief architect.
