Video monetization and optimization market shares 2014

For those of you, loyal readers who have followed this report, now in its third edition, there will be no surprise as to why monetization is making its appearance in the title and figures so prominently in the analysis and opinions voiced there.

Mobile video optimization was a solution brought forward by web optimization, browsing gateway and mobile video vendors that was positioned as a means to drastically reduce the volume of video transiting through a mobile network. With a combination of lossless (caching, pacing…) techniques aimed first at reducing the inherent waste of delivering videos created for the internet and laptops in a mobile network, the solution evolved towards aggressively reducing video volume through lossy (transcoding, transrating) techniques.

Vendors in this space have evolved their offering from a broad, binary application of the technology, essentially proxying and optimizing all video traffic all the time to a more granular, targeted implementation that performs optimization to portion of the traffic, at specific points in time in specific locations, driven by policy engines or relying on network congestion detection, either on explicit indication from the RAN or interpolation relying on the state of the TCP traffic. Most vendors are also now launching customer engagement tools, sophisticated analytics or new video charging capabilities to enable early monetization plays.

As usual, I provide market share calculations in term of deployment per vendor, the unit being one operator / country. For instance, Verizon Wireless counts for one deployment, even though the operator might deploy 40+ data centres. Groups such as Vodafone, Deutsche Telekom or Telefonica count for each of the properties where the technology is deployed.

Market shares

1. Flash Networks
   Flash Network’s market share is 40% . It is the market share leader and has grown faster than the market since the last update, through organic growth and acquisition of Mobixell Networks.
2. Citrix
   Citrix’ market share is 30%. The company has grown faster than the market  since the last update.
3. Openwave Mobility
   Openwave Mobility's market share is 8%. The company has grown faster than the market since the last update.
4. Venturi Wireless
   Venturi Wireless markets is 8%. The company has lost market shares since the last update.
5. Others
   Allot, Avvasi, NSN, Opera, Vantrix (in alphabetical order) share the remaining 14%.

The market share calculations are based on a proprietary {Core Analysis} database, collecting data such as vendors, resellers, value of the deployment in term of total cost of ownership for the operator, operator name, country and region. These data are cross-referenced from vendors' and operators' individual disclosures. This database also includes over 130 opportunities in video optimization that are at different stage of maturity (internal evaluation, vendor trial, RFI, RFx...) and will close over the next 18 months.

The market share is valid at the time of publishing but change on a weekly basis, as new deals are awarded.

The market share in term of revenue is not published here but is available as part of my workshop on the video optimization market. The rankings in term of revenue per vendor are quite different from the installed market share, as different price strategies and different geographic markets are considered.

Mobile video monetization and MWC14 wrap up

This year's Mobile World Congress proved itself extremely busy, with many vendors graduating from slides to demos and customer announcements in the mobile video field.

As usual, my "Mobile Video monetization and optimization 2014" report, now in its 3rd edition, will be released at the end of March. It features the dominant market (net neutrality, privacy, sponsored data, service prioritization...) and corresponding technology trends (analytics, big data, NFV, encryption, TCP, web and video optimization, DASH, LTE broadcast, H.265, VP9, SPDY. HTTP 2.0, 4K...) as well as in depth analysis of vendors strategy in this market.


Haven't had a chance to look through all the mobile video related announcements at mobile world congress?

Here is a list of releases issued by some of the companies followed in this blog.

As it is now customary, Allot releases its "mobile trends report" in time for the show. It features a few interesting findings such as the facts that laptop dongle users seem to be more tolerant of stalls than smartphone users, continuing to watch videos after repeated stalls where smartphones tend to stop. Additionally, it shows that in the case of the network studied, the network was inefficiently allocating bandwidth, unable to recognize larger devices, video encoding and hungry video containers to alleviate video stalls...

Avvasi was one of the busiest companies in mobile video, with no less than 4 announcements, including 2 named customers: Video minutes solution launch, Wind Canada customer announcement, Virgin France customer announcement and GSMA award shortlist. The 2 named customers are both for the product launched last year to manage mobile video. Complete analysis of the solution in my report.

Citrix-ByteMobile released its latest Mobile Analytics report at the show as well. Findings include the fact that video constitutes now 32% of social networks traffic and statistics showing that while mobile advertising in 2013 doubled its audience from 2014, only one in twenty subscriber is likely to see today a mobile video ad. In other news, the company launched a new offering in the analytics space with ByteMobile Insight, fruit of a partnership with Zettics. Big data analytics seemed to be a recurring theme with many vendors this year, with virtualization a close second.

Busy with Mobixell Network's acquisition, Flash Networks nonetheless made a noticeable change in its communication and positioning with the launch of its "game changer" campaign and the celebration of Layer8, its successful carrier OTT monetization tool now deployed commercially in several networks.

Openwave Mobility launched a new engagement tool, for customer self care and operator notifications as well as the new release of its media optimization solution.

Opera-Skyfire were not overly present on the PR front, beyond an announcement related to poor video quality in Russia's 3G networks. They will certainly be able to announce new customer wins shortly.

Vantrix made the news with two releases. A follow up to their standing partnership with Kontron on NFV and big data analytics, backed by the customary product new release announcement.

All these companies, together with Affirmed Networks, Connectem, Divi Networks, Ericsson, Huawei, Mahindra Conviva, NSN, Saguna Networks, Vasona Networks... and many others in the "Mobile video monetization and optimization 2014" report.

All packets are not created equal: why DPI and policy vendors look at video encoding

As we are still contemplating the impact of last week's US ruling on net neutrality, I thought I would attempt today to settle a question I often get in my workshops. Why is DPI insufficient when it comes to video policy enforcement?

Deep packet inspection platforms have evolved from a static rules-based filtering engine to a sophisticated enforcement point allowing packet and protocol classification, prioritization and shaping. Ubiquitous in enterprises and telco networks, they are the jack-of-all-trade of traffic management, allowing such a diverse set of use cases as policy enforcement, adult content filtering, lawful interception, QoS management, peer-to-peer throttling or interdiction, etc...
DPIs rely first on a robust classification engine. It snoops through data traffic and classifies each packet based on port, protocol, interface, origin, destination, etc... The more sophisticated engines go beyond layer 3 and are able to recognize classes of traffic using headers. This classification engine is sufficient for most traffic type inspection, from web browsing to email, from VoIP to video conferencing or peer-to-peer sharing.
The premise, here is that if you can recognize, classify, tag traffic accurately, then you can apply rules governing the delivery of this traffic, ranging from interdiction to authorization, with many variants of shaping in between.

DPI falls short in many cases when it comes to video streaming. Until 2008 or so, most video streaming was relying on specialized protocols such as RTSP. The classification was easy, as the videos were all encapsulated in a specific protocol, allowing instantiation and enforcement of rules in pretty straightforward manner. The emergence and predominance of HTTP based streaming video (progressive download, adaptive streaming and variants) has complicated the task for DPIs. The transport protocol remains the same as general web traffic, but the behaviour is quite different. As we have seen many times in this blog, video traffic must be measured in different manner from generic data traffic, if policy enforcement is to be implemented. All packets are not created equal.

• The first challenge is to recognise that a packet is video. DPIs generally infer the nature of the HTTP packet based on its origin/destination. For instance, they can see that the traffic's origin is YouTube, they can therefore assume that it is video. This is insufficient, not all YouTube traffic is video streaming (when you browse between pages, when you read or post comments, when you upload a video, when you like or dislike...). Applying video rules to browsing traffic or vice versa can have adverse consequences on the user experience.
• The second challenge is policy enforcement. The main tool in DPI arsenal for traffic shaping is setting the delivery bit rate for a specific class of traffic. As we have seen, videos come in many definition (4k, HD, SD, QCIF...), many containers and many formats, resulting in a variety of different encoding bit rate. If you want to shape your video traffic, it is crucial that you know all these elements and the encoding bit rate, because if traffic is throttled below the encoding, rate, then the video stalls and buffers or times out. It is not reasonable to have a one-size-fits-all policy for video (unless it is to forbid usage). In order to extract the video-specific attributes of a session, you need to decode it, which requires in-line transcoding capabilities, even if you do not intend to modify that video.

Herein lies the difficulty. To implement intelligent, sophisticated traffic management rules today, you need to be able handle video. To handle video, you need to recognize it (not infer or assume), and measure it. To recognize and measure it, you need to decode it. This is one of the reasons why Allot bought Ortiva Wireless in 2012, Procera partnered with Skyfire and ByteMobile upgraded their video inspection to full fledged DPI more recently. We will see more generic traffic management vendors (PCRF, PCEF, DPI...) partner and acquire video transcoding companies.

Thoughts on Flash Networks' acquisition of Mobixell

This is it. The news hit the press officially today and officiously yesterday through Azi Ronen's blog. Flash Networks has acquired Mobixell Networks. The newly formed company will command a leading market share in deployment in the video optimization segment.

This acquisition is the latest in a long series (see Marlin/Openwave, Opera/Skyfire, Citrix/ByteMobile and Allot/Ortiva...) and there are certainly more to come. If you are a frequent reader of this blog, it will not come as a surprise to you to see further concentration in that space.

Historically speaking, the companies in this segment have been under-capitalized to go after the market opportunity. Start-ups and reboots have been the rule rather than the exception and only recently did medium to large size companies such as Citrix, Allot, NSN, Huawei and Cisco entered the market. Inevitably, an increase in competition, together with a quasi full penetration of tier 1 has led to a price attrition.

Mobixell has been one of the proponent of the price war and while the strategy to acquire market share at any cost has served its purpose, since it has put them in the second place in term of installed base, It has been punishing on their bottom line. The company might have experienced some "investor fatigue" that has led to the historical CEO and CTO, both co-founders leaving the company earlier this year.
As disclosed to my clients, the change of direction would coincide with a strategy change, with an emphasis on profitability, but the company was already committed to a growing customer base that would require more capital to serve efficiently.

The new entity will have  a critical mass of customers in this space and a dominant market share in term of deployments, but not in revenue, as Citrix/ByteMobile still dominates most of the high-margin tier 1 mature operator groups.
No doubt this is not the endgame for Flash Networks and that more consolidations are to be expected in the near future.

Flash Networks' success will now require a large product management undertaking, to digest Mobixell , make the necessary choices between a product base almost entirely redundant and cajole both companies' customers with a roadmap that will be worth waiting for while the products align.

As mentioned previously, between policy management, optimization, charging, signalling management and DPI, there are too many vendors and too many functions with large overlap. Video is no doubt an important element of the equation as it now dominates data traffic but it is a relatively misunderstood technology that requires specialized and costly R&D investment. With so many under capitalized start ups, it is easier to acquire the technology than to develop it in-house. Particularly if you consider that it takes 40-55m$ and 7 years to bring a product to market. Many companies have under-estimated the skill set necessary to operate in video and an acquisition is also the best vehicle to acquire experienced engineers and patents. Full in-depth analysis of the market and the vendors' strategy can be found in the mobile video optimization report and workshops.

Video optimization mid-term update

As it is now traditional (here, here and here) , I update my video optimization market report mid-way from its release post mobile world congress.
This update sees many changes, including Cisco's new strategy in the space, together with company and product plans from Citrix ByteMobile, Allot, Flash Networks, Mobixell, Openwave Mobility, Opera Skyfire and many others.

Operator trends

The market trend for the segment reaffirms its maturity. Like last year, the summer has been quiet in term of activity while spring and the fall remain the high RFx quarters. We have recently seen two large groups select their vendor in the space (Telenor and Orange), more or less wrapping up the tier one group selection process for this cycle in mature markets. Growth in this segment now comes from Latin America and South East Asia, where many groups (Singtel, America Movil, ...) have yet to formulate / finalize a strategy in the space. As discussed in a recent post, coming back from LTE Asia, I have been able to experience first-hand both the interest and the confusion on how to manage efficiently OTT video in some of these markets.

Vendor trends

Citrix ByteMobile remains market leader, both in deployments and revenue. The deployment relative market share is decreasing slightly to 29%, while revenue market share is increasing. This is the result of the fact that new low-cost vendors are entering the market and tier 2 / 3 customers are buying solutions, depressing the average sale price, while increasing the volume of transactions.

Mobixell Networks remains number 2 in deployments with 23%, once again growing its market share over the period. The company's geographical growth comes from APAC and LatAm.

Flash Networks remains a strong third with 17%, growing as well faster than the market. The company is focusing on profitable growth in mature markets with large tier 1 groups.

While the vendors and their order remain unchanged at the top, the new entrants in the market are exceeding expectations, with good progress from Opera Skyfire and Avvasi for instance, while the mid-segment vendors are seeing their market shares and margin deteriorate.
For more information or to order my report, please contact me.

As usual, I provide market share calculations in term of deployment per vendor, the unit being one operator / country. For instance, Verizon Wireless counts for one deployment, even though the operator might deploy 40+ data centers. Groups such as Vodafone, Deutsche Telekom or Telefonica count for each of the properties where the technology is deployed.

The market share calculations are based on a proprietary {Core Analysis} database, collecting data such as vendors, resellers, value of the deployment in term of total cost of ownership for the operator, operator name, country and region. These data are cross-referenced from vendors' and operators' individual disclosures. This database also includes over 100 opportunities in video optimization that are at different stage of maturity (internal evaluation, vendor trial, RFI, RFx...) and will close over the next 18 months.
The market share is valid at the time of publishing but change on a weekly basis, as new deals are awarded.

Video optimization market shares 2013

This is the time of the year, when, after releasing the mobile video optimization 2013 report, I provide a little insight on the movers and shakers of that market segment and their progress over the past year.

As usual, I provide market share calculations in term of deployment per vendor, the unit being one operator / country. For instance, Verizon Wireless counts for one deployment, even though the operator might deploy 40+ data centers. Groups such as Vodafone, Deutsche Telekom or Telefonica count for each of the properties where the technology is deployed.

The market share calculations are based on a proprietary {Core Analysis} database, collecting data such as vendors, resellers, value of the deployment in term of total cost of ownership for the operator, operator name, country and region. These data are cross-referenced from vendors' and operators' individual disclosures. This database also includes over 150 opportunities in video optimization that are at different stage of maturity (internal evaluation, vendor trial, RFI, RFx...) and will close over the next 18 months.

The market share is valid at the time of publishing but change on a weekly basis, as new deals are awarded.

The market share in term of revenue is not published here but is available as part of my workshop on the video optimization market. The rankings in term of revenue per vendor are quite different from the installed market share, as different price strategies and different geographic markets are considered.

Market shares

• ByteMobile

ByteMobile is still the market leader in this segment, post Citrix acquisition. The company, with an estimated 35% market share remains stable and has grown with the market in the last year.

• Mobixell Networks

Mobixell Networks ascends this year to the second place in our ranking, with 19% market share. The company has grown faster than the market in term of share acquisition.

• Flash Networks

Flash Networks is in third place with a 15% market share. The company has seen its market share grow slower than the market last year.

• Venturi Wireless

Making its entry in fourth place this year is Venturi Wireless, who claims most of its deployments through an OEM channel with a market share of 10%. The company has been growing faster than the market last year.

• The rest

The remaining 21% is shared between (by alphabetical order) Allot, Avvasi,  Mahindra Comviva,  Openwave Mobility, Opera Skyfire and Vantrix.

Question? comments? please do not hesitate to contact me.

The sampling this year is larger than last year, as a result from new disclosures from emerging vendors that were stealth / not public last year. As a result, market shares are a little different and should not be directly compared with last year's, since some of the disclosures show deployments that predates last year's calculations.

2013: the year of Big Video

In September of 2012, Vodafone Germany shocked the industry in announcing that video was consuming 85% of its LTE network.
As we have started a brand new year and vendors and operators alike are finalizing plans for Mobile World Congress, I thought it would be timely to review what the main vendors of video optimization were up to in 2012.

Allot / Ortiva Wireless:
The company, with the acquisition of Ortiva Wireless in April and Oversi in July has certainly made great strides in their strategic plan to provide a one-stop-shop traffic management solution to its customers. Between DPI, policy management, charging functions, transparent caching and video optimization for mobile, enterprise and fixed broadband, the company has a large tool set and addressable market. The challenge will be in the integration of the acquired technologies and talents, together with the formulation of a differentiating, competitive solutions offering that goes beyond analytics, charging, managing...

Avvasi:
The company has entered the fray with a fresh outlook. Leader in mobile video QoE measurement, they have been asked by their customers to help manage the video QoE and have launched a new product (Q-SRV) to "measure, manage and monetize" the video experience in mobile networks. One to watch in 2013.

Bytemobile / Citrix: 
The acquisition of Bytemobile by Citrix last year was a big shock for the market segment. The leading vendor in market share was acquired by an industry's outsider under the rationale to enter the mobile market. Citrix is definitely starting to tickle F5 and Cisco with Netscaler as a load balancer / proxy in mobile networks. What best introduction in the mobile space than the leader in mobile internet and video optimization? It will be interesting to watch how the replacement of Unison platform by the T3000 series, together with the suggested replacement of F5 by Netscaler plays out in the coming months...

Flash Networks:
The company started the year with a bang with 3 large tier 1 customers in video optimization (MTS russia, Globe telecom and Telekom Austria Group) announcements. Since then, it has been quiet, but the company has been busy upgrading and up selling their existing customer base. It will be interesting to see whether the company will take advantage of some of the market deals coming this year.

Huawei:
The secretive Chinese vendor has seen its market share in browsing gateway increase dramatically over the last 3 years with over 114 operators and this is the traditional Trojan horse for video optimization to enter the market. Mobile internet is becoming a focus on the company's strategy in the core network and it looks like the slides on video optimization presented last year in Barcelona are morphing into a product offering. It is still early days, but Huawei can move fast when needed.

Mobixell Networks:
The company has digested its 724 solutions acquisition and made good progress in converting its installed base and winning new deals in video optimization. Not enough to satisfy its investors, apparently, with the replacement of its CEO in December last year. The company is clearly looking for different growth parameters and it is likely that we will see more strategic activities from them in 2013.

NSN:
Not much to report for the Nordic giant, struggling to impose its vision of self organizing networks in core. The sale of its OSS/BSS division to Redknee will either see a refocusing or spin off of the video assets.

OnMobile:
The company acquired Dilithium assets in 2010 and has been struggling to have a video strategy since. They briefly considered video optimization, but video is no longer a focus for the company in 2013.

Openwave Mobility:
After a rough couple of years, seeing its CEO replacement, and the spin off to an equity venture, the company is starting to re focus and to reboot its traffic management and video optimization strategy. They have a few references in the space and are working to update their browsing gateway's installed base with video optimization. It will be interesting to see if they are up to the challenge in 2013.

Skyfire:
The company took the market by storm by launching cloud-based video optimization and simultaneously announcing Verizon Wireless as a customer and investor. Since then, with a fresh round of financing, the company has been expanding its reach to Europe. It will be good to see how cloud takes in mobile networks.

In September of 2012, Jens Schulte-Bockum , CEO Vodafone Germany shocked the industry in announcing that the 10% of their customer base who have elected to shift to their LTE network had a fundamentally different usage pattern than their 3G counterparts:

“Voice, text, other messaging and data - everything that makes money for us - uses less than 15%. The bit that doesn’t make money uses 85% of the capacity. Clearly we are thinking about how we can monetise that. ”

“The bit that does not make money for us” is mobile OTT video. As mobile video threatens to overgrow every other traffic types, operators start to look at ways to alleviate the costs associated with the necessary capacity upgrades to meet the demand, as well as strategies to monetize this large, untapped opportunity. I will be releasing my report "Mobile Video Optimization 2013" on March 15 where I will examine the latest strategies from the dominant vendors in the space.

Allot continues its spending spree

After the acquisition of Ortiva Wireless, announced in April for $15-$17m, Allot announces today the acquisition of Oversi networks for $16m in cash with a conditional, performance related extra $5m.

Oversi Networks is a provider of transparent caching solutions for OTT and P2P traffic. Specifically, Oversi has been developing a purpose-built video cache, one of the first of its kind.

Many vendors in the space have caches that have been built on open source general-purpose web caches, originally to manage offline video optimization scenarios (for those not able to transcode mp4, flv/f4v containers in real time). As the long tail of video content unfolds, social media and virality create snowballing effects on some video content and a generic web cache shows limitations when it comes to efficiently cache video.

The benefits of a hierarchical, video specific cache then becomes clear. Since video nowadays come in many formats, containers, across many protocols and since content providers repost the same video with different attributes, titles, URLs, duration...etc, it is quite inefficient to cache video only based on metadata recognition. Some level of media inspection is necessary to ascertain what the video is and whether it really corresponds to the metadata.

All in all, another smart acquisition by Allot. On the paper, it certainly strengthens the company position, with technologies compatible and complementary with their legacy portfolio and the recent Ortiva's acquisition. It will be interesting to see how Allot's product portfolio evolves over time and how the different product lines start to synergize.

Mobile video optimization 2012 - July update

For those who follow the video optimization market, it will not come as a surprise that my acclaimed report needed already an update after its release in March.The market has been abuzz with rumors and movement, following acquisitions, re-positioning and the changes in market share:

• Bytemobile's acquisition by Citrix
• Ortiva wireless acquisition by Allot
• Openwave's acquisition by Marlin Equity Partners
• Mobile video optimization show 2012 in Brussels
• Flash Network now #2 in market share 

The report describes the trends impacting network operators, the technologies involved in video optimization, a review of the vendors and re-sellers in this space, with their differentiators and strategies.


You can find some reviews for the report and my services here and below:

“Patrick is an astute, engaging and articulate individual who has provided my company with valued data, opinion and reports on market status and dynamics in the area of OTT video. Patrick's insights have helped my company recently in developing group strategy and deployment options for video optimization and policy management. ” June 8, 2012
Top qualities: Great Results, Expert, High Integrity
Desmond O'Connor Vice President of Data Design at Deutsche Telekom group

Sprint kills two birds

There is little doubt in my mind, that someone woke up at Sprint one morning and looked at their current position and strategy and thought:

• Launched iPhone, check,
• Introduced all-you-can-eat unlimited data plan, check,
• Launch 4G, check, 
• ...wow that feels pretty good... 

That is until someone must have asked "Who are our suppliers of mobile internet technology who we will be relying on to grow drastically our capacity and services while reducing our costs?".


The answer was probably, "the same vendors whom we have relied on for 2G and 3G, Openwave and Ortiva Wireless"... Well, the market had changed and as the execs looked at the viability of their current suppliers, they probably accelerated their exit by selecting a new vendor. Sprint has been rumored to have selected Bytemobile last month, after a short evaluation. 


As you have seen, Ortiva got scooped up by Allot, a good operation for the vendor who has been wanting to expand their offering for the last eighteen months. The company was looking for good technology, at a low price, and that is exactly what they got. 


Ortiva Wireless has been one of the first pure play video optimization vendors, focusing on transrating and dynamic bit rate adaptation. A narrow field that allowed it to focus and execute well technically, on a few deployments, but lacked the breadth to challenge vendors with a more complete offering. The company never got the critical mass to grow organically fast enough, and when the news hit, last month, that Sprint, their largest customer was looking at alternative vendors for 4G,  the investors, who have put in over $40m in equity and convertible debt decided to look for alternative growth strategy. Allot had been in the market for a while for a video optimization vendor and the deal was concluded in a few weeks, for less than $16m.


The following week, Sandvine announces a joint video optimization  deployment with Mobixell at nTelos. Bytemobile had already started communicating (here) around policy-based optimization at mobile world congress, with Openet.


As for Openwave, if you have followed the saga (here), you will  not have been surprised to learn that after a few weeks of due diligence with a couple of possible suitors, the company decided to continue licensing its patent portfolio under the name "Unwired Planet" while divesting its product divisions split between Openwave Messaging and Openwave Mobility to Marlin Equity Partners for $55m.It is too bad that the strategic relationship with Juniper did not develop into an acquisition, but it is hardly surprising, considering Openwave's market share and technical results in video optimization.


Meanwhile, as Comviva, NSN, OnMobile, and Huawei enter the segment with their in-house and OEM'd technology, Alcatel Lucent, Amdocs, Cisco and others have selected partners for VAR and OEM and are actively participating in vendors' evaluations. 


These subjects and many more at the Mobile Video Optimization forum in Brussels June 12-13th. I am the show's official blogger and will chair day 1. I am looking forward to seeing you there.

Allot acquires Ortiva Wireless

You probably by now all know to whom I was referring to in my last post, when I was mentioning rumors of video optimization vendors getting closer to policy vendors. Allot announced this morning the acquisition of Ortiva Wireless for an undisclosed amount. 


This is the 4th consolidation in this space in 24months, after Ripcode was acquired by RGBNetworks, Dilithium's assets were sold to OnMobile in 2010 and Openwave products division was acquired by Marlin Equity partners earlier this year. Additionally, in related spaces, Avaya acquired Radvision and RealNetworks licensed its codec to Intel in 2012.

I had first heard that Ortiva was in advanced discussions with Allot on March 31st. At that point, Ortiva having allegedly lost future business with Sprint to Bytemobile was in a dire situation, as far as future revenue prospects where considered. Furthermore, one of its main investors, Intel does not appear on the last two financing bridges filed with the SEC. Allot, who had been rumored to have looked at many vendors in the space over the last 18 months, was the number one contender for a possible acquisition. Neither company wanted to offer comments at that stage, even when last week, the rumor became public in Israel and was commented on Azi Ronen's blog here. 


Beyond the purely opportunistic approach of this acquisition, it makes a lot of sense for Allot to have tried and integrate video optimization functions in its portfolio. Bytemobile has strong announced ties with Openet and last week, at the Policy control and real time charging conference 2012, the core of many discussions revolved around how to monetize the tide of OTT video traffic.


I was appalled to hear that, when asked about the best way to price for video, a panel composed of Reliance India, Vodafone Spain and Telefonica Czech, was mostly concerned about congestion and looking at pricing based on time of day. This is a defensive, cost-containment strategy that is sure to backfire. Many vendors who have been selling cost reduction as the main rationale for video optimization have backpedaled in the last few months. As it happens, many operators found out that in peak periods, managing aggressively the size of the feeds to reduce costs is not working. They see that a reduction in 20 to 30% of the size of the individual feeds does not mean less cost, but 20 to 30% more users accessing the same capacity at the same time. Which leads in many cases to no additional  revenue since they have not found a way to monetize OTT traffic and no cost reduction, since the network is still not able to meet the demand.


It is of course, one of many possibilities, but what strikes me, is that the industry has not yet agreed on what is the best way to measure video. Capacity (Megabytes), definition (HD or standard), duration, recentness, rights value or speed (Megabit per second) are some of the metrics that can be used for video charging, but in absence of a single accepted metric throughout the industry, many operators are hitting a wall. How is the industry supposed to monetize a traffic that it is not able to measure properly ? How can prices be shared and accepted by all the actors of the value chain if they measure the value of a video differently?
Costs for content owners and aggregators are measured in rights, geographies, storage, version control... Costs for CDNs are measured in geographies, point of presence, capacity... Costs for mobile carriers are measured in capacity, speed, duration, time of day, geography...


This is a  conundrum this industry will need to solve. If the mobile network operators want to "monetize" OTT video traffic, they first need to understand what measures can be used across other mobile networks horizontally and vertically with the other players of the value chain. Only then, an intelligent discussion on value and price can be derived. In the meantime, OTT vendors will continue selling (and in most cases giving) video content on mobile networks, increasing costs with no means for a viable business model.

Allot to acquire Flash Networks for $110 /$120 M?

This is the latest rumor from Globe. Allot, who has raised almost $80M a month ago and was rumored to be acquired by F5, then to discuss acquisition of Mobixell or PeerApp last year, has a $500M market cap. Flash Networks has raised over $61M.

The resulting company could be booking about $120M in sales and be profitable.

Allot, in a briefing with Jonathon Gordon, Director of Marketing, two weeks ago was noting: " Our policies focus more and more on revenue generation. With over 100 charging plans surveyed in our latest report, we see more and more demand for bundle plans for social networks and video. We can already discriminate traffic that is embedded, for instance, we can see that a user is watching a video within a facebook browsing session, but we cannot recognize and analyse the video in term of format, bit rate, etc...Premium video specific policies raise a lot of interest these days."

No doubt, the acquisition of an optimization vendor like Flash Networks can solve that problem, by creating a harmonious policy and charging function that actually manages video, which accounts for over half of 2011 mobile traffic globally.

As discussed here and here, video optimization becomes an attractive target for telco vendors who want to extend beyond DPI and policy. Since video is such a specialized skill, it is likely that growth in this area will not be organic. It is likely that the browsing gateway / DPI / PCRF / Optimization segments will collapse over the next 2 years, as they are atomized markets, with small, technology-driven under-capitalized companies and medium -to-large mature companies looking to increase market share or grow the top line.