As I begin my third month as Edgio’s CEO, I continue to be impressed and humbled by the unwavering commitment and dedication of our employees – to our customers, each other, and the long-term success of the company. The team has already accomplished so much this year against our goals to increase focus on our customers, continue to optimize our cost structure, accelerate innovation in target areas, grow profitable revenues, and deliver sustained shareholder value over time. Exceeding our customers’ expectations and delivering this value is what we wake up each day focused on!
We continue to see strong demand for our Apps/Security and Uplynk services and are investing in expanding our feature differentiation for both. Over the last 60 days the Edgio team has modeled our unit economic metrics down to a CPU-level across nearly 300 PoPs worldwide, and we have a plan to materially optimize our cost structure in 2024 and into 2025. We have turned off existing large-object CDN customers deemed not profitable and have set a gross margin bar for this business that we will not dip below. Our sales and marketing teams are laser-focused on accelerating sales velocity and continually integrating customer and market feedback into the development cycle. In short, we know our business better now than ever before.
Yet, as we continue to evaluate the business, we need to be more thoughtful and strategic regarding how and where we allocate our capital and resources. It is imperative for us to understand if the investments we are making align with our largest and most profitable opportunities, and if our current cost structure can be supported by our revenues. Despite commendable efforts since the Edgecast acquisition two years ago, we still need to do more to fully realize the promises we made to our shareholders. We must focus on business opportunities where we are differentiated and can command profitable, sustainable revenue. Therefore, we have made the decision to further streamline our workforce, and have eliminated certain sales, marketing, and operations roles in line with our stated strategy. While it is always difficult saying goodbye to our fellow teammates, these moves are unequivocally necessary to give us the highest chance of achieving our goal of becoming the market-leading edge-enabled solutions provider and a profitable growth company. So, while difficult, this strategic realignment enables us to invest in high-impact areas that drive innovation, competitiveness, and shareholder returns.
In addition to streamlining our teams, we need to be one step ahead of the industry in product innovation – across both security and streaming. How are we doing this? First, in security, we recently released our first quarterly Attack Trends Report issued by our threat response team. This report provides insight into attack trends with guidance to our enterprise customers on how they can best prepare and defend themselves against evolving threat landscapes. Our Security Operations Center (SOC) team offers compelling value proposition to our customers including global alerts to threats and predictive threat detection using AI learning models. We see a near-term world where we are running models at the edge that allow us to identify threats before they manifest, allowing Edgio to automatically take proactive steps to secure our customers’ valuable web properties and applications. For more insight into the innovative things our team is doing around security and AI, listen to the discussion our team had with Verizon regarding how to harness the power of AI in combating emerging cyber threats. Look for more news about our innovations in security as we head into RSA in Q2 of this year.
Edgio is also looking ahead to the future of streaming. We continuously evaluate the disruptive strategies required for the industry to be a true replacement option for Broadcast. We laud the success of Peacock’s streaming-only NFL playoff game, which peaked at an estimated 16.3M concurrent users using more than 30% of the Internets’ capacity across a slew of CDNs. But, what about when the Super Bowl (which we also powered) is streaming-only and audiences are double and triple those levels? Edgio – and the industry at large – is exploiting F.A.S.T. models that are revolutionizing streaming monetization. But what about markets where ad revenue cannot sustain service costs? Additionally, the reliance of major streaming platforms on excessive spending to attract subscribers underscores the challenge of competing for limited viewer attention and viewing hours, recently resulting in stringent cost-cutting measures from the most notable market leaders. In this challenging environment how do mid-tier operators succeed if the largest media companies haven’t yet found ways to operate these businesses profitably?
At Edgio we see this as an opportunity, and we are hyper-focused on helping our current and prospective customers solve for these challenges. We are exploring and bringing to market many new innovations and initiatives. These include more innovative CDN offload options to enable real-time data-driven multi-CDN collaboration for scalable and reliable delivery of the high-traffic ‘moments and events’ and improved monetization using the next-gen dynamic ad-insertion services offered at the edge and much closer to the end-users. Moreover, we are looking at the (real) benefits of GenAI, and AI generally, to help bring our streaming customers’ unit economics in line, beyond workforce productivity and automation, which we are doing today. And once we have brought the unit economics of streaming in line, Edgio will couple it with scale and flexibility of our evolving Uplynk platform to power the largest, and also the mid-tier, streaming services on the planet. Look for more news and details as we head into NAB in April.
We are optimistic about the road ahead and look forward to sharing more product news and innovation throughout the year. And, as we move forward, we remain dedicated to fostering a culture of accountability, transparency, and empathy. Maintaining transparent communication is crucial during times of change, and we are committed to keeping that open dialogue.
While at AWS Elemental I saw firsthand the power of a culture that is relentlessly focused on customer experience, prioritizes innovation as the source of competitive advantage, and constantly works to improve its cost structure. I see seeds of this here at Edgio and I and our leadership team are confident that these strategic actions, while painful in the short-run, will in the long-run strengthen our company’s foundation and enable us to successfully navigate and thrive in the evolving business landscape. We very much appreciate the ongoing support of our customers, shareholders, partners, suppliers, and especially our employees as we work together to build a sustainable and prosperous future.
