Optimizing the Mobile Video Startup Space

With Opera snatching up optimization specialist Skyfire for up to US$155 million, and startup Vasona racking up $22 million in its first 22 months, it's clear the mobile video optimization space is one to keep an eye on.

The reasons why are equally as clear. The influx of mobile data, dominated by video, has caught the mobile operators off guard. While in the past, technology has been their savior -- faster networks begat faster Intel -- video has turned this equation on its head. Now, technology isn't growing as fast as consumer demand.

What's more, everyone is mobile. Optimization may not be an issue for subscribers parked on the couch, but put them in motion and it's a different story. As Garrett Choi, CFO of traffic processing vendor QuickFire Networks puts it, "people 'need' to watch Honey Boo Boo in high definition on their iPad. Or, more accurately, the current Generation Z expects to."

While many thought LTE would be the great capacity savior, it's only accelerated video usage, according to Jeff Glueck, CEO of the newly acquired Skyfire. Vodafone Germany, for example, has seen 85 percent of its new LTE network fill up with video, despite the fact that only a fraction of its users have upgraded to 4G.

"No mobile operator has a real solution yet, which they will all admit behind closed doors under NDA behind their steadily weakening marketing-powered force fields," Choi quipped.

The solutions the operators are pursuing, however, are vast and many of them, including small cells, Wi-Fi offload, and optimization technologies that are cloud-based, hardware driven, focus on transcoding, prioritization, compression, TCP optimization, live in the cloud, the RAN or the network edge.

It's certainly reasonable to expect more activity in the mobile video optimization space. But, targets for takeover are less clear. Glueck suggests that the big M&A moves may be over for now, noting that the market is now made up of three big players and a lot of other smaller "weaker players with older technology." The big three he's referring to include Skyfire, Bytemobile, acquired by Citrix Systems Inc. last year, and mobile Internet vendor Flash Networks.

Some of the other said smaller players include Vasono, which aims to reduce congestion at the cell site, Vantrix Corp., which offers a bandwidth optimizer software, OpenWave Mobility, and others still. Glueck says that some of the small vendors may look to exit, but many are in too weak a position financially to do so. He suggested some fire sales, akin to Allot Communications Ltd.'s Ortiva acquisition last May, may pop up.

"There will also be disruptive new startups that are small and doing disruptive things, like Intucell, which was acquired by Cisco in the SON space," Glueck adds. "It's not competitive to us, but related to optimization."

So far these acquisitions have centered on two vendors making a stronger team, but an industry source suggests that future M&A could come from a cable company or wireless operator looking to purchase and take their own solution in house. But this is an idea that Glueck, for one, doesn't see happening anytime soon.

"It seems that the carriers are very good at procurement, so they can squeeze their vendors pretty hard. They are powerful. If you have great R&D that can be amortized over many customers instead of one paying that R&D, and you have the bargaining power, why not play suppliers off one another?"

—Sarah Reedy, contributing editor, Light Reading