Few of the millions of people watching Apple’s hit comedy “Ted Lasso” realize it, but video streams of the series arrive in homes thanks to a pioneering Internet company in Kendall Square called Akamai Technologies.
Millions of gamers battling online in Microsoft’s “Call of Duty: Black Ops” also ride the network of the Cambridge company, which runs some of the most critical Internet plumbing in the world and carries about one-third of all Web traffic, analysts estimate.
Akamai usually stays out of the news but on July 22, a software update had a bug that accidentally made many popular websites unreachable. As the sites of Fidelity, Amazon, and even the Globe went down, engineers scrambled to figure out what had gone wrong.
The outage was short-lived, but the challenges facing Akamai are much deeper.
Its rivals have instigated a brutal price war, forcing the 23-year-old company to look for new markets and reach for pricey acquisitions. Akamai’s stock price has gained only 4 percent this year, even as the Nasdaq Composite Index gained 23 percent. And with most tech workers seeking to remain remote, Akamai’s shiny new 19-story headquarters, which opened three months before the pandemic, stands mostly empty.
It all adds up to a crucial time of reinvention, as the company makes major new moves into cybersecurity and other areas.
Given its history, it’s somewhat surprising that Akamai made it even this far. A poster child of the Internet bubble, the company was founded in 1998 and its stock price lost 99 percent of its value from 2000 to 2001, as many of its early customers went bankrupt. Its brilliant and charismatic cofounder Danny Lewin, an MIT applied math grad student, died on Sept. 11, 2001, fighting the hijackers on American Airlines Flight 11. He was only 31.
It was Lewin’s master’s thesis, advised by MIT professor and Akamai cofounder Tom Leighton, that proposed creating a network of Internet-connected computers to distribute multiple copies of popular content all around the world. And though Lewin’s life was tragically cut short, it was the former Israeli special-forces officer’s vision and drive that permeated Akamai’s culture.
“He got people fired up and energized and set everyone on this big mission to change the world,” said Harald Prokop, who was an engineering leader for more than a decade at Akamai. (He’s now a senior vice president at GrubHub, which bought his startup LevelUp in 2018.) “We started when people were talking about the things we do now, like getting any movie you want at the click of a button. But in the 1990s that was science fiction.”
Leighton, now Akamai’s CEO, has been digging into Lewin’s playbook as he plots a strategy to reignite growth at the company, which employs 8,000 people, including about 1,600 in the Boston area. He took the top job in 2013 when Paul Sagan left and became a top venture capitalist.
“Danny accomplished amazing things in his short lifespan,” Leighton said in an interview. Akamai still uses technology that Lewin developed, he said. “Danny’s loss was devastating. His culture still lives on at Akamai today and makes a big difference.”
Many early employees agree. Annie Bourne, now general counsel at Boston startup Nasuni, worked at Akamai in business development and marketing from 1999 to 2005. “Danny would be so proud,” Bourne said. “He would also be asking, where are we going next, what are we going to do to get there, and telling us we’re already behind.”
Bourne still keeps a to-do list of sorts that Lewin once tried to staple to her. “That was his approach to get your attention — it sometimes did not go well with HR,” she said.
Whether the company succeeds from here also matters to the broader tech ecosystem. Akamai employees have formed dozens of startups employing many thousands more people and helping maintain the region’s vibrance.
“Akamai is one of the great, enduring companies to come out of the dot-com era,” David Jergen, managing partner at venture capital firm F-Prime, said. Its alumni, he added, “have also become some of the most prolific entrepreneurs and angel investors.” A study by Jergen’s firm found 40 startups that went public or were acquired have blossomed from the Akamai tree, more than any other local company; they include Uber, Julia Computing, LevelUp, and Expensify. (Uber founder Travis Kalanick’s earlier startup, Red Swoosh, was bought by Akamai in 2007.)
Akamai’s prominence has attracted plenty of competitors. In recent years, everyone from Amazon to smaller specialists like Cloudflare, Fastly, and Limelight have cut in on Akamai’s distribution business.
During COVID, the amount of traffic Akamai carried exploded, doubling to about 200 terabits per second, equivalent to sending the entire contents of the Library of Congress every three seconds. But Akamai’s revenue from carrying all that traffic grew only 4 percent to $2.1 billion last year compared to 2019 and didn’t grow at all in the first three quarters of 2021.
That’s why chief executive Leighton increasingly has been moving the company into a new area: the fast-growing market for cybersecurity services.
Since Akamai sees so much of what is happening on the Internet, it is also well-positioned to watch cybercrooks and hackers. So far, its main security services help customers block hacker attempts to overwhelm websites with fake traffic, keep intruders out of customers’ servers, and block automated bots trying to steal consumers’ identities. The business grew 25 percent to $1.1 billion last year and jumped another 27 percent in the first three quarters of 2021.
“At that rate, within a few years, it can be the majority of our revenue,” Leighton said. “We do feel our stock should be worth more than it is.”
The idea for the security business emerged over the past decade as Akamai’s customers were increasingly being hit by hacker attacks.
Initially, Akamai’s billing systems simply charged customers more to account for fake traffic. But customers complained and Akamai’s engineers developed methods to filter out the traffic and keep customers’ websites online. It added further protective capabilities, buying Florida security startup Prolexic for $370 million in 2014, as well as developing defenses against malware delivered via the Internet.
But with ransomware becoming a larger threat, Leighton decided another acquisition was required. In September, Akamai agreed to pay $600 million for Tel Aviv-based Guardicore, an expensive price for a startup with expected revenue of $35 million or less next year.
“Given the opportunity they have in security — the market is coming directly towards what they’re trying to do — Guardicore makes a ton of sense,” said analyst James Fish at Piper Sandler. “I’d rather see them step on the gas for security investments than hold back.”
After cybersecurity, Akamai has an even more nascent business helping companies move software applications from cloud data centers to its network of thousands of servers around the world. Such “edge computing” tech is needed for apps that can’t tolerate time lags and delay, such as software guiding self-driving cars. But it’s early, and at about $50 million in revenue per quarter, there’s a long way to go before it matches Akamai’s other businesses.
“We already have dozens of customers starting to experiment with different applications,” Leighton said. “There is a pretty exciting range of possibilities for the future.”
Akamai is also grappling with the changing nature of work after the pandemic. About 90 percent of the staff is able to work remotely, and internal surveys have shown little interest in a full return to the office.
Leighton saw those results and has decided to allow complete flexibility for those who don’t need to be hands-on in an office. So most employees will get to decide when, if ever, they come in.
“I think the sweet spot is some employees will want to come in all the time, but not very many,” he said. “Most will want to be remote three or four days a week.”
The company is still working out all the implications, but like many peers is considering a hoteling model, where employees don’t have assigned desks or offices.
Still, Akamai plans to remain firmly headquartered in Cambridge.
“There is great talent, a great work ethic, great culture, and a great environment,” Leighton said. “The big companies are starting to realize that, so they all have presences now, Amazon, Google, Microsoft. They’re all in the area now.”
Aaron Pressman can be reached at email@example.com. Follow him on Twitter @ampressman.