Fastly shares are up despite breaking the internet, so what is a CDN?

An error in an update on Fastly Inc’s (NYSE:FSLY) content delivery network (CDN) saw some of the world’s biggest websites stop working for a period on Tuesday.

Whilst techies worked to reset the error blank pages and ‘Error 503” messages were shown to visitors to the likes of Amazon.com, Reddit, CNN, Bloomberg, and the UK government’s website.

Perhaps bizarrely, Fastly Inc’s shares are soaring in the wake of what was evidently an “all publicity is good publicity” moment in the spotlight.

Sure enough, many people may not have heard of the company before their faux pas.

After breaking the internet in a literal, non-meme, fashion the New York listed share closed out Tuesday up US$9.25 or 19.7% at US$56.20 per share, and Wednesday’s premarket indication points to a slight further gain.

Elsewhere, Cloudflare (NYSE:NET) and Akamai (NASDAQ:AKAM), companies that didn’t wipe out any of the web’s institution-grade sites, saw their shares move up notably less dramatically, rising 4.5% and 1.16% to US$89.78 and US$117.30 respectively.

CDNs and digital infrastructure business are claimed to have been growing at around 30% annually and given the huge demand for online resources during the pandemic it is easy to make a case that it may be among the fastest growing tech business areas.

The tech wizards will say that Tuesday’s problem at Fastly was a glitch or a blip.

Andy Champagne, the owner of a great name and senior vice president of Akamai, was quoted in a Barron’s report on Tuesday commenting that: “The internet has been under inspection for the last 18 months like never before.

“It was a crucible moment, and it has done awesome.”

So what is a CDN?

Put most simply, CDN’s make web pages load faster – and that is very important.

Speed is increasingly a critical metric for online businesses, mostly because smartphone carrying humans are quite impatient.

Google’s algorithms for example put immense importance on page speeds whilst ranking sites in search results. And, in the real world, users will typically quit whatever they’re doing if they are made to wait longer than a couple of seconds for a page to load.

This is especially true of e-commerce, according to Search Engine Journal, which says that pages loading in less than 2 seconds achieve the highest transaction conversion rates. It adds that conversion rates slip away at around 4.4% for every extra second after that 2-second threshold.

‘Bounce’ rates (which measure the percentage of users that quickly exit a page but without interacting with it) average around 7% for pages that load in a single second or less, according to the SEJ, but they jump significantly to 38% if a page takes as long as 5 seconds to load.

CDNS are one of several weapons in the arsenal for website operators as they compete in a page speed arms race. These networks can be extremely complex but the concept behind them is really simple.

We tend not to question the ubiquity of the internet, but, the distance between the user and a website’s server matters.

Most websites exist on a specific server or bank of servers in a given location, potentially anywhere in the world.  An internet user can similarly be located in almost any geographic location. And the data needs to travel from one place to the other.

A CDN speeds up the loading process by storing a saved, or “cached”, version of the webpage across a network of servers spread across the globe.

This means that website visitors will, in theory, receive the page from the nearest server so that the data will travel the shortest available distance. There are other layers of optimisation on top of this, but this is jist of how a CDN works.

It is a highly dynamic and competitive industry. For CDN operators and customers every fraction of a second counts, so these networks are being enhanced and optimised constantly (as often as every couple of hours).

One such update at Fastly was determined to be the reason for Tuesday’s downtime.

Whilst it may be dismissed by some as a glitch, those more sceptical might wonder whether the Fastly crash exposed that a substantial portion of the internet is heavily reliant on only a small number of service providers. Whether or not this represents a structural risk for online businesses is beyond the scope of this article, and indeed the remit of this digital journalist.

Story by ProactiveInvestors