Content and application providers like Google, Spotify and Amazon are investing billions of dollars annually in a combination of facilities (such as data centers), fiber networks, servers and routers—to the tune of $33 billion annually on average.
According to a report from Analysys Mason, the level of investment has grown from $28 billion to $36 billion annually in the last three years, a spike of 13 percent between 2011 and 2013. This includes investment from pure online players such as those mentioned above, as well as the online element of multi-platform content providers such as the BBC or the New York Times.
The spending represents a material proportion of the annual revenues of content and application providers, researchers said. On average, the “largest three content and applications providers” have invested 9 percent of their 2011-2013 revenues in networks, facilities and equipment.
“This is perhaps less visible to end users than other investment in R&D, content development, software development and engineering, but forms an essential part of the physical fabric of the Internet,” the firm said in the report. “To address the ‘cloud’ analogy, the content and software they develop may be accessible anywhere and anytime, but it needs to be hosted and transported by physical networks, facilities and equipment.”
Investment made directly by content and application providers is the largest part of this, at around $25 billion (76 percent of the total).
The investment is dominated by hosting, which is driven by the growing volume of Internet content that must be hosted and processed – much of it user-generated (e.g. Facebook photos or YouTube videos). Facilities like Google’s Hamina data center are a prime example of direct investment put into hosting. Internet giants are also increasingly investing in physical cable networks, Analysys Mason noted, such as Facebook’s funding of the Asia Pacific Gateway, and Google’s spending on UNITY, the South-East Asia Japan Cable and most recently the FASTER cable system.
The report noted that transport investment is also significant, which reflects the scale of global terrestrial and submarine networks and the increasing demand for Internet bandwidth to support apps.
North America, Europe and Asia are all significant contributors to Internet investment, with Latin America, the Middle East and Africa contributing less.
“This is unsurprising given the existing concentration of Internet infrastructure in North America and Europe, and the large populations and growth in Internet usage in Asia,” Analysys Mason said.
Europe appears to be the largest destination for investment. Europe is a hub for Internet traffic as it is the meeting point of many international cables, home to the world’s largest IXPs, and has a large population of end users.
“This is attracting investment by U.S. companies, especially in data center facilities, as well as by local content and application providers such as Spotify and the BBC,” researchers said.
When the WannaCry ransomware attacked companies all over the world in 2017, experts soon realized it was meant to be stopped by regular updating. Even…
TMC recently announced the launch of three new artificial intelligence events under the banner of The New Intelligence. I recently spoke with TMC's Ex…
Organizations must align internally to achieve effective innovation. Companies should consider creating cross-functional teams or, at a minimum, incre…
The three events that are part of The New Intelligence are all about how businesses and service providers, and their customers, can benefit from artif…
TMC announced the launch of The New Intelligence conference and expo - The Event Powering the AI Revolution. This exciting new event will take place o…