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Developers are reinventing the way we live, work, and play online. Yet they repeatedly encounter innovation barriers when delivering modern digital experiences. Expectations for digital experiences are at an all-time high; they must be fast, secure, and highly personalized. If they aren’t reliable, end-users simply take their business elsewhere.
The challenge today is enabling developers to deliver a modern digital experience while simultaneously providing scale, security, and performance. Fastly built its edge cloud platform to solve this problem. The edge cloud is an emerging category of Infrastructure as a Service (“IaaS”) that enables developers to build, secure, and deliver digital experiences at the edge of the internet.
The edge cloud uses emerging cloud computing, a serverless paradigm in which the cloud provider runs the server and dynamically manages the allocation of machine resources while offering flexibility and control to developers. When milliseconds matter, processing at the edge is ideal for handling highly dynamic and time-sensitive data.
Fastly’s mission is to fuel the next modern digital experience by providing developers with a programmable and reliable edge cloud platform they adopt as their own. In this strategy story, we analyzed the business model of Fastly and understood what does Fastly do and how does Fastly work.
What does Fastly do? How does Fastly work?
Fastly, founded in 2011, is an American cloud computing services provider. It describes its network as an edge cloud platform designed to help developers extend their core cloud infrastructure to the edge of the network, closer to users. Fastly has a usage-based business model.
Organizations must keep up with complex and ever-evolving end-user requirements. Fastly helps them surpass their end-users expectations by powering fast, secure, and scalable digital experiences. Fastly built a powerful edge cloud platform designed from the ground up to be programmable and support agile software development.
Fastly’s Edge Cloud Platform
Fastly has built a robust, serverless edge cloud platform designed from the ground up to be programmable and support agile software development. Fastly processes, serves, and secures customers’ applications as close to their end-users as possible at the edge of the internet for enhanced performance and protection.
Fastly’s platform consists of four key components: a programmable edge, a software-defined modern network, safety in depth, and a philosophy of customer empowerment.
Programmable Edge: Fastly’s programmable edge sits between Fastly’s customers’ applications and their end-users, placing Fastly’s services closer to those users. It is composed of Fastly’s highly configurable cache layer, Fastly’s Varnish-based development environment, and Fastly’s new serverless compute products. It is designed to create a space for developers to innovate at their own pace.
Software-Defined Modern Network: Fastly’s edge cloud platform is designed to take advantage of the modern internet. Fastly’s philosophy has been to differentiate through software by building one powerful software-centric network composed of unique and proprietary components. Fastly’s approach is designed to give Fastly the flexibility to innovate and build.
Safety in Depth: Fastly has integrated security into every layer of development: architecture, programming, and operations. That’s why Fastly built security into the fabric of Fastly’s platform alongside performance. Fastly provides developers and security operations teams with a fast, safe environment to create, build, and run modern applications.
Customer Empowerment Philosophy: Fastly empowers customers to build great things while collaborating with them to promote their success. Fastly has built an understanding of what it takes to deliver a frictionless customer experience.
What is the business model of Fastly?
Fastly serves established enterprises, mid-market companies, and technology-savvy organizations. Fastly’s customers represent a diverse set of organizations across many industries with one thing in common: they compete by using software to build differentiation at the edge.
With Fastly’s edge cloud platform, its customers are disrupting existing industries and creating new ones. For example, several Fastly customers have reinvented digital publishing by connecting readers through subscription models to indispensable content, helping people understand the world through deeply reported independent journalism.
Fastly’s customers’ software applications use Fastly’s edge cloud platform to deliver consistently excellent online shopping experiences, fast and more secure financial transactions, and broadcast quality live streaming on any device. The range of applications developers build with Fastly’s edge cloud platform continues to expand rapidly. As of December 2021, Fastly had 2,804 customers.
Fastly’s edge cloud is a globally distributed, programmable platform designed for highly performant and secure web and application delivery. Fastly’s platform supports modern software development processes and empowers developers to innovate without constraints as they lead the charge for their organization’s digital transformation.
Fastly operates a single, software-centric network. Fastly’s POPs reside between a customer’s end-users and computing and data storage solutions, whether on-premise, in the cloud, or a mixture of both.
Fastly’s position on the network allows it to move functionality closer to end-users at the network edge for a faster, more secure experience. This includes edge compute, edge delivery, edge security, edge applications like load balancing and image optimization, video on demand, and managed edge delivery.
Sales & Marketing
Fastly’s go-to-market model initially focused on reaching and serving the needs of developers. Fastly reached developers through working groups, community events, conferences, and word-of-mouth.
Fastly’s sales and marketing organizations work together closely to cultivate customer relationships with developers and business leaders at enterprises and technology-savvy organizations to drive revenue growth. Fastly has geographically-based sales teams that continue to enhance Fastly’s value-based selling methodology.
Fastly’s land and expand sales strategy for enterprise customers demonstrate Fastly’s platform’s capabilities, and Fastly’s customer support enables broad adoption of Fastly’s technology within an organization.
Fastly also offers a trial to developers who sign up for testing and experimentation. Fastly does this to strengthen Fastly’s relationship and reputation within the developer community by providing developers with the ability to familiarize themselves with Fastly’s platform without first becoming a paying customer.
Fastly’s partner ecosystem consists of a wide range of companies that sell, service, package, and build edge applications to integrate with Fastly’s platform. Fastly’s program allows partners to accommodate different go-to-market models and allows each partner to customize their offerings to provide their differentiated value.
This ecosystem consists of companies that build edge applications to integrate with Fastly’s platform, enterprise resellers, and security integration providers, 5G and IOT platforms, video and streaming providers, cloud service providers, logging and analytics providers, and as JAMStack and PaaS providers.
Fastly generated $354.3 Million in 2021. Fastly has a usage-based business model. Fastly derives its revenue primarily from usage-based fees earned from customers using Fastly’s platform. Fastly also earns fixed-rate recurring revenue from security and other products and services.
Initially, customers typically choose to become platform customers, for which Fastly charges fees based on their committed or actual use of Fastly’s platform, as measured in gigabytes and requests. Many of Fastly’s customers generate billings in excess of their minimum commitment.
Fastly also generates revenue from additional products and professional and other services, such as implementation. Fastly charges a flat one-time or recurring fee for these additional products and services. Beginning in the fourth quarter of 2020, Fastly also began offering subscriptions to access a unified security web application and application programming interface at a fixed rate.
Results of Operations
Revenue was $354.3 million for 2021 compared to $290.9 million for 2020, an increase of $63.5 million, or 22%. Revenue growth was driven by the impact of a full year of revenue generated from products acquired from the acquisition of Signal Sciences and the further adoption of Fastly’s modern edge platform and products.
Approximately 93% of Fastly’s revenue in 2021 was driven by usage on its platform, primarily from existing customers, as revenue from new customers contributed less than 10% of the revenue.
The proportion of the revenue contribution between new and existing customers is consistent with typical customer behavior, as customers tend to contribute more revenue over time as their use of the platform increases. As per the annual report,