IMS Research made waves this week with the news that we’re about to hit the 5-billion mark with Internet-connected devices. That’s billion with a “B”. The news isn’t shocking given all the laptops, smartphones, connected TVs, tablets, and other gadgets we have floating around, but it does have serious implications. First, remember that IPv6 issue? It’s no wonder we may run out of IPv4 addresses as early as the end of this year. And as the market shifts to IPv6, online content and service providers may find their applications don’t work everywhere, or for everyone. The clock is ticking fast.

Second, a lot of connected devices mean a lot of bandwidth demand. And the online applications that perform best in a bandwidth-constrained environment are the ones most likely to succeed with consumers. It’s all about infrastructure. More connected devices mean companies need better infrastructure and delivery support to stay competitive.

Third, with more connected devices come more platforms that companies need to address in their mobile content delivery efforts. Got an iPhone app? Great. How about something that works on the Roku? Or in a Yahoo TV widget? Or on an Android tablet? There are 5 billion devices out there! And there will be quadruple that many in another decade.

Last week’s quarterly earnings call not only highlighted growing revenue rates across our business, but also identified key market trends guiding Limelight Networks’ future. First on the numbers front, Limelight generated $42.2 million in revenue in Q2, with revenue from value-added services jumping from 15% in Q1 to 28.8% in the second quarter. Value-added services are defined as everything from website acceleration and media transcoding, to online advertising services and content management. As CEO Jeff Lunsford explained in the call, the company has evolved from “a telco-like business model into an innovative cloud software company.” Increasingly, the value-added services in our portfolio are as core to our business as the company’s traditional CDN operations.

Regarding those value-added services, we see three trends informing our business strategy in the near term: the ongoing shift of content and advertising dollars to the online world, continued explosive growth in the mobile arena, and the migration of software applications, data, and IT services into the cloud.

The EyeWonder services are a big piece of how we are addressing the online advertising opportunity. eMarketing is forecasting growth in rich media advertising at a rate of close to 20% annually through 2012. EyeWonder is already a leader in that space, and earlier this summer we introduced AdVolve, a new tool specifically designed to help advertisers optimize their online campaigns through dynamic customization of multiple display-ad elements. From the earnings transcript: “The underlying targeting engine leverages Limelight’s cloud computing infrastructure to dynamically analyze and then automatically optimize the performance of the creative elements that make up a display advertisement.” In a short two months, we’ve already seen positive traction with the new AdVolve offering.

On the mobile side of our business, Limelight Networks’ mobile services grew faster than 40% sequentially. And we expect the customer interest we see in the mobile segment to carry over into the interactive advertising sector in 2011. Again, growth in the overall market is feeding our own strongly differentiated mobile business.

Finally, regarding cloud applications and services, we have expanded in a wide range of areas including storage, transcoding, site acceleration, and content management, among others. Singling out site acceleration, we saw increased traction in the second quarter thanks to our SITE software solution, and we plan to expand our acceleration offerings this fall. The recent acquisition of Delve Networks is also worth highlighting here, as it gives us new capabilities in content management that we have already begun integrating with the rest of our product portfolio.

If you’re interested in the full earnings report, you can listen to a replay through August 12th. There are further details on both the numbers and company strategy in the webcast.

In big news today, we’ve announced the acquisition of online video platform and analytics company Delve Networks. They make it easy for people to create rich online content without getting tangled up in coding details, interoperability issues, and the headache of managing multiple delivery channels. Delve does all this and has an impressive customer list to boot, including Standard & Poor’s, Hallmark, Lego, CDW, the NFL, ESPN, and many, many others.

Delve falls squarely in the rapidly growing Software as a Service (SaaS) category. By adding it to the Limelight distributed computing platform, their scalable software now gains an Internet-scale infrastructure. Together we’ll be able to help our customers continue to meet the critical challenges involved in video publishing, mobile publishing, and website publishing workflows. This type of value-added service is critical as online publishing continues to grow more complex, and as more organizations - small and large enterprises, government entities, associations, etc. - find they need to participate in the media-rich world of online communications.

Limelight Networks is well-matched with the Delve team for several reasons. One of the most important ones, however, is our shared corporate philosophy. Both of our companies are committed to open, standards-based architectures, and to partnering with the larger industry ecosystem to further innovation and simplify online publishing and delivery for our customers. To that end, we will continue to support our existing partner relationships with video platform providers, just as Delve will continue to support its relationships with other delivery partners. We believe our companies complement each other well, but not to the exclusion of other providers. We will continue to give our customers the freedom to choose the technologies and services that best meet their needs.

Delve Networks is part of Limelight Networks as of today, with the entire Delve team joining the Limelight organization. We’re pleased to welcome co-founder Alex Castro and the rest of the talented team to Limelight, and excited to see the innovations that will come from our new Video Platform Solutions Group.

Want to learn more about what Delve has to offer? Take a peek at the Delve Networks website for video demos and product details.

If you’re a gamer, you may already know about Gaikai. Last month the company announced Electronic Arts as a publishing partner, and for the last year Gaikai has been pretty vocal about its aspirations in the cloud gaming space. In brief, Gaikai works with publishers to advertise titles using pop-up game demos. So, for example, if EA wants to promote a new game in the Sims series, it can use Gaikai to embed a demo of the game at online retail sites like Best Buy or Gamestop. The goal is to stop the “funnel of pain,” as Gaikai CEO David Perry calls it. Instead of moving gamers off a retail site to learn more about a new title, Gaikai offers one-click demo access so visitors can test out a game without ever leaving the store’s domain.

Limelight Networks announced today a strategic investment in Gaikai. It’s the first venture investment made by the company, and it reflects our belief in gaming as an area with serious potential for growth in the cloud services arena. Gaikai is unique because of the business model it’s established, and because of its desire to work with game publishers rather than against them. However, Gaikai is also representative of a growing market in the online gaming space – one that looks ready to explode over the next couple of years.

The match between Limelight Networks’ scalable infrastructure services and Gaikai’s delivery model is a natural one, and it’s easy to envision just how Gaikai’s model could expand with Limelight’s resources in the future. For the moment, however, the focus is on Limelight Networks’ financial support of the start-up gaming company. CEO Perry notes that Gaikai is set for a soft launch in the next couple of weeks.

If you want people to build great stuff on your platform, you have to open it up. And that’s exactly what Rackspace has planned with the announcement today of OpenStack, an open-source project designed to make cloud code freely available for the developer community. At launch, the OpenStack project includes code from the Rackspace Cloud Files offering. Anyone is now free to take that Rackspace code and build on top of it to shape their own object storage system in the cloud.

The Rackspace announcement is big news in the evolution of cloud computing. One of the biggest fears many organizations have with the cloud is the fear of locking up their assets on someone else’s platform. That fear goes away when the platform is entirely open. Rackspace is a long-time partner of Limelight Networks, and the open approach is part of what has made our two companies work so well together.

Incidentally, along with the traditional Rackspace Cloud Files service comes an option to include Limelight Networks delivery services. In other words, you can host your files with Rackspace and have them accessible anywhere around the world using the Limelight content delivery network. Rackspace actually uses a Limelight API to integrate the storage and delivery services into one offering. That’s the power of open platforms.

Want more information on OpenStack? There’s plenty available on the new Rackspace OpenStack site, and you can follow @openstack on Twitter. (Shameless plug: you should also be following @llnw if you’re not already.) Stay tuned. There’s more to this story to come.

If you’re one of millions of Twitter addicts, you’re probably very familiar with Tweetmeme’s “Retweet” button. It lets users highlight blog posts and stories with an automatically-published Twitter link. (If you like this post, hit Retweet) Until recently, Tweetmeme was an English-language phenomenon, but earlier this month the company introduced international language support, starting with French, German, Italian, Spanish, Japanese, and Portuguese.

This was a case of Tweetmeme growing a lot bigger and a lot faster than its founders ever imagined. In a press release out today, we talk about how Limelight Networks was called in to provide web acceleration services once Tweetmeme started to grow beyond its own infrastructure capabilities. Think about this: the Retweet button gets more than six hundred million impressions daily. Throw in language translation, and that number is likely to grow ever further. If you like the little Retweet icon, just keep in mind that there’s a lot of network power that goes behind delivering it to more than two hundred thousand websites today. Small object, huge reach.

Today, we announced our first product launch with EyeWonder under the Limelight Networks umbrella. EyeWonder is debuting AdVolve, an application for combining creative online ad content with sophisticated ad targeting. Advertising agencies can use AdVolve to switch out specific elements in an online display ad based on the audience at the other end. Elements can include the headline, images, promotional offers, and more. Users pair different configurations with demographic profiles to come up with optimal ads for a wide range of potential viewers. AdVolve then automates the process of delivering the right ad to the right consumer.

The delivery part of the equation is where Limelight Networks’ traditional services come into play. Our network has the massive distributed capacity to be able to speed ad delivery no matter how rich and complex the content, and no matter where the end-user is located. And because our system is a global computing infrastructure, we are putting in place an architecture that allows us to optimize huge volumes of content at the edge, rather than necessarily from a handful of origin points. Imagine what that means for the future.

For more on AdVolve, check out the EyeWonder video and feature list. The pics below show elements of the AdVolve software and screenshots of the interface.

The GigaOM Structure conference took place this week, and one of the issues addressed was the need for companies to look at how to scale their information infrastructures. From a GigaOM post covering one of the conference panels:

“Facebook’s VP of technical operations, Jonathan Heiliger, said one thing the company has found as it’s grown to more than 400 million users is that whenever it predicts that demand for a new feature or service will be really high, it isn’t, and ‘when we predict it will be really low, it turns out to be really high.’”

Getting a new online business, or service, or product feature off the ground is fraught with difficulties, but the hardest component may be predicting user demand, and therefore preparing the appropriate resources. Hence the appeal of both cloud services, and the more narrowly defined category of Infrastructure as a Service (Iaas). For most companies, it makes more sense to rely on resources available on-demand, than it does to place big bets on how, when, and where an offering may become popular.

If you look at information resource needs as a layer cake, the bottom layer is the infrastructure, the next layer is the delivery platform, and the top layer is the user-facing application. You need scale at every level. With infrastructure, you need storage and processing power to accommodate not only a certain volume of data, but demand for it in different locations around the world. The delivery platform needs scale to be able to adapt to changing user requirements, including access across new CE devices, and new software systems. The application level needs scale to give you the flexibility to continue improving the user experience - whether that improvement means better, more sophisticated ad targeting, or the ability to personalize online content and services.

Scalability is hardly a new concept, but applying it to an online business model is still a relatively new phenomenon, particularly in light of evolving user expectations, and the need for global distribution.

Mobile advertising is still in its infancy, but with smartphones and tablets on the upswing, the market is destined for rapid growth. Which is why Jumptap, a Limelight Networks partner, is bulking up on new ad services now. This week, the company announced the addition of video to the Jumptap Premium Ad Network. Limelight Networks will deliver that video for in-stream, pre-roll, mid-roll, and post-roll ads.

There are numerous stats illustrating the benefits of rich media advertising online, but publishers are only beginning to investigate how video can impact mobile advertising efforts. On the one hand, publishers want to monetize their content in every way possible. On the other hand, the technical and integration challenges are not insignificant. If big guys like MTV Networks have taken a careful and measured approach to mobile video, it suggests the industry as a whole is still trying to figure out a workable strategy for mobile delivery. The process isn’t getting any easier either. With a new handset launch or mobile OS update virtually every week, publishers have an exploding list of mobile platforms to contend with.

There is good news, however. Mobile video quality is improving by leaps and bounds, and the early pool of companies taking advantage of the new channel for advertising are getting access to consumers that their competitors are missing out on. As an example, if you’ve seen the app for The New York Times on the iPad, you know that one particular watch manufacturer has rich media ads plastered across every section of the online newspaper. No doubt the company’s competitors have not yet figured out how to integrate iPad advertising into their ad strategies. Score one for first-mover advantage.

For the partnership with Jumptap, Limelight Networks is pushing out mobile video that is automatically formatted for whatever device a consumer may be using. That doesn’t take away the challenge of managing complex advertising buys across multiple channels, but it does significantly reduce the technical headaches for companies ready to move forward with mobile video advertising. Since the mobile channel is only going to expand, that’s no small consideration. It may also be a good catalyst for more companies to jump in to the mobile fray.

Which is better at compressing video, H.264 or VP8? Some sites such as Quavlive offer comparisons. (Credit: Screenshot of Quavlive by Stephen Shankland/CNET)

If you’re deep in the media delivery business, chances are you’ve been following recent coverage of Google’s open-source WebM project. Announced in mid-May, the WebM project includes the VP8 video codec and Vorbis audio codec, both of which are available royalty-free. Debate is hot and heavy about the technical merits of VP8 compared to H.264, but plenty of people see potential in the open-source alternative. Given that potential, Limelight Networks is now supporting WebM/VP8 encoding for any customers interested in using it. Read on for more detail from Limelight Senior Director of System Engineering Wylie Swanson. There’s also great information available on the WebM project blog.

From Limelight’s Wylie Swanson:

Limelight Networks is pleased to announce support for WebM/VP8 encoding using our new Media Transcode platform. The WebM project was open-sourced just a few short weeks ago, and we are pleased to be able to incorporate support so quickly. WebM is an open, royalty-free, media file format, and is quickly becoming a hot topic on blogs and in the news. While the jury may still be out on how significant WebM is or will be, our customers can try it for themselves.

WebM includes:

• VP8, a promising new video codec that was released under a BSD-style, royalty-free license
• Vorbis, an already open source and broadly implemented codec
• A container format based on a subset of the Matroska media container

The team that created VP8 have been pioneers in video codec development for over a decade. VP8’s vision is to deliver high quality video while adapting to the varying processing and bandwidth conditions found on today’s broad range of web-connected devices. VP8’s bandwidth efficiency could mean lower serving costs for content publishers and higher quality video for end-users.