Video is hot, continued: Limelight raises $130 million

You’re familiar with popular video-sharing consumer companies like YouTube, Grouper and Guba, and the constant debate about whether or not they will make serious money.

Well, a growing number of companies happy to forgo household brand-recognition, and willing to make stacks of cash off of the exploding traffic rates of YouTube et al.

Limelight Networks, based in Phoenix, is the leading example. It has just raised a whopping $130 million to build out its back-end service for delivering video, games, music and other media across the Internet. Goldman Sachs Capital Partners led the round, supplying more than $100 million of it, according to Limelight’s chief strategist, Mike Gordon.

This comes on the heels of yesterday’s announcement by Panther Express that it has built a delivery network even faster than Limelight’s.

Limelight and Panther are a so-called Content Delivery Networks (CDNs). In Limelight’s case, it is placing huge numbers of servers around the world to carry traffic to its nodes around the world — where it hooks up and serves the video and other content to the various internet service providers, whether AT&T, Deutsche Telekom, or NTT in Japan.

Limelight is giving industry leader Akamai a run for its money. Because it is newer, Limelight has built a more efficient architecture, with hundreds, and soon thousands of servers in dozens of locations, said Gordon. This lets it hook up nodes from its larger customers directly to all the major Internet carriers. For example, it can take a music file requested by an end-user from Rhapsody and can funnel it directly to an end-user’s computer via a node with the user’s ISP. That compares favorably to Akamai, which built its network during a time when resources were scarce. Akamai’s network has to labor through many more calculations about which servers and networks to use on the public Internet backbone, Gordon said.

Until now, Limelight has been second only to Akamai in the overall market of delivering content. Akamai doesn’t break down its revenue by industry, but it looks like Limelight may soon surpass Akamai in serving “media” related traffic. Limelight booked about $10.5 million in revenue the first quarter, and booked about $14.5 million in revenue in the second quarter — which is crazy growth. That’s 40 percent growth, quarter to quarter. Meanwhile, Akamai, which is running around $85 million across its various businesses, says roughly a third to a quarter of that comes from “media” transmission — but that includes traffic from slow-poke media folks like the WashingtonPost.com. So Limelight may be the biggest kid on the block in transmitting videos and other social media.

(Not surprising, then there are rumors that YouTube is a customer, and that its traffic growth alone is feuling much of Limelight’s crazy growth — the only difference being, is that Limelight is actually making some money! However, the YouTube relationship is something we couldn’t confirm with Limelight’s Gordon, when we talked with him today. He did say the company has more than 600 customers, including MySpace, Rhapsody and XBox Live.)

The deal was led by Pete Perrone, who is in Goldman Sachs’ Silicon Valley office. Limelight has been profitable three years, Gordon told us.

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