4 min read

Razor's Edge: The Consumer Agent Economy Trade Phase 1... BUY FSLY

Between GrokBot, Astra Computer Use, and Instinct it seems like most people spent the weekend thinking about the AI trade again. My feed was filled with the usual suspects from Oracle, Semis, Optics, Power etc. Moar Compute which frankly I understand, but also surprised me a bit.

I instead spent the whole weekend thinking about Cloudflare, Expedia, Fastly, Booking, Meta, Visa/Mastercard, AWS, Twilio etc.

The Instinct agent in the above post turned one person's desire to get the near impossible table at 4 Charles into 200 requests/hour. Now imagine 10,000 people w agents want 4 Charles: That's 48 million requests/day. And Resy's response here wasn't "Wow, agents, better upgrade infra; It was account terminated."

Not shocking. If you are sitting on supply/inventory aggreg, brute force agents just increase cost with no incremental revenue. They also threaten to ruin the core user experience before transition. The default response is you gonna wanna block anyone who thinks they just got their free hackbot to price arb everything.

Anyway, there all kinds of things to think about here as some folks probably will read this bearish for aggregators like booking/expedia as consumer choice is handed to agent, but kind of hard to argue against the infra advtg they now have.

Aggregators bring all of the following to bear...

  • supply
  • live prices
  • availability
  • reviews
  • cancellation rules
  • taxes
  • customer service
  • payment
  • refunds
  • fraud handling
  • booking modifications

So, ur just kind of going to change the interaction and for the agents to work the aggregators have to really be willing to accept them. This also makes for interesting things in payments and potentially auction/exchange level shift for a biz like booking etc. But let's not get ahead of of ourselves.

What knee jerk interests me now is the traffic/security side of things and namely Fastly/Akam/Cloudflare.

There is a good expert call on tegus from few weeks ago with Loveholidays. They have used Fastly for more than a decade. It originally entered through the CDN, but Fastly now sits much deeper in the architecture through rate limiting, DDoS protection, Compute@Edge, KV Store and security tooling.The most interesting part of the call was what has happened this year.

The company says bot and scraping traffic is growing at the highest rate it has ever seen. Overall traffic has risen significantly enough that the executive estimated both traffic and Fastly costs have roughly doubled year over year. That surge is now both bandwidth problem and business issue.

Loveholidays is a low-margin travel marketplace whose competitors would love to scrape its pricing and inventory. Automated traffic can also contaminate its analytics: if large amounts of bot traffic arrive through a marketing source and never convert, the company can mistakenly conclude that real customers from that source are low-quality and reallocate advertising spend incorrectly. As a result, Loveholidays is now evaluating additional Fastly security products including Content Guard and the next-generation firewall specifically to gain more control over this traffic. Yey for fastly.

But for me the important takeaway from the call is the travel site DOES NOT simply want to block every machine. They expect some agentic traffic eventually to represent the next generation of customers shopping for holidays. A legitimate personal agent should receive real inventory and pricing. An unwanted scraper might be throttled, blocked, or even sent deliberately degraded information (not a bad idea).

Management seems to see this coming already. On its Q2 call, they described a major auto-shopping platform that viewed AI traffic as both an opportunity and a threat and consequently added Fastly Bot Management and DDoS Protection to gain better visibility and control over automated traffic. Fastly’s CEO framed the new problem as: each machine request increasingly requires a decision about whether it should be authorized, cached, throttled, monetized or blocked.

So, here we are a few weeks later and these out of the box consumer agents have joined the party, and we gonna most definitely be getting Meta's version of these and potentially similar capability from the big three's assistants. So, maybe get out in front of this instead of defaulting to semis...

Anyway, Cloudflare obviously long-term no brainer on all of this and many other amazing narratives and that's been in the price and its probably just more of an own again. Akamai was the easy number two on the compute angle recently with Fastly kind of just being the pure retail beta with little real meat yet. I think this time around that though that changes.

Why I’d put FSLY #1 for this, despite NET being the better the narrative company and akam being the quality

I think you actually have a real catalyst now for both traffic and security upsell in all fastly's core which was irrelevant compute wise during bottleneck AI trade phase of this.

The Loveholiday exec stated that:

-Bot/scraping traffic is growing at the fastest pace ever
-overall traffic and Fastly spend roughly doubled YoY
-they are now evaluating additional Fastly security specifically because of that traffic

So, assuming agent proxies now gonna hammer the consumer human web which drives initial consumption and security attach. They have the right install base for this. Also, Fastly also just reported: Network Services +17%, Security +43% Compute/Observability +69%. And Fastly has explicitly expanded Content Guard around unauthorized AI agents and API Security around shadow APIs. So, this is pretty clear accel case monetization more request, Bot Management
WAF, API Security, Compute@Edge policy.

Also think this makes their observability product very interesting because you now really NEED to know whose the traffic at the edge?

Vendors no longer know which traffic represents real customers, competitors, scrapers, AI crawlers or legitimate shopping agents. This is gonna corrupt commercial analytics.

Fastly's telemetry data now has serious business value......

Marketing wants to know:

Are Gemini/Instinct users converting?

Security wants to know:

Which bots are scraping pricing?

Infrastructure wants to know:

Which traffic is hammering origin?

Product wants to know:

How do agent users behave differently?.

And this isn't already included telemetry, Fastly charges separately for it.

Fastly has dedicated Observability packages with request allowances:

  • Starter: 500M requests/month
  • Advantage: 2B
  • Ultimate: 5B

So, no need to dwell on how this monetizes as with many things in AI as its there already. And while observability is peanuts today in revenue, you don't need an imagination on how this potentially scales exponentially. This is also 1000x more compelling then how the stock was pitched 4-5 months ago with a hard catalyst starting to play out. And there investor day is two weeks out and same time as Meta connect so u have some catalysts as well.