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by Jason Krause

(IDG) -- Akamai created a huge splash when it went public two weeks ago, immediately trading at more than four times its IPO price. But don't think the company has a lock on an emerging market. This business space – content distribution – is about to get very crowded.

But don't let the name fool you. "Content distribution" is just the latest semantic vapor used to describe the slowly evolving caching business. The basic premise behind caching is to put servers out on networks to store frequently visited Web content. Rather than force Web surfers to travel through network bottlenecks to a particular site, Internet service providers can find the desired content cached on a server that is much closer and more accessible, thus speeding up download times.

But while companies like Inktomi (INKT) and Network Appliance (NTAP) have been selling caching devices to ISPs for several years, the business has recently evolved into a service industry. "We've all been in the content-distribution business for a while, but we didn't know it," says Amit Pandey, director of marketing at Network Appliance. "Akamai and others have made what we do into a service, so it needed a new name."

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The key to Akamai's success has been to build an extensive network – the company already has almost 1,500 servers in 24 countries on 55 networks – and to convince content sites like Apple (AAPL) , CNN, the New York Times, Yahoo (YHOO) and Motley Fool to pay them to supercharge their offerings.

Akamai may be the high-profile player right now, but there's no shortage of pretenders. There are 10 or 12 viable players in the space, including newcomers like Edgix and Exodus (EXDS) (the latter a Web-hosting company), and old-school caching stalwarts like InfoLibria. Boston-based Adaro is trying to outscale Akamai with international distribution. It has servers in 30 countries, working on a backbone of 13 Internet service providers, and claims it can deliver service to more than 97 percent of the world.

This is a confusing, incestuous market. While the industry has been squabbling over standards, there is also remarkable unity, as a number of content-distribution companies are striking "content peering" agreements that let them share Web data cached on competitor networks. This practice is remarkably like that employed by early ISPs, which used to share bandwidth. Of course, after industry consolidation and years of infighting, those ISPs largely stopped swapping bandwidth.

Although Akamai has done an admirable job of getting networking and Web-hosting companies to give Akamai space in their facilities, it's only a matter of time before the facilities-based companies realize that the Akamais and Adaros of the world are stealing their business. Infrastructure companies base their bottom line on selling bandwidth, while content distributors are happily trying to cut the amount of bandwidth people use.

One service provider has recognized the challenge posed by content distributors. Digital Island began life as a networking company with a grandiose plan to launch a bevy of data centers that would offer faster Web services. But then it realized that you don't need a whole data center; a smart-caching server on a network could provide much the same function. So the company went out and bought Sandpiper, an early content-delivery leader. Now Digital Island has the technology to forgo the data centers, but can still generate revenue from distributing Web content.

As service providers like Digital Island and Web hoster Exodus are getting into the game, they will have an advantage over companies like Akamai, which don't own an infrastructure, but instead lease space on someone else's. Meanwhile, upstarts like Sky Cache and iBeam are using satellites to build out a network to circumvent the hassle of getting physical access to terrestrial networks.

The most pressing question facing these guys is the eventual role of companies like the UUNet division of MCI WorldCom. Akamai and Adaro have lots of servers in data centers, but they have little to no presence in the key network-access points that UUNet owns.

The backbone providers must realize that content-distribution companies could undermine the need for their massive conduits. Conversely, if they ever turn to face this threat, outfits like Akamai will have a powerful enemy.

For now, the Web is still too slow and too disorganized for any one company to exert enough market pressure to try to manage bandwidth bottlenecks. "When service providers finally get around to laying fiber to the home, maybe the world won't need us," says Abhi Chaki, director of business development with Edgix. "But until then, somebody's got to fix the Internet's bottlenecks."