Moments after Jeff Bezos left the stage at the Web 2.0 Summit last week I was able to talk to him for a few minutes about Amazon’s web services ambitions. Jeff is emphasizing that new services like Mechanical Turk, Simple Storage Service (S3) and Elastic Compute Cloud (EC2) are going to be a key business line for them in the future, and they are planting the seeds now.
This was also the subject of a recent cover story on Business Week (written by Rob Hof, one of Silicon Valley’s best tech writers). While these services are still in their infancy, a high profile group of companies are starting to jump on board: Microsoft, Xerox and Second Life are all customers. And SmugMug CEO Don MacAskill recently wrote a long blog post gushing about the amount of money they are saving using S3 over alternative solutions - $500k so far and an estimated $1 million or more in 2007.
It would be interesting to know what Amazon thinks of like.com. If e-commerce 2.0 looks a little like that.
Amazon has lost focus. It built a great brand selling book, but now the company has expanded out to several other businesses. Yes, expansion might bring extra dough for the short term, but in the long run it is likely to dilute their brand value.
The point is that Amazon’s move to expand its product line does not complement its existing products. What would happen to PepsiCo if it started selling cars?
What’s even worse is that Jeff Bezos is ignoring outside criticism. Success blinds like nothing else.
- Jawad Shuaib
These guys are providing excellent value. I’m very excited to see how this evolves.
Looks like Bezos is going through the ,,new project” excitement period.
Basically if your other projects are boring, too mature or not going too well, you don’t put more time into them, instead it’s so much more fun to get excited about something new, the feeling of building something new, something great, that’s gonna be so much better than all this boring stuff that’s causing you headaches…
Jawad, i am going to have to disagree. You have to ask yourself, amongst who are they loosing their focus? I think the problem is that you’re looking at amazon’s users in aggregate, when really you must segregate them into their intended markets, then analyze any implications.
The regular web user would never ever have to know about s3 or EC2 or any other web service for that matter. The developers that end up using the web services themselves, and save money, would become even more loyal and attached to amazon.
John D.
This is heaven for startups. Imagine having the power of provisioning unlimited space and unlimited computing power. You are actually building your apps using 10-15 years of experience already behind you taking care of scalability and reliability issues. I am very much excited about it. EC2 is still in infant stage but definitely has an early movers advantage in this space. I wonder VMware guys must be having nightmares when it really rocks in.
John, I understand where you are coming from. It might seem natural for any large business to eventually seek other markets, but it almost always ends up segregating the business and losing focus. Why did Chengis Khan’s empire collapse? Or Hitler so easily lose control? Or Alexander get beaten out of India? When a business is doing great, it begins pushing itself into new vistas instead of improvising the territory it already controls.
Go to Amazon.com. I buy atleast one book from them every month. But you know, I have to actually “find” the sign in button each and every time. Amazon’s website is cluttered with useless information and text. A multibillion dollar business that solely depends on its website has one of the worst organized websites I’ve seen.
My point here is that instead of innovating outwards, a business should innovate within its existing products. Start with a better organized website. Instead of trying to sell me holiday DVD’s for my mom, sell me books. Make it easier for me to become their affiliate. Those are the sort of tactics that will help Amazon in the long run.
Rockefeller and Henry Ford were two business men who understood this concept of vertical integration. Unfortunately, this art is lost in many businesses today. When you try to be everything to everyone, you end up being a no one. It is time Amazon decides what it is in business for.
- Jawad Shuaib
Jawad, I completely understand your argument, but I still believe amazon is on the right track. It’s all about marginal gain vs. marginal risk at this point. In any healthy corporate environment, or empire as you’ve suggested, there comes a time where growth and expansion beyond your core competency is inevitable. Amazon’s relative growth 5 years from now on basis of sheer real dollars will be less then these newer services. That is not to say that there is no room for growth in the retail side. I believe theses are both complementary markets taking advantage of economies of scale.
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Yes there is a chance they may become good at everything and master of none, but I believe that’s a risk you have to take, and prove the skeptics wrong about. How can a huge corporation just stay static as new opportunities pass them by, they can’t be naive and ignorant, they must learn to adapt and evolve and cope with what’s going on around them. Amazon is doing a great job at that.
well, it does all sound great, but take a look at the s3 and ec2 discussion forums and you’ll probably hear otherwise…lots of complaining about speed, ip allocations and other conundrums…once that’s all worked out though (ec2 is still beta), then i have high hopes for them as a tools provider…
Dave,
I personally use S3. EC is still beta. Once in a while I’ve had issues with S3 — but they were promptly resolved by S3 staff.
Obviously, they arent right there with these services, but based on my personal experience — they are building up on all the feedback and improving the QoS.
I was thinking about this a bit more - what are the upsides and downsides for Amazon here?
Upside is that if it works well, they will have an extra source of revenue. However since they are public company, as soon as the service becomes very profitable, Google & co is likely to jump in, copying & improving, without the costly learning path. This will push prices down. Not so great for Amazon’s shareholders who will be asking Bezos why is he competing in his non-core business (as he has done in A9 recently).
Downside is fairly obvious…
But for startups out there who have a big need of a storage space somewhere, this is indeed a great news. Am not that excited about EC2 - what substantial benefits does it offer than VPS offered by ISPs?
I read the Business Week article and found it fascinating. There are some great ideas coming out of Amazon, however, it will be interesting to see if this evolves into a viable business for them. Good luck, Mr. Bezos.
Jeff Bezos is building the “Cushman & Wakefield” of the internet with Mechanical Turk, Simple Storage Service (S3) and Elastic Compute Cloud (EC2). Amazon builds the foundation for any new startup, any existing business to build their business’ on. You build your business and Jeff Bezos will supply you the ‘plumbing’, the ‘electricity’, or whatever ‘utility’ you require. You focus best on what you’re doing and leave the rest to Amazon.
Smart? Heeck yes!!….especially if it’s reliable, scalable and affordable. Why not leverage what he has, what he (plus the Amazon family) knows, build a robust foundation and allow others to tap into his world of expertise and experience in the internet business? Isn’t that the basic architecture of this web 2.0 world?
There was a time when people were sceptical of Amazon as a business. I think Jeff Bezos will prove people wrong (again). Once he gets the growing pains out of the way, and Amazon keeps learning from their mistakes and our complaints (’feedback’)and continuously improves their web services infrastructure, Michael Arrington (techCrunch) will say in a year’s time….”I brought it to you first”
Mahei (New Zealand)
i agree with mike & others above that these are interesting businesses, but i agree with jawad i don’t think these are core to Amazon’s existing users, publishers, and other Amazon ecosystem players. there are perhaps minor overlaps with digital publishers, but otherwise they seem like disparate services to almost entirely different audience.
i think jeff is a brilliant guy, but these services make a lot more sense as part of a separate incubator (a la Idealab / Bill Gross) than they do as part of Amazon.
if you want to make the case for A9 and perhaps some form of product catalog management solution, even some form of fulfillment automation service (would be very useful for physical goods sellers / providers), then i understand how all of those fit well with existing Amazon customers, partners, and businesses.
however, S3, EC2, and mechanical turk are all great ideas for a separate incubator / venture firm… jeff should spin them out and create a venture with those goals & customers specifically in mind. don’t get me wrong, there’s huge opportunity with them, but the fact that he’s doing them at amazon is more coincidence than synergy as far as i can tell.
(and btw, wish i had my own playground incubator like that… i’m jealous as hell wherever it lives
- dave mcclure
http://500hats.typepad.com/
Several of you (Jawad, et al) are missing the point. Amazon has been doing this work *ANYWAY*. S3, EC2 and their other web services offerings are not science fair projects, they are becoming key parts of of Amazon’s own infrastructure. Amazon.com is a large consumer of Amazon Web Service’s offerings (I’ve heard from an Amazonian at Web 2.0 that Unbox and Search Inside the Book both use S3 heavily). For them to store your bits next to their bits just lowers their costs and brings in extra revenue. The same holds true for EC2. This is the same play UPS made when it exposed its logistics pipeline to outside customers. Order a washing machine from Sears, and a guy in a brown uniform driving a brown truck will deliver it. Same principle, different industry.
Read this post from Shmula (not me) on Bezos from a former Amazoner:
http://www.shmula.com/251/jeff.....t-isnt-new
yes Mark, you are right. The point was missed. All Jeff Bezos is doing is turning his company inside out, as he says, to fully optimise what exists in Amazon in infrastructure and IP for public utility….and make a bit of money on the side as well. THAT will should keep all stakeholders happy.
Have you seen MediaMax/Streamload? They are offering a similar service, but much less expensively (to S3). It looks a little raw yet, but so does the AWS stuff.