While I was busy announcing the upcoming TechCrunch20 conference and picking fights with venture capitalists today, Dan Farber was covering the news at the Web 2.0 Expo. One of the more interesting disclosures to surface: Amazon’s Jeff Bezos announced that their S3 storage-on-demand service, which launched just thirteen months ago, surpassed 5 billion stored objects. This is up from just 800 million stored objects in July 2006.
Income from S3 is little more than a rounding error for Amazon, with nearly $11 billion in 2006 revenue. But the service has some passionate users who are claiming to be saving a lot of money versus handling storage themselves. It’s not too early to say, as Dan does, that “Infrastructure as a service has arrived.”
Amazon does need to be careful on the expense side, however. A BusinessWeek article late last year got deep into the numbers:
Most worrisome to investors is Amazon’s three-year-plus binge on new technologies. So far this year its spending on technology and content, including hiring hundreds of engineers and programmers to produce all these new services and buy more servers to run them, is up 52%, to $485 million. As a result, operating margins, at 4.1% for the past four quarters, now come in at less than Wal-Mart’s 5.9%. Even Barnes & Noble Inc. (BKS), that doughty bricks-and-mortar book chain that many expected to get remaindered by the Web, has higher margins, at 5.4%. “I have yet to see how these investments are producing any profit,” gripes Piper Jaffray & Co. analyst Safa Rashtchy. “They’re probably more of a distraction than anything else.”
See our related coverage of other Amazon web services - EC2 and Mechanical Turk. I also had a podcast discussion with Jeff Bezos last November about Amazon’s web services unit. Listen to the interview at TalkCrunch.
Does anyone have an idea how many TB in storage are used to store these 5 billion objects?
I recommend you cover RightScale.com. Prett sure there will soon be a TechCrunch post about what % of S3, EC2 and SQS data are being driven from “it”.
“Income from S3 is little more than a rounding error for Amazon, with nearly $11 billion in 2006 revenue. ”
I think the correct number is $11 million, not billion. That would be 2/3rds of their market cap.
I just checked and I have 52.7G stored there right now. It’s all digital camera pictures and movies. Obviously it’s my off-site backup.
I use S3Drive - http://www.suchwerk.net/sodcms_S3Drive_at_work.htm which mounts it as a drive letter on my fileserver, making it easy to utilize.
Amazon as of 31st dec 2006 had revenues of about 11 Billion
The gross profit stood at about 2.5 Billion dollars..
trust that clarifies
Do these figures include amazon’s own usage of the service?
Great question Darren!
- 5 billion objects - I guess that is photos / docs / anything right?
- what percentage of these “things” have been active over the last year? and again what percentage is Amazon using? heh
-RB
@Bill Minton
S3Drive is an excellent app that makes using S3 a real pleasure. I’d recommend it to anyone who is interested in getting started with using S3 for their backup needs.
I think thats actually a really big mark for Amazon, I’d like to see what else comes from them. I’m not a huge fan of the google parade so its great to see if they will soon be a big competition.
GOOG or MSFT should make a push to get amazon. Too bad they might get a slap from Bezos if they even try but hey who knows.
–Zaid
JungleDisk is also another good option. It is similar to S3Drive but they include extra features such as automatic backups (and plans to include synchronizing) and they also have clients for both Linux and Mac. I just wish they offered some sort of website access as well for when I’m on another computer.
In regards to “passionate users who are claiming to be saving a lot of money”, I was able to launch of unique search engine with over 2 million FAQs from all over the web using the Alexa Web Search Platform. I never could have afforded to do this without the Alexa services.
I see long term potential for this webservice, beyond web 2.0 hype.
Amazon’s AWS have made a huge difference to our business plans. They’re such a great solution for start-ups that need to handle variable (unknown / fluctuating) loads.
Porting images across to S3 saves bandwidth, server load & worry. Using EC2 to deliver compute power as needed helps get over the launch hump.
I can’t wait for this space to become even more active. Amazon’s service is already so fantastic, that it will be interesting to see what else comes from eventual competitors. The possibilities that come out of a resource like EC2 will dramatically change web-app performance by levelling the playing field & giving web-apps a genuine advantage over desktop applications.
Chalk me up as another infrastructure-as-a-service evangelist!
Remember dot com crash at the wall street??
First, you ask venture capital. Venture capital goes to bank. You take wall street money, you don’t pay it back 4-7 years. In 8 years, your company will crash and lose tons of money. You should look at buildings in Dubai, shanghai, etc… Right here, we got is cracked roads, broken streets, pumping pollution cars, expensive food cost, abandon buildings, new orleans cities, and high housing cost.
Food is cheap, gas, and cars is cheap in Dubai & shanghai. You see nice buildings in overseas. Now, if we keep using VC money — wall street & U.S. stock exchange will crash or go turmoil. No one listen… Stop using VC money. WEB 2.0 is not VC; WEB 1.0 is VC !!!
I saw powerset.com article. How long does take to get them finish hype search engine with million dollar capital?
I saw another startup asking about venture around… then I saw website, they were partying and not doing professional work like ibm, dell, etc…
perhaps i should start my own store
@16 james
“dramatically change web-app performance by levelling the playing field & giving web-apps a genuine advantage over desktop applications.”
Spot on man, there are other recent developments that make this even more applicable….
I love S3 and host all my video there. It is simple to use and OH so affordable. I have a short tutorial on how to set this up here:
http://www.askmrvideo.com/cam/s3/
I have a client wanting to put 11 hours of instructional video online. This was not do-able a few years ago. Today, it will cost less than a dollar to host and stream per user.
I just hope with all this investment in infrastructure that they keep their focus on great service. I’ve always been impressed with Amazon’s emphasis on customer service. It’s something that keeps me coming back to them time and time again. If they provide good infrastructure service WITH good customer service, they’ll have me as a loyal customer for life.
GJ
http://www.60in3.com
First… why is it not ok to have low operating margins when you can make more sales? It is the profit that matters…
Second, analysts and investment bankers very commonly use the wrong comps to bolster their argument. BnN and Walmart do not have high-NPV projects going on, and aren’t exploring creating and moving into markets that don’t exist - for instance - utility computing. These ventures will pay off in the future (but they are risky).
We started using S3 as a giant off line Disk back up and Archive service… and so far I have to say we’re very pleased with it. We’re storing just shy of a million videos there and they’re saving us a good 60% on our Storage management costs, not to mention it’s capacity on demand which is fantastic for us.
Good job Amazon, keep it up!!!
Just thought I’d add one more voice to the fans of S3. I’ve used it in a number of applications and found it be be very simple to use. Given that I mostly work in MS technologies, I’d like to see Microsoft come out with something similar to E2. My guess, however, is that they’d see it as a threat to their core server license business…
Chad
http://www.wtfShouldIDo.com
link #19 AskMrVideo: http://www.askm…deo.com/cam/s3/
VERY COOL!
The irony of this story being posted today. Last night I sent an email to my CTO to review this offering for our new start up. On the surface being a business guy this looks good, under the covers being a business guy - the truth is I have no clue.
Am I missing something here or is Amazon offering to be a large part of my data center engineering team which in turn will save me $$$ as well as supplying all the hardware and again saving me $$$?
Amongst the companies making use of S3, I believe one of the more compelling is ElephantDrive. The desktop software provides simple desktop synchronization tools and abstracts the technical and billing relationship with S3. Full disclosure: I cofounded the company.
While its certainly nice not to pay for storage that you don’t use, its also nice not to have to worry about a bill growing every month… 1 GB for free and $9.95 per PC per month for all you can eat. Depending on how frequently you’re accessing your data, you could actually be saving money over S3 pricing.
It goes without saying that we believe Amazon Web Services and specifically S3 are the most innovative on the web. We’re looking forward to other large web enterprises releasing similar offerings. An expanded ecosystem for storage-as-a-service strengthens our platform and allows us to pass along better performance and pricing to our users as it becomes available…
Gal Josefsberg
#20, Customer Loyalty is very good with Amazon.
But don’t know, if the maintanance cost goes up for s3 and subscription charges should not increase. Thats what worried about in flickr account too.
http://www.suggestusability.com
I use Elephant Drive, and I like the flat-rate — if I start slinging lots of GB around (oh damn, I need to tweak that one and upload it again…) I’d rather not think about whether it is starting to cost me. Someone else’s problem, I have other stuff to do.
we’re going to use S3 as our back-up. Glad to see the endorsements from others using it.
@24 Alejandro - yes.
S3 performance and reliability is great. This service have very great potential and will move further….
I am surprised that investors are not seeing the long-term potential for services such as those Amazon is offering. By creating a redundant, scalable storage solutions that requires minimal management they have created a low-maintenance income generator, which can be expected to create long-term dependable revenue from continued customers as well as continued growth as the service grows. S3 is still in its very infancy, and as applications for it continue to expand (especially backup applications) its utilization will become much more widespread. Though, Streamload could become a ferocious competitor if they have get their act together, but the slow pace at which they are advancing in the API department causes me great doubts.
Couple of notes here — first, S3 is a solid, relatively fast, and very price-competitive product. I archive my personal data there, so far only a few dozen Gb but it’s been painless.
The reason we didn’t go with it for our primary storage system is latency — we weren’t able to push bits in and out fast enough with consistently low jitter and lag. We’re certainly looking at this as backup storage, and that’s been the approach a lot of companies seem to have taken, i.e. storage for the large, immutable blobs of primary customer data, with local infrastructure used for low-lag serving activity on derivatives.
The second point is about people wondering why VCs aren’t pushing more heavily into this market. The reason they’re holding off is that there isn’t unbounded upside in this kind of play - it’s capital-intensive, has the slow uptake of something like enterprise sales (which it is), and meanwhile you’re paying down the expensive fast machines you needed to buy to prove to potential customers that your system scales and is fast enough to meet their needs. In the mean time those 320Gb drives you bought are obsoleted by Some Competitor who paid even less this week for his 750Gb drives and can offer that same capacity for half of your super-low-just-for-early-customers rates.
Storage is a reasonable example here but CPU cycles moves the same way. We just built out a second tier of our servers, just a few months after our first tier, paying 20% less per identical machine. No VC wants to be in that kind of race to the bottom.
How about latency and other stats? Are these available?
If yes, can someone post the link?
Looks to be a great offering.
I am an Elephantdrive user, and with the large amount of data that I frequently need to access while on the road, I have to say that the unlimited amount of storage that comes with my subscription is -quite- useful. S3’s pricing makes it less palatable.
Amazon S3 is a cool service and I wander when it will make the top 25 online backup companies list at the review site:
BackupReview.info
This site is an excellent website for online backup information, news and articles. It lists more than 400 online backup companies and ranks the top 25 on a monthly basis.
With tons of engineers workin on their web services, i wonder why Ec2 is still crappy. It will never replace traditional hosting, unfortunately, as I was told by one of their engineers in the forums.
also can someone fix the S3 add-on for firefox. it’s an abandonware.
@#24 Alejandro,
We are very pleased using S3, and I think we’re up to 3TB of data we have over there.. that said I would not use them as an “Akamai” type service since their stuff is not on the edge of the network. Latency is not terrible, but since it’s likely to be different from your dynamic pages, I don’t think it’s a great idea to serve stuff off S3 live, rather we are using them for archiving and “right click save as” type links. If you’re looking for a high performance cache system then you may want to look into Limelight or Akamai, and maybe use S3 as the index server (where the cache servers pull their file).
As for cost savings, we’re seeing about a 60% savings in server/storage management, head count costs and the like. Plus we can scale S3 as needed which is fantastic. Speed tp upgrade has been a big growth limitation for us.
“I just hope with all this investment in infrastructure that they keep their focus on great service.”
I wholeheartedly agree with Gal. Their great customer service has created a very high trust factor within their core e-tailing business.
That customer trust factor also allows Amazon associates like me to earn a little change from their E-Commerce web service.
http://www.jangle.net
Amazon S3 offers incomparable service in terms of speed, robustness and pricing. We use it for our Video solution and it has proven to be a flexible, scalable and easy-to-use platform.