Amazon earnings just came out. The company had a strong fourth quarter, with revenues up 42 percent to $5.7 billion, net income doubling to $207 million, and free cash flow doubling as well to $1.4 billion. On the earnings call, there is a lot of concern among analysts about margin pressure next year.
Most of the things that tend to interest us here at TechCrunch about Amazon are not yet material to its finances. But one detail that stuck out in the earnings release hints at the growth of Amazon Web Services:
Adoption of Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) continues to grow. As an indicator of adoption, bandwidth utilized by these services in fourth quarter 2007 was even greater than bandwidth utilized in the same period by all of Amazon.com’s global websites combined.
That means startups and other companies using Amazon’s Web-scale computing infrastructure now bigger collectively than Amazon.com, at least as measured by bandwidth usage. Amazon is one of the largest Websites in the world (No. 7 in the U.S.), so that is a significant milestone. Amazon doesn’t break out revenues from its Web Services, but presumably it is part of the “Other” line, which was only $131 million for the quarter and includes businesses besides Amazon Web Services (such as its merchant services).
Other tidbits:
—Registered developers in the quarter reached 330,000, a 10 percent increase from the third quarter.
—Demand for the Kindle continues to outstrip supply. CEO Jeff Bezos says on the call:
The Kindle, in terms of demand, is out-pacing our expectations. it is also on the manufacturing side causing us to scramble We are working hard to increase the number of units we can supply. Our goal is to get back into a situation when you order a Kindle, we ship it immediately. That is our standard.We are super-excited by the demand.
And in response to a question about whether there are hidden features yet to be turned on in the Kindle, Bezos punted by pointing out:
There are a number of experimental features. We have made them accessible so customers can tell us if we should work on them and make them part of the product.
The current “experimental” features are a basic browser, a music player, and the NowNow question answering service that uses Mechanical Turk in the background. Here’s my feedback: Keep the browser, and make it better.
At the very end of the call, Bezos was asked about the shift in media from physical to digital and how that will impact Amazon. Media accounted for 59 percent of Amazon’s sales last quarter (or $3.3 billion), and Amazon is moving aggressively to offer digital movies, music, and books. Bezos thinks this move to digital will eventually pay off:
When media was largely physical, it made sense to buy it in the physical world. But as media becomes digital it does not make so much sense to buy them in the physical world. The bulk of the sales now are in the physical world. So our relative advantage over time should improve.
Not to mention, it won’t have to take a hit on shipping costs.
AWS ROCKS!!!
It’s amazing to see such a demand for kindle. I recall at Le Web 3 the designer Philippe Starck pointed that it should have had a more consumer-friendly design after Rob Scoble showed kindle to him.
I don’t think judging by bandwidth is correct when you compare Amazon with all startups. There are companies like Mogulus, Ooyala who use video heavily based on AWS, and that what takes most of the bandwidth. For Amazon probably MP3 downloads section is the most consumed bandwidth, consider that it was released recently…
I like the Kindle concept, even with its 1.0 flaws - don’t have it yet, waiting for a color model.
And their stock tanked 11%…. I wish this detail gets covered in the headline….
Dumb, dumb, dumb. They lead in web services now, but that will soon become a commodity business. They need to keep there eye on the ball and focus on continuing to be the very best web retailer.
A case in point- I ordered a GPS system from Amazon two days ago and paid extra for two day shipping. I could have bought it from several web retailers for $40 less but I trust Amazon. But I don’t have my GPS system that I need starting tomorrow morning because, for the first time ever, Amazon required a signature for me to get delivery today and I’m used to the UPS man leaving lots of expensive stuff on my doorstep in our very secure neighborhood. Amazon could have and should have notified me of the signature requirement and I would have had it shipped to my office.
So my impression of Amazon just took a big dive- just as I was reading in Forbes about how great they are in web services. Many a market leading enterprise has foundered on the shoals of getting involved in areas outside of their brand and core competency. It looks like Amazon will be the next.
Interesting comment about the Kindle, considering these devices have been available for a while now… what has amazon done to make the kindle such a hit?
“Media accounted for 59 percent of Google’s sales last quarter”
Google or Amazon? (Not sure if its an error.)
@Matt,
Amazon has an amazing sales power. I’d venture to say that its stronger that Sony’s.
The kindle is a hit, the kindle is a hit. This is excellent news, and while I don’t own a Kindle this success can only lead to the rapid launch of the Kindle 2.0 which will have features such as: tagging, sharing, group-reviews, beaming. Thats when I’ll buy it.
Web services are where its at. Invest in Amazon stock now.
I think the Amazon Web Services platform is the most under realized and most potentially disruptive platform available today.
Most savvy IT guys I know either haven’t even heard about it….or just slightly get it.
Wait til everyone starts using it as a core IT department stable for processing power, storage and job management.
@#5:
My Watchlist tells a different story? 11%…huh???
I do see a big future for Amazons AWS services. I’ve been using both S3 and EC2 over the last couple of months and am very impressed. All startups should take a serious look at what AWS offers.
While it is inevitable that grid computing services will be commodities, the large economies of scale that Amazon will be able to leverage will see them well positioned.
The traffic comparison is a little useless, for example I uploaded my entire personal photo collection to S3 around 8Gb, it’s going to take a lot of HTML checkout page requests to equal that bandwidth usage.
Go Amazon! I knew the Kindle would be a hit, despite all of the critics. The Kindle release is comparable to the first iPod release in terms of “changing the game. Where are all the critics now? After they realized how much Kindles were selling for on Ebay, people started to stfu.
AWS is no different either, a revolutionary platform in its own right. Jeff Bezos is a “G” and smarter than most of his competition.
Amazon should partner up with a REAL hardware company (i.e. Apple) for the second generation. It would carry a “new” name too; let’s just call it the “iBook”…lol.
Wait! The Kindle is a hit? Just because, “Demand for the Kindle continues to outstrip supply,” it does not mean it is a hit. It means they failed to anticipate demand.
How many Kindle units have been SOLD???? Total revenue from Kindle sales???
These are the questions that will help us understand how popular the Kindle is in popular culture.
Amazon is a strong player and will continue to make serious waves in about any market it chooses to play in.
I remember TechCrunch (Arrington in particular) heavily criticizing both of these products/services. Along with the Deadpool of burned start-ups, there needs to be a Deadpool of burned predictions…its only fair.
@8, thanks for the catch. Typo is fixed.
@7, the Kindle only started to be sold last quarter, the first official indication of sales.
@16, you are right to ask how about units and dollars. That is the true measure. Unfortunately, Amazon would not break that out. But given the massive marketing push they gave the Kindle, it is safe to assume they made a decent number of them and sold out. The question is: Was it a big hit (hundreds of thousands of units) or a minor hit (tens of thousands of units)?
Erick, I obviously agree with you on some level; but, it seems quite obvious that when a company does not break out these numbers, they are not too proud.
My guess is that unit sales were in the low 5 figures.
The Kindle is a very niche product. At least it was correctly priced.
I just wish you would have provided that type of commentary in your OP.
My apologies if you think that is a troll comment.
what abt. comparision with other hotmail, google and yahoo
I love my Kindle. It’s the best device I’ve put in my hands recently.
I’ll buy the upgrades when they arrive. The Kindle is a hit with me. Yes, it can’t help me shave my back, but there’s nothing like cracking open a fresh LCD screen of my favorite newspaper while listening to the Mayor of Detroit twist in the wind on the radio for banging his subordinate behind his wife’s back.
Ahhh…I will miss this stuff when I’m dead.
“Dumb, dumb, dumb. They lead in web services now, but that will soon become a commodity business. They need to keep there eye on the ball and focus on continuing to be the very best web retailer.
A case in point- I ordered a GPS system from Amazon two days ago and paid extra for two day shipping. I could have bought it from several web retailers for $40 less but I trust Amazon. But I don’t have my GPS system that I need starting tomorrow morning because, for the first time ever, Amazon required a signature for me to get delivery today and I’m used to the UPS man leaving lots of expensive stuff on my doorstep in our very secure neighborhood. Amazon could have and should have notified me of the signature requirement and I would have had it shipped to my office.
So my impression of Amazon just took a big dive- just as I was reading in Forbes about how great they are in web services. Many a market leading enterprise has foundered on the shoals of getting involved in areas outside of their brand and core competency. It looks like Amazon will be the next.”
LOL I love how some random guy is making SWEEPING generalizations and BOLD business recommendations all because he assumed he wouldn’t need to sign for a package and didn’t leave a note on his door to let the delivery guy leave the package there.
Hello Kindle!
Goodbye publishing industry!
“Kindle,” as in kindle for the flames!
Why no mention of digital rights? Oh yeah, most techies think “freedom of information” means “information for free.” Well get ready for more infomercials! And say goodbye to the professional authors. They’ll all be hobbyists soon!
Or do you have some idea of how people will be paid for content? Kindle’s DRM? A joke, right?
Nice writeup Erick. We have the full conference call transcript up now:
http://seekingalpha.com/articl.....transcript
This revelation is a testament of Cloud computing as the natural substitute for managing infrastructure, and that Amazon is clearly dominating the space and positioning their services for the coming generation of cloud apps.
It’s quite amazing that Amazing managed to do that in just a few years, move from the biggest retailer to the biggest cloud services provider.
If you’re looking for experts in Amazon auto-scaling scripts, and EC2 and S3 in general, FaceySpacey.com has you covered.
James
from
FaceySpacey.com, Your One Stop Social Media Shop.
> Nice writeup Erick. We have the full conference call transcript up now:
> http://seekingalpha.com/articl…..transcript
The transcripts are fantastic, thanks, but how can I view them as one page?
Overheard in the Amazon offices….
“Hey purchasing - order another 100 Kindle’s. The first 100 are sold!”
“Really?”
“Yeah, this thing’s a HIT!”
“sweet!”
So my impression of Amazon just took a big dive- just as I was reading in Forbes about how great they are in web services
@22:
UPS, not Amazon, requires signatures for expedited shipping. In fact, UPS now requires a signature on delivery for all but the standard no-extras services, so that if someone tries to claim the product was not delivered, they can point to the signature. Blame the fraudsters.
@4:
$11 down? If by down you mean up, then maybe.
All that we know so far is that early adopters and bibliophiles soaked up the initial supply. The consumer electronics trash heap is piled high with products that were in great demand (short supply ??) in the first weeks of distribution. We need to see at least three more quarters of data before we know whether Kindle is the next iPod or the next FlyPen.
Anyone know if any startup that has seen tremendous traffic has been built on AWS? Something that was designed to have industrial strength requirements and actually succeeded in using the scalability AWS promises.
I’ve been following the Twitter scalability story recently and noticed their split with Joyent. Wonder if anyone has done a study of how Twitter might have done had they started with AWS.
For all Kindle owners/users: NowNow workers are no longer allowed to answer customer service questions. Seriously. We all got an email saying we’d be banned if we did.
This means, of course, that if people ask customer service questions they’ll get no answer, and probably be quite upset, but nobody said Amazon was particularly smart or forward thinking.
More info:
http://turkers.proboards80.com.....1201914223