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.

Just over three months ago Amazon made a major move beyond online retail with the launch of its S3 grid storage service. The company today released some information about the program’s early progress. Online storage as a utility might seem unexciting to some, but it could be a real boon to innovation. S3 just passed 800 million discrete objects stored and has some interesting customers using the service. At $0.15 per GB-Month of storage used and $0.20 per GB of data transferred, the effort is poised to change the game for web services previously weighed down by the requirements of storing their own data.

Use cases range from large to small. Microsoft is using it to serve up its MSDN Direct Student Download to students around the world. Photosharing service Smugmug says it’s saved $500,000 by using S3 for its database that adds 10 terabytes of images each month. There are a number of start-ups leveraging S3 as their back-end for unique front-end storage apps. Other companies highlighted as using S3 include Altexa, ElephantDrive, Jungle Disk and MediaSilo.

We profiled S3 when it launched and said it could be a game changer. That potential appears to be beginning to bear fruit. We’ve covered a number of other online storage options here as well.

You’re probably familiar with the argument that Net Neutrality is essential for innovation because small start ups must have access to affordable data transfer infrastructure. The same is true for storage – S3 has the potential to facilitate loads of innovation by commoditizing what was in the past a substantial resource drain for data intensive services. This is only the beginning and I’ll be excited to see more companies or features appear for which data storage is a solved problem.

Episode 3 of TalkCrunch is up. We invited in two key Amazon S3 team members, Adam Selipsky (VP of Product Management and Developer Relations for Amazon Web Services) and Dave Barth (Product Manager for S3), to talk about Amazon’s exciting new Grid Storage web service.

As I wrote previously, S3 provides a terrific opportunity for startups with great ideas for a storage user interface to avoid building a back end storage infrastructure. Amazon is offering extremely low pricing and a very dependable infrastructure. For some people, S3 will allow them to launch a service that they otherwise couldn’t have built.

Nik Cubrilovic, the CEO of startup Omnidrive, was co-host of the show (as was Keith Teare) and we tried to convince him, unsuccesfully, to switch to S3 for the back-end of his storage.

Talkcrunch continues to do well after its first three shows. It is currently included in the iTunes “new and notable” section and is on of the top 20 technology podcasts (as of right now it is #12).

Amazon Web Service is launching a new web service tonight called S3 – which stands for “Simple Storage Service”. It is a storage service backend for developers that offers “a highly scalable, reliable, and low-latency data storage infrastructure at very low costs”.

I was able to speak with Adam Selipsky (Amazon Web Services VP of Product Management and Developer Relations), Dave Barth (Product Manager for Amazon S3) and Andrew Herdener (Senior Public Relations Manager for Amazon) today about the service.

They’ve built the back end for the number one requested company that I wrote about late last year – reliable and cheap online storage. I’ve been watching this space very closely, even profiling a number of new entrants, and I have to say that S3 changes the game entirely. Move over Google Drive, Amazon just stole your thunder (for now).

Until now, a sophisticated and scalable data storage infrastructure like Amazon’s has been beyond the reach of small developers. Amazon S3 enables any developer to leverage Amazon’s own benefits of massive scale with no up-front investment or performance compromises. Developers are now free to innovate knowing that no matter how successful their businesses become, it will be inexpensive and simple to ensure their data is quickly accessible, always available, and secure.

Here are the facts: This is a web service, and so Amazon is not releasing a customer facing service. They are offering standards-based REST and SOAP web services interfaces for developers. Entire classes of companies can be built on S3 that would not have been possible before due to infrastructure costs for the developer.

Virtually any file type is allowed, up to 5 GB. Files may be set as public, shared or private and will have a unique URL.

Pricing is cheaper than anything else I’ve seen: $0.15 per GB of storage per month, and $0.20 for each GB of data transferred up or downstream. This translates to $15 per month for 100 GB of storage, net of any transfer fees (to move that much data on to S3 would be a one time cost of $20). These prices are going to be significantly below the development and ongoing costs for small or medium sized storage projects – meaning a lot of the front end services I’ve previously profiled will be much better off moving their entire back end to S3.

This is game changing.

See Rob Hof at Business Week for his thoughts on S3 as well. He says “it should put to rest the notion, still popular among a few analysts, that Amazon is just a retailer.”