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Summary:

The whirligig that was Web 2.0 conference is finally beginning to spin down; but Amazon.com CEO Jeff Bezos’ talk at the conference will remain with me for a long time. Bezos was one of the handful willing to provide a vision of the future. It is […]

The whirligig that was Web 2.0 conference is finally beginning to spin down; but Amazon.com CEO Jeff Bezos’ talk at the conference will remain with me for a long time. Bezos was one of the handful willing to provide a vision of the future. It is hard to argue with Amazon’s ability to spot important trends before everyone else. We wrote about this over a year ago.

His talk, of course outlines his dilemma. On one hand, he runs a retailer; and on the other hand, he is leading a technological movement (on demand computing) that has had many false starts. His main revenue stream is a pennies-and-sense operation; but he sees the opportunity in the new on-demand/web services. It is a hard choice.

As an investor, you want Bezos to get Amazon’s retail business humming, but if you are a technology enthusiast, then his experiments in newer technology models are always intriguing. Our readers were equally divided, though given our community’s technological inclinations, no surprise that 50% of those who voted wanted Bezos and Amazon to experiment with S3 and EC2 type services. He gave a financial justification for Amazon’s move into on-demand computing type services.

For 11 years, we’ve been operating a web-scale application, with high reliability, in a high volume, low margin business, very conscious of our cost structure. I always think high volume, low margin businesses are more defensive – we look at the absolute dollar level of profit and free cash flow…we’re good at it, we know how to do it, and we think it can be a meaningful financially attractive business one day….Our biggest cost is not power, or servers, or people. It’s lack of utilization. It dominates all other costs.

Though, there are no plans to work this weekend, there is a good chance, that recent developments, Bezos’ comments and other random thoughts might inspire a new post, or perhaps would result in re-tweaking the current one. In case you were wondering about my whereabouts, I am answering emails – a whole pile of them. Have a good weekend everyone!

  1. sounds like he’s in the airline business

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  2. Well, he could spin off S3 and have Amazon as the first customer. The core business chugs along as a public entity, dutifully doling out 10Qs and 10Ks, while the S3 entity focuses on innovation. There are more opportunities for the on-demand offering at this point. It is going to be a lot easier to get additional funding for it too.

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  3. S3 and Elsatic are both excellent computing infrastructures to a limited extent. Business Potential ???

    Amazon now needs some killer Web 2.0 apps on top of AWS to make money. Once you deploy them, true color of your backened emerges. Google is having a hard time to maintain blogger up and running (Go check out their Blogger help groups). Bezos, its a job easier said than done.

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  4. what’s interesting is that A9 was spun out separate, but makes sense as part of the core biz (guess it sort of is again now).

    at the same time, all this other incubator / tech stuff is part of the core biz (tho doesn’t quite fit), but would seem to make a lot more sense spun out.

    jeff bezos is probably one of the few guys who could hold a candle to bill gross for most great ideas at a stretch… too bad he was so succesful building a billion-dollar retailer; he never had time to play in the lab.

    solution: hand over the reins to amazon (and/or get bought by MSFT or WallMart), and spin himself out into an Idealab-style incubator along with S3, EC2, and the other cool stuff he’s been coming up with.

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  5. om,
    sounds like the summit was inspiring! maybe we could work a reciprocal mesh agreement next year.

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  6. It’s tough to argue for Amazon to spend a ton of money on Web 2.0 technologies and the like. Outside of techies, would they really get that many more customers as a result?

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  7. Chetan,

    Smugmug and tonnes of other companies (me included) use s3 and ec2.

    both are godsend if you want large amounts of cheap storage.

    In my opinion,I completely agree with Om’s point above. I think AWS has a tremendous potential going forward and only in the near future will its true potential merge.

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  8. this is a far more lucrative prospect for amazon, an opportunity to become an infrastructure firm beyond a simple enabler (eg storefronts et al)…they should at least consider a tracking stock next year if this begins to scale…it might create a solution to a much more fundamental problem: preventing a giant brain drain from the second generation of fully vested execs and technical leads who are looking for a new and lucrative challenge…

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  9. The “talk at the conference” doesn´t seem to work.
    Thanks

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  10. Sorry, the “talk at the conference” LINK doesn´t seem to work.
    Thanks

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