So You Wanna Be a Web Tycoon? Amazon Can Help

Amazon Web ServicesIf you aim to build the next Flickr or YouTube or even Hype Machine, Amazon has you in its sights. Jeff Bezos wants to bring his success in the high-volume, low-margin business of bookselling to the world of web app startups. He’s targeting micro-size businesses with an elastic in-the-cloud computing model that could bring world-class web infrastructure support right to you, the wannabe web tycoon.

While Amazon Web Services (AWS) offerings are currently limited in capability and oriented to only the most technical of developers, what they’re doing changes all the economic rules about creating a web startup. You thought that cheap web hosting and free email services disrupted the startup business space and kept venture capitalists up at night? Take a look at the next generation of web apps infrastructure, as imagined by Amazon.

The Utility Computing Model

Amazon Web Services are most notable for using a utility model of pricing and distribution: you only pay for what you use and someone else manages the hardware.

Let someone else buy and manage your computers. One of the first things you’ll need to purchase for your startup is a few computers for email, web hosting, customer data storage, and whatever processing your unique application does.

You could check out Dell prices or go for whitebox PCs but why not buy virtual machines online? Amazon’s Simple Storage Service (S3) provides disk space in the cloud at a price of only $0.15 per gigabyte per month with charges of $0.20 per gigabyte of data transferred. The Elastic Compute Cloud (EC2) prices “instance-hours” at $0.10 each, where an instance provides the equivalent of a 1.7Ghz x86 processor with 1.75GB of RAM, 160GB hard drive, and 250MB/s of network bandwidth.

Here’s a great benefit: someone else manages that hardware. If a hard drive fails, someone else is responsible for noticing it and replacing it. If your business grows to the point of needing an entire warehouse full of cooled blade servers, someone else suffers that headache–someone who’s already built up the organizational knowledge to handle such a task.

Gain purchasing power. Amazon has far more purchasing power and know-how than most solo or small group efforts. Take advantage of their ability to negotiate the best prices and play suppliers off one another–that’d be near impossible for you to do.

Pay for just what you need. Bezos calls this “pay by the drink.” You pay for just what you use–not for a specific amount of bandwidth or disk space as determined by the account type you choose. This allows your business to start small and grow as necessary, all the while paying for no more than what you need. It allows you to handle any peaks and valleys in demand.

Amazon’s utility computing model changes the game financially. SmugMug claims to have saved $500,000 by using S3 for photo storage. Mashup Camp organizer David Berlind calculated he could run servers on AWS for his Mass Events Lab business at around 20% of the costs of running servers himself.

Beyond Utility Computing

The utility computing model isn’t the sum total of Amazon’s aim at mass-market, game-changing web app infrastructure. In their offerings beyond S3 and EC2, we can see the promise of a whole new way of building online services.

Online outsourcing. Mechanical Turk, Amazon’s offering for providing “artificial artificial intelligence” otherwise known as human intelligence, was announced to great fanfare in 2005. Mechanical Turk (also known as MTurk) allows web app developers to programmatically submit simple tasks requiring human input into Amazon’s system where they’re presented for people to complete, with small reimbursement fees. This might be used for such tasks as transcribing podcasts or checking photos for pornography.

MTurk is not the most popular of AWS offerings right now. Most of the tasks offered on Mechanical Turk pay only a nominal amount. It’s not exciting for what it does now; it’s exciting because it suggests the possibility of easily, conveniently, and reliably delegating portions of your company’s workload to other people without having to hire and fire. Employees in the cloud, a virtual team, accessible via an API–now that is cool (and a bit farfetched, admittedly!)

Run a store without touching any goods. Amazon’s e-commerce service and associate program allow you to sell books, music, and whatever else Amazon sells without your ever having to see those goods. Via an API, you can access Amazon’s entire product catalog with images and product details, then put it on your website. Sign up for an Amazon Associates account, and you’ll earn revenue every time someone buys from your site.

What’s lacking? A do-it-yourself web app development platform. Amazon hasn’t yet come out with a user-friendly tool for making mashups–web applications that combine data and interactivity from various sources on the web. However, a bunch of other folks including JotSpot, TiddlyWiki TiddlySpot, Ning, and Coghead offer easy-to-use, browser-based tools for building web apps that handle some mashup-making tasks. Except for JotSpot, now owned by Google, I’d have some qualms about creating my rule-the-world online service using one of those. Are they really going to be able to scale up to become the next FaceBook or YouTube? What happens when I need more computing power or disk space but I’ve run up against what they’re willing to host for me?

What we future web tycoons need is a mashup platform that hosts mashups on Amazon’s S3 and EC2, that brings together other features of AWS like the search capability and message-passing for distributed program control, and ideally ties in some Mechanical Turk like functionality for leveraging human intelligence online. And then we’ll all be off to mint our web money.

When Can I Sign Up?

We’re moving closer to the day when a non-programmer with a regular-sized wallet can come up with an idea for a web-based business and put it together himself from pieces available on the web. We’re not there yet, that’s for sure, but Amazon’s vision for bringing web business infrastructure to the masses, along with a few other key developments in the web technology landscape like DIY web app platforms, means web tycoonhood might be closer than you thought.

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