AWS Looks on Pace for That $500M in 2010

It was a good week for Amazon Web Services, and one for which the company can take complete and total responsibility. AWS announced a year of free service for new developers, added new features to make its Hadoop-based Elastic MapReduce product more useful, won a contract to provide cloud computing resources for the government’s service and, presumably, comprised an even greater portion of Amazon’s $7.56 billion third quarter.

As I write in my Weekly Update at GigaOM Pro, all this could matter a great deal when it comes to improving Amazon’s bottom line and AWS’s market share.

I think the win and the third-quarter results are intrinsically intertwined. Om wrote in August about the UBS report estimating AWS revenue at $500 million in 2010, out of roughly $900 million labeled “Other” on Amazon’s earnings sheet. In the third quarter, “Other” amounted for $240 million, bringing the to-date 2010 total to $632 million. Assuming UBS’s methodology is accurate, AWS will hit its $500 million mark.

The fourth quarter is here, and the holiday spike in web traffic should mean a lot more money for AWS. Last year, its fourth quarter “Other” revenue amounted for $231 million of the $653 million annual total for “Other,” and represented a 42 percent increase over third-quarter “Other” revenues. A comparable spike this year would bring fourth-quarter “Other” revenue to $341 million, raising the 2010 total to $973 million. AWS’s portion of that could push toward $550 million.

Looking forward, there’s no indication that UBS took the government contract into consideration when projecting future revenues. The Obama Administration has been pushing cloud computing at every turn, and government contracts are notoriously lucrative. could prove to be a cash cow for AWS.

The other two announcements this week — a year of free AWS usage and adjustable job flows for Elastic MapReduce — underscore AWS’s top position among cloud providers. These announcements are about increasing the AWS user base by courting up-and-coming developer segments (Hadoop, for instance) and driving down prices. Neither are earth-shaking, but I don’t know of other cloud providers able to give away a free year (even if the total cost is minimal) or expend resources on a homegrown Hadoop offering.

Weeks like this remind us just how big AWS is in the world of cloud computing. Competitive providers like GoGrid, Joyent, Rackspace and VMware are advancing fast, as are projects like OpenStack, but they won’t steal IaaS revenue share or developers from AWS without a fight.

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