Jeff Bezos Talks Amazon Web Services at Web 2.0

I’ve always liked Jeff Bezos persona as he comes off as a very honest and energetic guy who’s passionate about the web and what can be done on it. He started out by talking about the Amazon we know today that has 61 million active buyers and will surpass 10 billion in 2006 sales.

However Jeff came to speak at this summit about their newer developer business called Amazon Web Services that is less known. Currently they have over 200,000 registered developers in 10 different web service offerings. He primiarly came to talk about S3 (Simple Storage Service) and EC2 (Elastic Compute Cloud).

S3 (Simple Storage Service)

• Storage in the cloud of services
• Programmatic access via web services API
• Easy to use

EC2 (Elastic Compute Cloud)

• Compute capacity in a cloud
• Scale capacity up and down in minutes
• Developers control their machine instances
• Very inexpensive
• Integrated with Amazon S3
• $70 month for a 1.7 GHZ machine if you were using computing capacity 24 hours a day, 7 days a week.

Jeff showed some examples of companies using their services. Second Life moved to Amazon S3 service in the middle of the distribution of their application download very seamlessly, and without even contacting Amazon about it.

He believes the biggest benefit is that it removes capacity from being an issue when running a web application.

Why are people so excited over access to hardware?

It removes the capacity problem, and allows companies to focus more on creating the core kernel of your idea. Over 70% of time is normally dealing with the heavy lifting that Amazon’s services take care of.

He closed with a quote: “We make muck, so you don’t have to.”

Tim O’Reilly then sat down with him to ask some more questions about Amazon Web Services. The following is a paraphrased version of the conversation, please don’t take them as exact quotes:

TO: Jeff, you mentioned Microsoft is a customer, you’d think they’d have their own infrastructure?

JB: They have lots of businesses, and obviously they do infrastructure, but they have business units who want to get work done today. (Slight dig at Microsoft!)

TO: You are a retailer, and this seems like a service that would come from a company more like Google or Yahoo. What’s the future of Amazon? Are you a dark horse in this race?

JB: We’re not a dark horse. We’re a “lightning-colored horse”. We’ve been running a large capacity web application for 10 years, and we hae low margins so we need to keep our infrastructure costs low. We took the things we’re good at and learned how to turn them to the outside.

TO: Why do this? Wall Street has been good to your stock, but analysts are confused.

JB: Well, we’ve been doing this for 10 years. We’re good at, we know how to do it, and we think it can be a meaningful and financially attractive business.

TO: Will it replace your other business?

JB: No, we have three businesses. We have our consumer-facing business, seller-facing business, and now this developer-facing business. But the more powerful response to your why question, is why not?

TO: Why has EC2 been succeeding?

JB: It’s simple to use, self-service, and inexpensive.

TO: Where does Alexa and A9 fit into this?

JB: It’s part of the same set of services. Alexa has one of the best web crawls, and that’s some heavy lifting. If we can take that fixed cost and sell it as a variable cost we think that’s attractive.

TO: What’s missing from the muck next?

JB: We have more services coming, some we’ve been working on for two years. But I won’t tell you what those are.

TO: What about one-click as a service? You have the best shopping cart.

JB: That’s a good idea. One that’s in early beta is Fulfillment by Amazon. People can use our API to send us a notification that they’ve shipped us merchandise to our fulfillment centers. We’ll stow it, and then you can use the API to alert us to ship it to a specified address. A fulfillment center is heavy lifting, so if people can buy that service by the drink, that’s great. You can treat a fulfillment center just like a printer.

TO: So how long before you make money?

JB: All our costs are covered by our main business. So we’ve priced it to make money right away.

TO: What about costs for power in the datacenter wars?

JB: The biggest cost isn’t power or servers, it’s lack of total utilization. If most data centers really add up how much the servers are being used, it will only be some percentage of the time. It’s like buying a Boeing 747 and leaving it parked most of the time.

TO: What are you getting from your relationship with 37 Signals?

JB: These guys are really humble and smart, and I’m going to learn a lot from working with them.

Photo Credit: Niall Kennedy