AWS Growth: Really Big, Really Vague

Amazon's utility computing services now use more bandwidth than its retail operations.

Rich Miller

January 31, 2008

2 Min Read
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While most of the financial analysts and press are focusing on shrinking profit margins at Amazon (AMZN), TechCrunch and Read Write Web have picked up on a paragraph in the company's earnings report that briefly discusses its utility computing initiatives. Here's what Amazon reported:

Adoption of Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) continues to grow. As an indicator of adoption, bandwidth utilized by these services in fourth quarter 2007 was even greater than bandwidth utilized in the same period by all of's global websites combined.

I don't think the bandwidth growth is that surprising. The service now hosts content for 330,000 developers (up 30,000 from last quarter) and its customers include growing services like 37 Signals, Powerset, SmugMug, ElephantDrive, Jungle Disk and (Mailtrust). Many of these startups are attracted to S3 because it allows them to host large files cheaply. But big files like photos and backups are bandwidth hogs. So amid the enthusiasm about the "growth" of AWS, allow me to be the cranky guy who wants more data.

It's worth noting that the metric Amazon has chosen - bandwidth - is an expense. This suggests that bandwidth expenses from Amazon Web Services are now costing the company more than the bandwidth for its entire retail operation (which undoubtedly has higher overhead from other non-bandwidth costs).

There's a lot of enthusiasm about the emergence of utility computing, which has been heightened by interest in Nicholas Carr's new book, The Big Switch. If the Internet is to be dominated by huge computing clouds, the performance and profitability of the largest clouds is an important issue, and Amazon is likely to provide the best early case study of how to monetize a huge utility computing operation.

But when will we know more? Amazon is a large public company, and the infrastructure that is supporting AWS is not cheap. In coming quarters, Wall Street will want details about the return on Amazon's big bet on utility computing. Perhaps Amazon is keeping AWS revenues under wraps because the results will attract more competitors, and Amazon wants to retain its first-mover advantage for as long as possible. Or perhaps the financials for AWS will simply shift analysts' focus on profit margins from the company's retail unit to its utility computing operation.

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