WEB 2.0 - Amazon Web Services losing money

Amazon.com's IT infrastructure services business hasn't achieved profitability yet, but CEO Jeff Bezos is sure it will succeed.

Amazon.com's Web services business isn't profitable, but it's growing very rapidly and the company expects it to make money eventually, Chief Executive Officer Jeff Bezos said Monday.

Amazon Web Services, launched in 2004, provides hosted IT infrastructure services for developers in areas like storage and server computing. It is Amazon's newest business and Bezos is convinced it will succeed because there is rising demand from companies large and small for offloading IT infrastructure work to a third party, Bezos said at the Web 2.0 Expo event in San Francisco.

For example, S3, a hosted storage service, has grown exponentially, from having 800,000 objects stored in mid-2006 to over 5 billion today, Bezos said, the first time he has disclosed usage figures for the service.

"Managing bandwidth, buying servers, negotiating with hosting companies: none of this stuff helps your idea be any better or gets your product faster to market," said Bezos in a keynote speech during which he also answered questions from Tim O'Reilly, founder and CEO of O'Reilly Media, one of the event's organizers.

Instead, Amazon is an expert at these tasks, and can provide them on-demand, charging customers only for the storage or server capacity they use, he said. Amazon Web Services' clients currently range from global companies like Microsoft to tiny startups who have decided to delegate back-end tasks on Amazon like hardware provisioning and software maintenance.

What Amazon doesn't like others to do is to grab data from one of its Web services without permission, as has been the case with the Alexa Internet division, responsible for some of the company's best known Web services for developers. When O'Reilly urged him to patch up Amazon's differences with the Statsaholic Web site, the normally cheery Bezos got defensive.

Statsaholic displays graphs on demand using data from Alexa, an Amazon division that tracks and ranks Web sites' popularity. Amazon and the Web site locked horn last month, initially over Statsaholic's original name: Alexaholic. Bezos said the Alexa division objected to the name on the grounds of trademark violation. Although the name was changed, Statsaholic continues to own the domain Alexaholic.com, from where it redirects traffic to its new domain, so the issue isn't resolved, Bezos said.

Moreover, Statsaholic uses graph data that Alexa hasn't made available for access by third parties via application programming interfaces (APIs), which is why Amazon also started blocking the Alexa graphs from appearing in Statsaholic., he said.

In a blog posting on March 26, Ron Hornbaker, creator of Statsaholic, defended his position.

"Why hasn't Alexa made the graphs part of their official API and charged per request? They've done it with their website thumbnail images, and with data, but why not with the graphs? I would be their first customer for such a service, as long as it was priced appropriately," he wrote.

Alexa has had other problems recently. In November, Alexa's Web experienced serious availability and performance problems, logging over 18 hours of downtime.

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Juan Carlos Perez

IDG News Service
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