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Amazon is expanding their EC2 feature set so rapidly... The pace is mind blowing to me. Last year, Randy Bias estimated EC2 was pulling $220M revenue/yr: http:
by mrb 16y ago
Amazon is expanding their EC2 feature set so rapidly... The pace is mind blowing to me. Last year, Randy Bias estimated EC2 was pulling $220M revenue/yr:
http://cloudscaling.com/blog/cloud-computing/amazons-ec2-generating-220m-annually http://cloudscaling.com/blog/cloud-computing/amazons-ec2-gen...
And he estimated an overly conservative 10-20% annual growth. But given the EC2 buzz this year, and personal anecdotes from my friends and colleagues using it, my gut feeling tells me the 2010 revenues will have increased 50-100% over 2009 revenues.
Is EC2 profitable to Amazon? Likely very profitable if you want my opinion. It is well accepted in the industry that the dominant cost in large scale datacenters is power and cooling --not hardware, not human resources-- and I keep running numbers in my head and the hourly prices of all instance types are well above power & cooling.
Just as an example, we know that this new GPU instance has two 95W Xeon X5570 and two 247W Tesla M2050; assuming (1) a max TDP of 50W for the motherboard and rest of the server, (2) instances are run under full load 100% of the time and always reach these max TDP numbers (unlikely, but follow me for the sake of the argument), (3) Amazon uses servers with 80PLUS power supplies (80% efficient or more), (4) a rather good datacenter with a PUE of 1.3 (power usage effectiveness, which includes overhead from power distribution and cooling; numbers in the range of 1.2-1.4 are often quoted by James Hamilton from the AWS team: http://perspectives.mvdirona.com/ http://perspectives.mvdirona.com/), and (5) electricity costs of $0.10/kWh (average in the US, but I know Amazon datacenters are in locations with cheaper electricity), then the hourly power and cooling costs would be:
(95*2 + 50 + 247*2) / 0.8 * 1.3 / 1000 * 0.10 = $0.119/hr
Amazon charges 17x this amount for on-demand instances ($2.10/hr), and 6x this amount for reserved instances ($0.74/hr).
Given these numbers, Amazon must recoup the initial deployment costs very, very quickly... Which is why I also think EC2 must be very profitable.
- samratjp 16y agoYup, they're supposed to make twice as much this year - http://venturebeat.com/2010/08/03/amazon-web-services-generating-an-estimated-500m-in-revenue-thanks-in-part-to-growth-of-social-games/ http://venturebeat.com/2010/08/03/amazon-web-services-genera...
- anarchitect 16y agoAt an Amazon Tech Summit I was at in London this month, it was mentioned that Jeff Bezos expects AWS to eventually exceed the profits they make from retail.
- ANH 16y agoIt's even more impressive when you know Amazon started AWS to take advantage of excess capacity they had during the off-season when they weren't dealing with the crush of holiday orders.
- nivertech 16y agoThis is just urban myth, according to Werner Vogels.
- ANH 16y agoWell, the Amazon Senior VP of International Retail said this was the case in his talk for the Stanford Entrepreneurial Thought Leadership series. So, seems there's some dispute within the company. But I suppose I should take Werner's word for it since he's the CTO.
- randybias 16y agoIt was premeditated and planned using all new capacity. I chatted with Chris Pinkham, who architected and was VP of Engineering for EC2. I also verified with Chris Brown, who was development lead for EC2 and Ben Black who was leading networking.
- deleted 16y ago[deleted]
- abthomson 16y agoIt's definitely not accepted that power and cooling are the dominant cost, in most cases it's the servers: From James Hamilton (who just happens to work for Amazon) http://perspectives.mvdirona.com/2010/09/18/OverallDataCenterCosts.aspx http://perspectives.mvdirona.com/2010/09/18/OverallDataCente...
- mrb 16y agoStrange. I read James' blog (I even linked to it). And I remember posts demonstrating the reverse, that the cost of servers was not dominant in large-scale data centers, but dominant only in medium- and small-scale data centers (think typical enterprise data centers). James was using this data to explain why it made sense for enterprises to benefit from large-scale cost savings by moving to EC2. Anyway, this does not change my point that the EC2 hourly prices are so high that they eclipse both power & cooling as well as server costs for Amazon.
- buss 16y ago> Is EC2 profitable to Amazon? Likely very profitable if you want my opinion. As a rule of thumb, if Amazon is doing something then it is profitable. Amazon will very quickly stop doing something if it can't make money.
- alnayyir 16y ago>Amazon will very quickly stop doing something if it can't make money. New to the whole Bay Area thing eh? Plenty of Zombie Startups out there that aren't getting traction/pivoting.
- randybias 16y agoYep. I was wrong. It looks like AWS, Rackspace Cloud, and probably even GoGrid are all around 100% y-o-y growth.