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Two interesting points: 1) Close to 70% of Amazon operating income once again can be attributed to AWS. Consolidated operating income: $3,084 m AWS operating

Two interesting points: 1) Close to 70% of Amazon operating income once again can be attributed to AWS. Consolidated operating income: $3,084 m AWS operating income: $2,121 m 2) AWS revenue was $8.3B for the quarter, 37% more than the same quarter last year.

ajross 7y ago
What's interesting isn't the fact that they "make" more from AWS, it's that AWS gets premium margins where their store is running right at cost (and has been, basically forever -- it's their thing, sorta). The interesting number you left out was the non-AWS revenue, which in 2018 (too lazy to correlate with today's announcement) was $230B, literally 30x higher. AWS is a tiny drop in the bucket, no matter what the profit details say. Which then prompts the question of why AWS gets that kind of margin, when it would seem like a pretty commoditized field at this point. Linux VMs are an open and very portable deployment platform. You can get them from any number of top tier providers and a huge horde of little ones. You'd expect to see a ton of competition driving prices down, but we don't. I genuinely don't know why.
- spenczar5 7y ago
  I don’t think it’s commoditized. AWS has moved past being just EC2. Virtualization is a small piece or the picture, and building and operating DynamoDB or S3 or SQS are all very tough tasks.
  - manojlds 7y ago
    And RDS.
    - t34543 7y ago
      At my scale two DBAs + MySQL on EC2 is cheaper than Aurora. I believe other companies will come to the same conclusion in time.
      - sascha_sl 7y ago
        Where do you find such cheap DBAs? Are they by chance also in other roles?
  - ethbro 7y ago
    It's not commoditized at the scale Amazon operates it at. And from an AWS / profit perspective, running the rest of Amazon is essentially what gives them a base consumer to get them to that scale.
    - jjeaff 7y ago
      Which is the strange part. Because it is rather commoditized on the level that 95% of their customers are by themselves. It's that aggregate of so many individual clients that makes it difficult. So why aren't all the small clients getting picked off by the hundreds of small competitors? My take is that the sheer scale of AWS has hit a point where engineers (the ones making infrastructure decisions) and moving from one company to another are just more likely to be familiar with AWS at this point. The same concept makes hiring easier. My other guess is that lots of engineers are like me and just got sick of their hosting company getting bought out and constantly having to deal with console changes and migrations. I am with GCP now, one of the reasons I picked GCP is because they are very large and have reasons to continue offering cloud services even if it becomes commoditized and unprofitable. The same is true for AWS. Also, of course "no one ever got fired for choosing AWS".
  - deleted 7y ago
    [deleted]
- meowface 7y ago
  AWS is basically "run your entire company's engineering as a service" now, and they've done a good job at it. It's not at all easy to compete with such an integrated and battle-tested platform (other than on cost; AWS can be pretty expensive).
  - notyourwork 7y ago
    Same thing as a fast food burger versus a restaurant porter house, you get what you pay for.
    - kortilla 7y ago
      Analogy is a little off. AWS is fast food and expensive because consistency, availability, and volume are what count in the cloud business. You can get better quality VMs for less money but you won’t be able to provision thousands easily and it’s not going to be available 24/7.
      - SkyPuncher 7y ago
        Even further, I'd say AWS is fast food that supports dozens of niche diets - pretty much anywhere in the world, anytime. McDonald's isn't impressive because they can make a Big Mac in 30 seconds. They're impressive because I can get almost the exact same Big Mac anywhere in the world.
  - axaxs 7y ago
    This is absolutely true, sure, but the UX is dreadful. If someone like, say, DigitalOcean who has nice design spent the money to actually compete, I'd move in a heartbeat. Google is a nonstarter, and Azure is a 'maybe'. Most people use a few key services. Everytime I log in, I'm slammed with 200 tiny hyperlinks.
    - rb666 7y ago
      We are looking to move some of our applications to the cloud and Kubernetes the coming time. We'd like to go for DO, partially for the horror the AWS interface appears to be. Could you give me an idea what we'd be missing by choosing DO over AWS? (as your comment appears to say we would)
- justicezyx 7y ago
  Simple. Server multiplexing. Let's say I increase fleet utilization for 1%. My projected margin increase 1%, not retrospectively though. Plus the projected server hardware price drop. The margin increases naturally. If there were no competitor from Google and MSFT. Amzn would need to be extremely aggressive to not making a log of money. That's why Google was very confident in winning the Cloud war back in early 2012-2014, and prior to that time frame. Google can operate fleet utilization way higher than industry standard, and clearly is ahead of Amzn then. But it turns out a business is not that simple as writing code. And obviously, Amzn catches up in fleet efficiency. AFAIK, now Google and Amzn are almost head on head in that department, while Azure is the poor kid lagging behind. But that's not a problem for MSFT. Their strength is in enterprise and conventional developer community building.
- zmmmmm 7y ago
  It's not commodotized at all. They have successfully achieved the jump to be the "nobody got fired for choosing company X" of cloud computing. Everybody trusts them. I've been directly involved in planning out cloud migration for an organization and put forward other options that were substantially cheaper but it didn't matter: they wanted AWS.
- laser 7y ago
  You’re comparing quarterly revenue from AWS to annual Amazon? The proper ratio is more like 7-8x, not 30x.
hef19898 7y ago
That's the case since at least 2016. Back then, when Amazon shares were around 1k USD I had the theory that at least 800 USD came from AWS and the rest came from Amazon's retail business. Made sense back than because before AWS took of shares stood around 200 USD if I remember correctly. Not sure what that says about Amazon in 2019, so.

ajross 7y ago

What's interesting isn't the fact that they "make" more from AWS, it's that AWS gets premium margins where their store is running right at cost (and has been, basically forever -- it's their thing, sorta). The interesting number you left out was the non-AWS revenue, which in 2018 (too lazy to correlate with today's announcement) was $230B, literally 30x higher. AWS is a tiny drop in the bucket, no matter what the profit details say. Which then prompts the question of why AWS gets that kind of margin, when it would seem like a pretty commoditized field at this point. Linux VMs are an open and very portable deployment platform. You can get them from any number of top tier providers and a huge horde of little ones. You'd expect to see a ton of competition driving prices down, but we don't. I genuinely don't know why.

spenczar5 7y ago
I don’t think it’s commoditized. AWS has moved past being just EC2. Virtualization is a small piece or the picture, and building and operating DynamoDB or S3 or SQS are all very tough tasks.
- manojlds 7y ago
  And RDS.
  - t34543 7y ago
    At my scale two DBAs + MySQL on EC2 is cheaper than Aurora. I believe other companies will come to the same conclusion in time.
    - sascha_sl 7y ago
      Where do you find such cheap DBAs? Are they by chance also in other roles?
- ethbro 7y ago
  It's not commoditized at the scale Amazon operates it at. And from an AWS / profit perspective, running the rest of Amazon is essentially what gives them a base consumer to get them to that scale.
  - jjeaff 7y ago
    Which is the strange part. Because it is rather commoditized on the level that 95% of their customers are by themselves. It's that aggregate of so many individual clients that makes it difficult. So why aren't all the small clients getting picked off by the hundreds of small competitors? My take is that the sheer scale of AWS has hit a point where engineers (the ones making infrastructure decisions) and moving from one company to another are just more likely to be familiar with AWS at this point. The same concept makes hiring easier. My other guess is that lots of engineers are like me and just got sick of their hosting company getting bought out and constantly having to deal with console changes and migrations. I am with GCP now, one of the reasons I picked GCP is because they are very large and have reasons to continue offering cloud services even if it becomes commoditized and unprofitable. The same is true for AWS. Also, of course "no one ever got fired for choosing AWS".
- deleted 7y ago
  [deleted]
meowface 7y ago
AWS is basically "run your entire company's engineering as a service" now, and they've done a good job at it. It's not at all easy to compete with such an integrated and battle-tested platform (other than on cost; AWS can be pretty expensive).
- notyourwork 7y ago
  Same thing as a fast food burger versus a restaurant porter house, you get what you pay for.
  - kortilla 7y ago
    Analogy is a little off. AWS is fast food and expensive because consistency, availability, and volume are what count in the cloud business. You can get better quality VMs for less money but you won’t be able to provision thousands easily and it’s not going to be available 24/7.
    - SkyPuncher 7y ago
      Even further, I'd say AWS is fast food that supports dozens of niche diets - pretty much anywhere in the world, anytime. McDonald's isn't impressive because they can make a Big Mac in 30 seconds. They're impressive because I can get almost the exact same Big Mac anywhere in the world.
- axaxs 7y ago
  This is absolutely true, sure, but the UX is dreadful. If someone like, say, DigitalOcean who has nice design spent the money to actually compete, I'd move in a heartbeat. Google is a nonstarter, and Azure is a 'maybe'. Most people use a few key services. Everytime I log in, I'm slammed with 200 tiny hyperlinks.
  - rb666 7y ago
    We are looking to move some of our applications to the cloud and Kubernetes the coming time. We'd like to go for DO, partially for the horror the AWS interface appears to be. Could you give me an idea what we'd be missing by choosing DO over AWS? (as your comment appears to say we would)
justicezyx 7y ago
Simple. Server multiplexing. Let's say I increase fleet utilization for 1%. My projected margin increase 1%, not retrospectively though. Plus the projected server hardware price drop. The margin increases naturally. If there were no competitor from Google and MSFT. Amzn would need to be extremely aggressive to not making a log of money. That's why Google was very confident in winning the Cloud war back in early 2012-2014, and prior to that time frame. Google can operate fleet utilization way higher than industry standard, and clearly is ahead of Amzn then. But it turns out a business is not that simple as writing code. And obviously, Amzn catches up in fleet efficiency. AFAIK, now Google and Amzn are almost head on head in that department, while Azure is the poor kid lagging behind. But that's not a problem for MSFT. Their strength is in enterprise and conventional developer community building.
zmmmmm 7y ago
It's not commodotized at all. They have successfully achieved the jump to be the "nobody got fired for choosing company X" of cloud computing. Everybody trusts them. I've been directly involved in planning out cloud migration for an organization and put forward other options that were substantially cheaper but it didn't matter: they wanted AWS.
laser 7y ago
You’re comparing quarterly revenue from AWS to annual Amazon? The proper ratio is more like 7-8x, not 30x.

hef19898 7y ago

That's the case since at least 2016. Back then, when Amazon shares were around 1k USD I had the theory that at least 800 USD came from AWS and the rest came from Amazon's retail business. Made sense back than because before AWS took of shares stood around 200 USD if I remember correctly. Not sure what that says about Amazon in 2019, so.