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Amazon is much more accustomed to operating a low-margin business than Google or Microsoft. Google's overall profitability can allow it to take bigger losses an
by mlinsey 14y ago
Amazon is much more accustomed to operating a low-margin business than Google or Microsoft. Google's overall profitability can allow it to take bigger losses and subsidize its cloud services division if it wants to, but at some point, executives have to wonder if that's the most strategic use of those resources.
It's also not always the case that the leader competes on quality while the followers compete on price. In many industries, being the leader means you have infrastructure advantages and nobody can touch you on price, whereas others must serve smaller markets based on quality. Retail (both online and offline) is a good example. You'd be foolish to suggest that Amazon (the retail side) or Wal-Mart give up competing on price and let their smaller competitors take that mantle.
- spdy 14y agoNoone on this planet can compete with Google on storage prices. I dont want to know how many petabytes of space they have laying around "just in case" another planet comes around and they have to index/mirror all the information.
- mlinsey 14y agoExtraterrestrial planets aside, it's a fair point. Google's fleet undoubtedly has more machines than Amazon's in total, and that might give Google better economies of scale even though it isn't the leader in the utility computing space. However, there are several other considerations. We don't know if the main google.com fleet is made up of the same types of machines as the ones used for Google Compute Engine; for example Google can much more easily tolerate a high failure rate for a single machine than a startup renting a couple of instances. There are also more costs to consider than just the hardware, customer support being a big example. Overall, I'd say that Google can certainly undercut Amazon on price, but at the cost of reducing the margins that its executives and shareholders are used to seeing. They might see this as a worthwhile tradeoff if they see utility computing as a strategically important space; but personally I don't see that space as a long-term threat to Google in the same way social networks or mobile phones were. But I'm certainly happy to see Google compete here; I benefit as much as any other startup from a price war.
- jaytaylor 14y ago> .. Google's fleet undoubtedly has more machines than Amazon's in total .. Given that this assertion is mandatory for your argument to hold water, actual numbers to support your claims are required here. And since Google and Amazon don't publicly share this data, where does that leave us?
- spade 14y agoFrom 2009 to 2011, Google spent ~$8B on capital expenditures (buildings, property,& equipment) while Amazon spent ~$3B on capital expenditures. Given Google's scale, they probably have better economics than Amazon.
- mlinsey 14y agoTechnically, this argument is mandatory for an argument against me to hold water (that I was simply trying to say was a fair point against my original claim, even though many people were unfairly downvoting spdy for it). Feel free to discard the post if you'd like, which would leave us with the argument in my original post. I'm pretty confident in what I wrote, though.
- michaelt 14y agoAmazon is much more accustomed to operating a low-margin business than Google or Microsoft. I'd have thought Amazon's core business, shipping physical goods in exchange for cash, would be more profitable than Google's core business, providing search and e-mail funded by adverts. I'm not an expert on ad-supported websites, but they aren't exactly notoriously profitable.