Amazon Sitting on Cloud Nine
Jeff Bezos and company have plenty of reasons to be cheerful
these days. Among them is the half a billion dollars in revenue Amazon
will generate this year from its cloud computing business, a service that essentially
rents out spare computing power and storage to companies large and small.
According to Brian
Pitz and Brian Fitzgerald at UBS Investment Research, Amazon will see its web
services grow from $500 million this year to $750 million by 2011. By 2014,
they project Amazon will generate revenue in the neighborhood of $2.54 billion.
Amazon’s Web Services are just a tiny percentage of the company’s overall numbers,
the analysts point out its percentage of earnings per share will grow from
10 cents this year to 83 cents by 2014. Importantly, according to an article
on GigaOm, the margins on this business are around 50
percent, more than double Amazon’s normal gross margin percentage.
A Mail & Guardian piece
concludes that the service, first started in 2006, has succeeded for three
key reasons: "technical
flexibility, a highly granular pay-as-you-go billing model and a powerful self-service
Discussion Questions: Do you see cloud computing growing from a relatively
small business today to a large industry going forward? Do you see other retailers
getting into this business? What do you see as the key benefits of cloud
computing services? What drawbacks could stunt its growth?
- How Big is Amazon’s Cloud Computing Business? Find Out – GigaOM
cloud has a silver lining – Mail & Guardian
- Amazon.com Announces Second Quarter Sales up 41% to $6.57 Billion – Amazon.com,