While I was busy announcing the upcoming TechCrunch20 conference and picking fights with venture capitalists today, Dan Farber was covering the news at the Web 2.0 Expo. One of the more interesting disclosures to surface: Amazon’s Jeff Bezos announced that their S3 storage-on-demand service, which launched just thirteen months ago, surpassed 5 billion stored objects. This is up from just 800 million stored objects in July 2006.
Income from S3 is little more than a rounding error for Amazon, with nearly $11 billion in 2006 revenue. But the service has some passionate users who are claiming to be saving a lot of money versus handling storage themselves. It’s not too early to say, as Dan does, that “Infrastructure as a service has arrived.”
Amazon does need to be careful on the expense side, however. A BusinessWeek article late last year got deep into the numbers:
Most worrisome to investors is Amazon’s three-year-plus binge on new technologies. So far this year its spending on technology and content, including hiring hundreds of engineers and programmers to produce all these new services and buy more servers to run them, is up 52%, to $485 million. As a result, operating margins, at 4.1% for the past four quarters, now come in at less than Wal-Mart’s 5.9%. Even Barnes & Noble Inc. (BKS), that doughty bricks-and-mortar book chain that many expected to get remaindered by the Web, has higher margins, at 5.4%. “I have yet to see how these investments are producing any profit,” gripes Piper Jaffray & Co. analyst Safa Rashtchy. “They’re probably more of a distraction than anything else.”
See our related coverage of other Amazon web services – EC2 and Mechanical Turk. I also had a podcast discussion with Jeff Bezos last November about Amazon’s web services unit. Listen to the interview at TalkCrunch.