Amazon Web Services revenue rises 81% year over year • Hacker News Board

Re: Amazon Web Services revenue rises 81% year over year

#141

Post by yokohama11 » Fri, Jul 24, 2015, 4:27 PM UTC

ISL wrote: post #136

ethbro wrote: post #130

Earlier quoted context omitted.

Incidentally, this is pretty much how Warren Buffett made his first billions with Berkshire to the best of my understanding. He realized that insurance generated enormous carry, and if you were able to better utilize that (say, by buying other companies and improving them) then you had a pretty winning strategy.

Most insurance companies operate this way, which long predates Buffett. In fact, it's possible for premiums to sum to less than the costs of insuring precisely because of the float. Buffett has done well by choosing companies and people that are good at avoiding losing money. If Amazon had a viable competitor, the profits of float investments would be the ammunition in the resulting price war. Amazon's margin is some…

Not even just possible, but the default of operation in the industry. Most don't turn an underwriting profit with any consistency and make all their money on their investments from that float.

Re: Amazon Web Services revenue rises 81% year over year

#142

Post by yokohama11 » Fri, Jul 24, 2015, 4:41 PM UTC

mbesto wrote: post #81

ksec wrote: post #61

Off Topic, Previously I was always put off by Amazon's design. You can click on anything Amazon related, AWS included and see some fugly UI and layout. And i got to check AWS again and i am pleasantly surprised things have improved dramatically!

Summary: Many design elements work for Amazon.com mainly because of its status as the world's largest and most established e-commerce site. Normal sites should not copy Amazon's design. http://www.nngroup.com/articles/amazon-no-e-commerce-role-mo...

That report is a decade old. While I'm not going to hold up Amazon as the ideal e-commerce design, the site has been drastically altered since 2005 and many of those complaints are invalid now.

Re: Amazon Web Services revenue rises 81% year over year

#143

Post by ethbro » Fri, Jul 24, 2015, 5:06 PM UTC

ISL wrote: post #136

ethbro wrote: post #130

Earlier quoted context omitted.

Incidentally, this is pretty much how Warren Buffett made his first billions with Berkshire to the best of my understanding. He realized that insurance generated enormous carry, and if you were able to better utilize that (say, by buying other companies and improving them) then you had a pretty winning strategy.

Most insurance companies operate this way, which long predates Buffett. In fact, it's possible for premiums to sum to less than the costs of insuring precisely because of the float. Buffett has done well by choosing companies and people that are good at avoiding losing money. If Amazon had a viable competitor, the profits of float investments would be the ammunition in the resulting price war. Amazon's margin is some…

I was under the impression that most insurance companies aren't part of a larger business entity that directly invests their float in other companies.

I'd assume there would be advantages on that closer relationship vs a stand-alone insurance company simply investing in a publicly traded offering.

Re: Amazon Web Services revenue rises 81% year over year

#144

Post by x0x0 » Fri, Jul 24, 2015, 6:19 PM UTC

sokoloff wrote: post #62

x0x0 wrote: post #53

Earlier quoted context omitted.

But your capital lease payments aren't included in (ie removed from) that operating profit. Since you don't know which is larger, I remain befuddled how you claim aws is profitable.

Capital lease principal payments are absolutely charged against operating profit per GAAP. If Amazon is breaking out a segment P&L for AWS, they are no doubt making a good faith effort to correctly charge operating expenses, including capital leases, against that P&L. They also don't break out their electricity costs to run their DCs nor their engineering costs attributable to AWS, yet I'm confident that they are cha…

hmm... I'm going through their 10q and taking notes =P

I try to post here this weekend

Re: Amazon Web Services revenue rises 81% year over year

#145

Post by sokoloff » Fri, Jul 24, 2015, 6:50 PM UTC

x0x0 wrote: post #144

sokoloff wrote: post #62

Earlier quoted context omitted.

Capital lease principal payments are absolutely charged against operating profit per GAAP. If Amazon is breaking out a segment P&L for AWS, they are no doubt making a good faith effort to correctly charge operating expenses, including capital leases, against that P&L. They also don't break out their electricity costs to run their DCs nor their engineering costs attributable to AWS, yet I'm confident that they are cha…

hmm... I'm going through their 10q and taking notes =P I try to post here this weekend

I'll be here to read it. (not trying to be snarky, just confirming that I'm interested enough in the thread to follow what you write)

Re: Amazon Web Services revenue rises 81% year over year

#146

Post by lostcolony » Fri, Jul 24, 2015, 7:31 PM UTC

msravi wrote: post #89

lostcolony wrote: post #63

Earlier quoted context omitted.

Is it? Cloud providers bring you not just localized infrastructure, but distributed infrastructure, with clear mechanisms for scaling as needed, plus support, etc. With AWS, you have a predictable cost, predictable up-time, and ability to scale at peak, and your costs are spread over time, rather than all up front. With your own servers you have to build out to handle peak load (and run mostly dormant during non-peak…

So why would you not have localized infrastructure to handle average loads and use AWS to scale to peak only when necessary? Why use AWS even for your average loads?

Because then you have to target two different sets of infrastructure. The extra work and complexity carries with it a rather large cost too, -and- greater risk. It's almost the worst of both worlds, rather than the best, as you have to solve all the problems of rolling your own, -and- pay Amazon for the extra utilization.

Re: Amazon Web Services revenue rises 81% year over year

#147

Post by boulos » Fri, Jul 24, 2015, 11:28 PM UTC

_pmf_ wrote: post #115

boulos wrote: post #76

Earlier quoted context omitted.

I think you misinterpret the causality of recent cloud price drops: Google's price drops at year pushed AWS to follow suit, and they haven't matched since (the gap is greater than 20% for GCE vs EC2 now). Microsoft is also publicly committed to matching AWS. Huge Disclaimer: I work at Google on GCE.

Well, given that Google's support consists of an automatic E-mail reply bot, I wonder why the gap is only 20%.

You mean our Free / Bronze support listed here: https://cloud.google.com/support/ ? As people have mentioned on several threads, Google Cloud is actually a business so there are actual support people paid to help when you need it.

Re: Amazon Web Services revenue rises 81% year over year

#148

Post by M2Ys4U » Sat, Jul 25, 2015, 2:35 AM UTC

mdasen wrote: post #123

cft wrote: post #84

Earlier quoted context omitted.

Bezos long ago figured out that the best tax strategy in modern America for a public company is to operate without profit. The company operates with a relatively (to the revenue) small loss, maintaining positive cash flow by issuing and selling additional stock. Selling new stock is (remarkably) tax free. The dilution is negligible since the stock is valued by the revenue (not profit so much). Everybody benefits: exe…

If the point of a business is compensating its employees, that might be a strategy. However, that isn't the point of the business. The point of the business is to generate money for the shareholders. Over the short/medium term, shareholders might be content with growth and revenue. Over the long term, without profits the business has nothing for shareholders. It really isn't a tax strategy any more than being unemplo…

>If the point of a business is compensating its employees, that might be a strategy. However, that isn't the point of the business. The point of the business is to generate money for the shareholders.

Interestingly the Bank of England's Chief Economist has today attacked that principle of company law: http://www.bbc.co.uk/news/business-33660426

To quote from the article:

The Bank of England's chief economist has expressed concern that shareholder power is leading to slower growth.

Andy Haldane told BBC Newsnight that business investment had been lower than was "desirable" for years.

One reason was that a high proportion of corporate profits were being paid out to shareholders rather than reinvested in the company.

He said that in 1970, £10 out of each £100 of profits were typically paid to shareholders through dividends.

Today, however, that figure was between £60 and £70. Mr Haldane argued that left far less cash available for growth-boosting investment and that firms risked "eating themselves".

Corporate short-termism - a focus on immediate gains rather than long-term prospects - was a rising problem for companies and pre-dated the financial crisis, he said.

Re: Amazon Web Services revenue rises 81% year over year

#149

Post by chx » Sat, Jul 25, 2015, 9:45 AM UTC

BillinghamJ wrote: post #105

chx wrote: post #100

Earlier quoted context omitted.

Why? Why colo and not rent dedicated servers...? I tried to understand the logic behind colo but I can't.

It's cheaper, drastically so at scale. You just need to be running enough for it to be cost efficient to have an ops person.

Care to point to an analysis supporting this? There's surely a point where the bother with replacing spare parts is cheaper than letting someone else deal with it but it must be some scale.

Re: Amazon Web Services revenue rises 81% year over year

#150

Post by eru » Thu, Jul 30, 2015, 8:56 AM UTC

sumedh wrote: post #133

calpaterson wrote: post #112

Earlier quoted context omitted.

If you returned it to shareholders they would be reinvesting it too (just somewhere else). You can return capital to investors tax efficiently using share buybacks. Haven't looked at Amazon's annual report in detail so can't tell if they are reinvesting profit in areas that will have high return or not.

> You can return capital to investors tax efficiently using share buybacks. What if the share price is not undervalued, the investors would get hurt if you do a buyback.

How?