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AWS’s Share of Amazon’s Profit

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Re: AWS’s Share of Amazon’s Profit

#111

Post by psz »

MaxBarraclough wrote: post #107
jcrites wrote: post #98

Earlier quoted context omitted.

Amazon runs virtually everything on AWS. There are probably some exceptions for exotic infrastructure, but the vast majority of compute and storage systems at Amazon run on top of AWS. There's probably a team using every single AWS service somewhere in the company. This doesn't mean that Amazon only uses AWS products, though. Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in additi…

> Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in addition to using CloudFront for other use-cases I find this pretty surprising. Do you know the reason?

My guesses: a) Amazon.com/co.uk/etc traffic is too big even for CloudFront. b) They don't want Amazon.com traffic to evict AWS customers' cached items out of CloudFront, the very reason customers buy CloudFront in the first place. c) Legacy, they just didn't move from Akamai yet.

Re: AWS’s Share of Amazon’s Profit

#112

Post by jcrites »

MaxBarraclough wrote: post #107
jcrites wrote: post #98

Earlier quoted context omitted.

Amazon runs virtually everything on AWS. There are probably some exceptions for exotic infrastructure, but the vast majority of compute and storage systems at Amazon run on top of AWS. There's probably a team using every single AWS service somewhere in the company. This doesn't mean that Amazon only uses AWS products, though. Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in additi…

> Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in addition to using CloudFront for other use-cases I find this pretty surprising. Do you know the reason?

I don't actually know the reason. I'll see if I can find out and whether it's appropriate to share. It's possible that it's a redundancy thing (have multiple providers so we stay up if one goes down), a performance thing, or it could be a features thing. I don't know.

I will note that what Akamai is trying to do: serve static content extremely quickly from locations close to all customers, is a bit different from what the typical AWS services and AWS region are trying to do. Akamai probably wants to cache identical content all over the world, in boxes that I would expect to be present within the network of many different ISPs (just like Netflix does to serve its video [1]).

In Oct 2019, CloudFront announced that they had 200 different points of presence (POPS) around the globe [2]. I don't know exactly how to compare Akamai to CloudFront, but Akamai claims to have POPs in over 130 countries and in 1,700 networks [3]. Akamai was founded only four years after Amazon and has been focused on content distribution since then. Just like a company can't snap their fingers and have Amazon's retail logistics presence, AWS can't snap its fingers and have CloudFront POPs in every country/network/ISP where Amazon Retail needs good performance. The answer may be that they're still catching up.

I'm completely I'm speculating though, and don't have any knowledge about this beyond the public research that I linked to.

[1] https://openconnect.netflix.com/en/

[2] https://aws.amazon.com/blogs/aws/200-amazon-cloudfront-point...

[3] https://www.akamai.com/us/en/resources/visualizing-akamai/me...

Re: AWS’s Share of Amazon’s Profit

#113

Post by jariel »

rexreed wrote: post #69

He's overly simplifying the contribution to profit by not understanding the contribution to expenses. It's not his fault because Amazon doesn't break it out that way. They don't allocate certain expenses to AWS and other expenses to other branches. While there's no doubt that AWS is very profitable, to say it contributes a certain percentage to overall profits probably misses the mark tremendously. It's probably and…

1) "very difficult to extricate costs of server farms that support the retail operation from server farms that host client services from overall operating costs."

Not only is not not hard to do, they are almost assuredly already doing it.

2) It matters a lot, and the article does not miss the point.

As for 1 - AWS Retail is a 'customer account', and they can track and measure the services used.

They have to do this because that's how 'management accounting' works. 'Accounting' is not just a 'GATT' thing, it's also for measuring how profitable units and businesses are. AWS services used by a product will be charged not only to AWS services but even internally to a product account at Amazon Retail.

As for 2 - it matters a lot because Amazon is dumping on Amazon retail, which may be an anti-competitive practice.

Not only does AWS show x% contribution to profit, but it's also probably much worse: Amazon Retail may be significantly in the red after 25 years of operation, subsidized by AWS.

Given Amazon's size and leverage in retail, it's definitely time to look at breaking them up in order to separate the two businesses.

In normal times, this would be 'good for America' for obvious reasons. But in a 'big global economic fight' - it might be better from a nationalist perspective to let it go on at AWS, G, Oracle, MS etc.

Has anyone noticed all the big, fat successful cloud players are only ever built by companies with zillions to spare? Implying that this is huge competitive advantage of America vis-a-vis other nations (and continents) who can't hope to compete without government intervention.

AWS/Amazon Retail is an anomalous cojoining of businesses, which is fine, but it probably needs to be looked at along with the overlapping of the other cloud providers and their main businesses.

Re: AWS’s Share of Amazon’s Profit

#114

Post by jariel »

fragsworth wrote: post #14
orf wrote: post #2

> So, if this graph is right, then over the last couple of years, somewhere between 50% and 80% of Amazon’s profit has been due to AWS.

It is important to consider that Amazon probably still considers its retail business a growth business, and that it has not captured enough of the market yet to start raising prices. I am pretty sure Amazon's retail business is going to completely dwarf AWS in the long term, because they are currently willing to break even on it (and possibly lose money) just to outdo the competition.

"Amazon's retail business is going to completely dwarf AWS in the long term"

It will in revenues but not in profits.

Right now, Wallmart, Exxon, GM etc. 'dwarf' most tech businesses in terms of revenues and the size of their businesses, but the profits are smaller, so tech companies have a higher valuation.

Re: AWS’s Share of Amazon’s Profit

#115

Post by sbierwagen »

jcrites wrote: post #103
jldugger wrote: post #95

Earlier quoted context omitted.

Indeed half the point of AWS was to facilitate cost accounting. Probably because Bezos thought they had expertise in online marketplaces that would transfer. Jury's still deliberating on whether AWS' incomprehensible billing is a signal of incompetence or sheer brilliance.

Designing billing for a service can be really challenging. The ideal pricing structure exactly aligns the incentives of the customer with the costs of the service provider. As a service designer, it is challenging to achieve this and strike the right balance. One naive solution is to account for all of the possible costs that users generate, and surface them with a price in the bill. But this can result in extremely…

> then perhaps the right pricing plan and offering for you is something like a guaranteed cell phone line, which comes with the promise that it will not be over-subscribed

Something like that does exist: https://en.wikipedia.org/wiki/Nationwide_Wireless_Priority_S... Mostly cops only. Fun fact: satellite phones had terrible reliability during Katrina, because so many FEMA people showed up and tried using them at the same time that they saturated the Iridium network.

Re: AWS’s Share of Amazon’s Profit

#116

Post by thenaturalist »

boredpudding wrote: post #105
9nGQluzmnq3M wrote: post #70

Earlier quoted context omitted.

I would presume AWS is so large these days that Amazon retail's infra is only a small fraction of the fleet? Published data on their scale is thin on the ground, but this post from 2017 guesstimated that they had 4 million physical servers at the time, and AWS certainly hasn't shrunk since then: https://blog.sqlizer.io/posts/facebook-on-aws/

This article is about how much profit from Amazon comes from AWS. Not how big of a 'client' Amazon is in AWS itself.

Well, if you read the parent comment here again, I hope you can understand that "how big of a 'client' Amazon is in AWS itself" is _precisely_ about estimating profits for AWS.

The fact that Amazon is self-serving AWS resources is obfuscating profit calculations or estimates as there is no way of determining ROI on assets Amazon consumes itself - most likely in a somewhat shared model together with other, actually paying customers.

Re: AWS’s Share of Amazon’s Profit

#117

Post by amelius »

MaxBarraclough wrote: post #107
jcrites wrote: post #98

Earlier quoted context omitted.

Amazon runs virtually everything on AWS. There are probably some exceptions for exotic infrastructure, but the vast majority of compute and storage systems at Amazon run on top of AWS. There's probably a team using every single AWS service somewhere in the company. This doesn't mean that Amazon only uses AWS products, though. Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in additi…

> Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in addition to using CloudFront for other use-cases I find this pretty surprising. Do you know the reason?

Content distribution is easily commoditized, hence not very interesting for Amazon.

Re: AWS’s Share of Amazon’s Profit

#118

Post by mrep »

jcrites wrote: post #98
Illniyar wrote: post #75

Earlier quoted context omitted.

I thought Amazon don't use aws for their main product. Do they use it for alexa?

Amazon runs virtually everything on AWS. There are probably some exceptions for exotic infrastructure, but the vast majority of compute and storage systems at Amazon run on top of AWS. There's probably a team using every single AWS service somewhere in the company. This doesn't mean that Amazon only uses AWS products, though. Amazon continues to use e.g. Akamai for static content hosting for some use-cases, in additi…

> Amazon runs virtually everything on AWS.

Does sable, the internal nosql database used for practically everything in retail run on AWS nowadays? Cause it didn't back in 2018 which and partially why they couldn't scale up on prime day and got overloaded [0, and have friends who worked in retail].

[0]: https://www.cnet.com/news/report-why-amazon-crashed-on-prime...

Re: AWS’s Share of Amazon’s Profit

#119

Post by C1sc0cat »

blahblah12 wrote: post #92
kvz wrote: post #85

Earlier quoted context omitted.

On the one hand that sounds weird and AWS could just offer any discount, on the other if they can get done the same on less resources, others can rent the freed up resources at a premium

This is called cross-org transfer pricing. It's a common practice in accounting. In fact, imagine a company where this doesn't happen. Retail decides that they can "excessively" use AWS. This contributes to waste and problematic accounting when it comes time to report finances. https://en.wikipedia.org/wiki/Transfer_pricing

It can also open up a can of worms as companies as big as Amazon can get into trouble with regulators.

When I worked at BT we could not crosssubsidize say our online services and had to give up the short dial for access 618 used to connect you to PRESTEL on any exchange.

Also at one point they where considering not allowing people working for a joint venture to use the same restaurants

Re: AWS’s Share of Amazon’s Profit

#120

Post by jkingsbery »

biggestdecision wrote: post #93
swyx wrote: post #57

I'm not sure if this helps or hurts Tim's assertions (not mentioned in this piece, but from context he wants AWS to be spun off into a separate company). if AWS' share is so high, would AMZN shareholders approve a spinoff? does it matter since they get ownership of new-AWS anyway? unclear whatever it is I think Tim has a research agenda here and we shouldn't be surprised to see him come up with a more forceful blogpo…

But also, what synergy do the tech giant and retail giant parts of Amazon have? If the two parts of the business don't really gel, what's the benefit of keeping them together in one company?

(I'm an engineer at Amazon, but I don't speak on behalf of the company, I'm just sharing my experience)

Here are a few different ways that AWS and Retail interact:

1. The obvious that everyone knows: Retail uses AWS's products, providing feedback and ideas for new services and features.

2. Employee transfers: it's quite common for people to move between Retail and AWS and vice versa, and they bring what they learned in one org to their new org, helping to spread information about best practices.

3. Other employee knowledge transfers: I've personally benefited from engineers in AWS sharing their knowledge about general engineering topics on internal interest mailing lists or through tech talks.

4. Best practices: there are some differences, but AWS and Retail operate similarly in many ways: use of 6-pagers for sharing ideas (https://www.linkedin.com/pulse/beauty-amazons-6-pager-brad-p...), weekly review of metrics, hiring tools and practices being just a few examples.

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