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AWS’s Share of Amazon’s Profit

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Re: AWS’s Share of Amazon’s Profit

#61

Post by c1b »

runawaybottle wrote: post #51
fragsworth wrote: post #14

Earlier quoted context omitted.

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.

Competing on price never pays off imho. You’ll race to the bottom. Amazon already has a massive monopoly on retail, and they wouldn’t dare mess with the prices. My experience: I once tried to corner the market on WoW gems by buying out the undercutters and setting my desired price. My money wasn’t long enough. I really don’t think anyone’s money is long enough :p

Yes this example is very pertinent to Amazons profit strategy thank you for sharing.

Re: AWS’s Share of Amazon’s Profit

#62

Post by jgalt212 »

rb808 wrote: post #59
mbesto wrote: post #38

Profit can be a really weird number, especially when it comes to data centers. So looking at pure earning statements numbers is likely going to be misleading no matter how you try to look at (unless you actually look at bank statements, you can create as many interpretations as you want). First, data centers require A LOT of upfront capital. This capital is then capitalized over years, which is how it ultimately affe…

"printing money" yes today, but if GCP/Azure or something else comes in and competes heavily the margins could easily shrink to something negative.

I guess, but these products have such strong lock in.

Re: AWS’s Share of Amazon’s Profit

#63

Post by kelnos »

kayoone wrote: post #48
kelnos wrote: post #18

Earlier quoted context omitted.

> We had all kinds of downtimes due to AWS over the years. No, you just had downtime, full stop. Failures are inevitable, regardless of whose datacenter you're using. Failure-tolerant architecture design minimizes (or eliminates, if you're lucky) the downtime caused by failures. I'm not saying that's easy or necessarily appropriate depending on the stage of your company, but foisting responsibility onto AWS is missin…

I am not "foisting responsibility". There are fallbacks and fail safes in place to mitigate such issues but that's not my point. My point is that they sell us a dream of infinite scaling, all managed and no more problems, which just isn't the case. I know, it's naive to believe that in the first place but the marketing certainly goes into that direction and some proponents spin this story all the time. Would the alte…

I think you're maybe mixing up different things? "Infinite scaling" doesn't mean your app is failure-free and constantly available. In my experience AWS's scaling features work pretty well, as does their on-demand provisioning. But they have very little to do with tolerating infrastructure failures. That's up to you, regardless of whether you're developing on AWS or on hardware you own.

Re: AWS’s Share of Amazon’s Profit

#64

Post by runawaybottle »

c1b wrote: post #61
runawaybottle wrote: post #51

Earlier quoted context omitted.

Competing on price never pays off imho. You’ll race to the bottom. Amazon already has a massive monopoly on retail, and they wouldn’t dare mess with the prices. My experience: I once tried to corner the market on WoW gems by buying out the undercutters and setting my desired price. My money wasn’t long enough. I really don’t think anyone’s money is long enough :p

Yes this example is very pertinent to Amazons profit strategy thank you for sharing.

Waiting for some Eve fans to share their economic exploits.

Re: AWS’s Share of Amazon’s Profit

#65

Post by syshum »

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.

Hmm.. they might want to look at Sears or Walmart.

Sears is more or less dead. Walmart is struggling to keep market share with amz. With groceries their only saving grace

If price is their long term plan with retail that is a loosing proposal. Once they dominant they might be able to sqeeze the market for a few years maybe a decade but them something else will topple them

Re: AWS’s Share of Amazon’s Profit

#66

Post by kasey_junk »

syshum wrote: post #65
fragsworth wrote: post #14

Earlier quoted context omitted.

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.

Hmm.. they might want to look at Sears or Walmart. Sears is more or less dead. Walmart is struggling to keep market share with amz. With groceries their only saving grace If price is their long term plan with retail that is a loosing proposal. Once they dominant they might be able to sqeeze the market for a few years maybe a decade but them something else will topple them

Sears was started over 115 years ago and was a dominating force for most of those years.

Walmart is responsible for the 7th, 8th and 9th largest fortunes in the world built before modern monetary policy. Further they completely changed retail in America.

Those seem like weird counter examples.

Re: AWS’s Share of Amazon’s Profit

#67

Post by vl »

rb808 wrote: post #59
mbesto wrote: post #38

Profit can be a really weird number, especially when it comes to data centers. So looking at pure earning statements numbers is likely going to be misleading no matter how you try to look at (unless you actually look at bank statements, you can create as many interpretations as you want). First, data centers require A LOT of upfront capital. This capital is then capitalized over years, which is how it ultimately affe…

"printing money" yes today, but if GCP/Azure or something else comes in and competes heavily the margins could easily shrink to something negative.

There are so few clouds, that it doesn’t work like this. When I saw it first hand the way it was done is prices were set to match competition. Occasionally somebody would reduce the prices, and others would match it. Since offerings are not exactly the same, there are variations, but overall for basic services like VMs and storage neither cloud will give you significant advantage in price.

Re: AWS’s Share of Amazon’s Profit

#68

Post by JCharante »

legitster wrote: post #20

This drives me mad. I have no idea why Amazon even bothers with the retail side. It barely pays for itself, they are already the biggest player by a mile, and there is no horizon in which economies of scale start paying off (the uptick of demand from Covid probably lost them money!) The only thing that makes sense to me is some political long play. The Amazon retail operation employs a lot more people in a lot more p…

(the uptick of demand from Covid probably lost them money!)

I would frequently get deliveries from Whole Foods Market or get stuff off amazon a couple times a week. Due to covid just making deliveries impossible I've cancelled my Prime Subscription and haven't bought anything from Amazon in months. It wouldn't surprise me to see their revenue go down from Prime memberships.

Re: AWS’s Share of Amazon’s Profit

#69

Post by rexreed »

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 most likely very difficult to extricate costs of server farms that support the retail operation from server farms that host client services from overall operating costs. You'd need far more detail on gross margins and tight definitions for contribution of revenue. For example, do people who order things on Alexa get revenue counted for non-AWS while the Alexa infrastructure is counted as AWS expense? These are not easy questions. This is why it's not broken out as you'd like.

I'd wager that the contribution to profits is not as suggested here, but it's hard to know just how far off the calculation is. And it might not matter.

Re: AWS’s Share of Amazon’s Profit

#70

Post by 9nGQluzmnq3M »

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…

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/

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