Friday, November 17, 2006

The Future of Internet Services, Part I

We repeatedly see references to Web 2.0. Everyone "knows" that it refers to the next generation of the Internet, but what does it really mean? I checked Wikipedia and found the following definition:

a phrase coined by O'Reilly Media in 2004, refers to a supposed second generation of Internet-based services--such as social networking sites . . . that emphasize online collaboration and sharing among users. O'Reilly Media . . . used the phrase as a title for a series of conferences and since 2004 it has become a popular . . . buzzword amongst certain technical and marketing communities.

This is the perfect introduction to my post for today. Someone challenged me this week on questions I've raised about the future of brick-and-mortar bookstores and about my belief that self-publishing will be the wave of the future. To answer these, I'm going to focus on a company that doesn't immediately leap to mind when you think of the one company that personifies the future of the Internet.

Many people when asked to name a company that is on the forefront of Internet dominance would say Google or Microsoft or even Yahoo. Instead, I'm going to select Amazon.

Amazon is in an awkward position. Its stockholders are griping, stock analysts are listing it as a "sell" and its operating margins for the last year have been less than even Wal-Mart's, a company legendary for the thinnest of profit margins.

Most of the these issues stem from one thing: Amazon founder Jeff Bezos' huge investment in new technologies and in purchasing other Internet companies. In a story dated November 12, BusinessWeek Online estimates that Bezos has spent "12 years and $2 billion perfecting many of the pieces behind [his] . . . online store."

Let's spend just a few minutes looking at some of the companies Bezos has acquired or developed. Thanks to Wikipedia and BusinessWeek Online for the descriptions and dates acquired:

Amazon Associates: an affiliate marketing program. By linking to Amazon products and services, an Associate can receive up to 8.5% in referral fees for doing so. Launched in 1996.
International Movie Database: an online database ( of information about actors, films, television shows, television stars, video games and production crew personnel. Acquired 1998.
PlanetAll: a Web-based address book, calendar, and reminder service. Acquired in 1998.
Junglee: an XML-based data-mining startup. Acquired in 1998
Alexa: a website ( that provides information on the web traffic to other websites. Acquired 1999. an e-commerce company developing technology for business and consumer transactions on the Internet. Acquired 1999. a website that operates the popular, a seller of used and antiquarian books, as well as, which features music memorabilia and rare recordings. Acquired 1999.
Amazon Marketplace: a service that let customers sell used books, CDs, DVDs, and other products alongside new items. Launched 2001.
Search Inside: a feature that makes it possible for customers to search for keywords in the full text of many books in the Amazon catalog. Launched 2003. is an Internet search engine from It went live in 2004. a Chinese e-commerce Web site. Acquired 2004.
BookSurge: a print-on demand company. Acquired in 2005.
Mechanical Turk (MTurk): an application programming interface (API) allowing programs to dispatch tasks to human processors. Beta testing since 2005.
Amazon S3 (Simple Storage Service): an online storage service that is inexpensive, scalable, responsive, and highly reliable. The service charges storage fees of 15 cents per gigabyte per month and data transfer fees of 20 cents per gigabyte.Launched 2006.
Amazon Grocery: website service selling non-perishable food and household items. They offer Super Saver Shipping (free shipping to a single location for purchases over $25 USD). Launched 2006.
EC2 ("Elastic Compute Cloud"): a virtual site farm, allowing users to use the Amazon infrastructure with its high reliability to run diverse applications ranging from running simulations to web hosting. Beta testing since 2006.
Amazon Unbox: a digital video downloading service that offers thousands of television shows, movies and other videos from more than 30 studios and networks. Launched 2006.

It's easy to see where Bezos' money and Amazon's profits have gone.

Tomorrow we'll talk about Bezos' vision, and what he plans to do with all his new toys.

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