Saturday, November 18, 2006

The Future of Internet Services, Part II

This is Part II of two parts. Yesterday we talked about Jeff Bezos and his plans for the future of

BusinessWeek (BW) Online quotes Bezos: "'All the kinds of things you need to build great Web-scale applications are already in the guts of Amazon . . . The only difference is, we're now exposing the guts, making [them] available to others' . . . And he hopes, making money."

Bezos' strategy--and it's a bold one--is to make Amazon's system and services available to Internet users so that the small business person will have access to the same services that a large company like Amazon or Google has access to. He "is initially aiming these services at startups and other small companies with a little tech savvy. But it's clear that businesses of all kinds are the ultimate target market."

Among the new companies and services Amazon has acquired or launched in the last eight years are S3 (Simple Storage Service), EC2 (Elastic Compute Cloud) and MTurk (Mechanical Turk). With S3, "Amazon charges 15 cents per gigabyte per month for businesses of all kinds to store data and programs on Amazon's vast array of disk drives. It also charges merchants 45 cents per square foot per month for real space in its real warehouses. EC2 rents out computing power, starting at 10 cents an hour for the equivalent of a basic server computer. MTurk takes on the jobs that a computer doesn't do well. Amazon has "set up a semi-automated global marketplace for online piecework, such as transcribing snippets of podcasts . . . Amazon takes a 10% commission on those jobs." (BW) Thousands of individual people around the world take on small tasks assigned to them (like picking the best photo out of a group) and are paid by the piece. They can work from home while watching TV and earning money at the same time.

All these services "potentially make a profit center out of idle computing capacity needed for [Amazon's] . . . retail operation. Like most computer networks, Amazon's uses as little as 10% of its capacity at any one time just to leave room for occasional spikes." (BW)

We talked yesterday about Web 2.0 being the next wave of the Internet. Amazon is seeking to place itself at the head of that wave.

"Google, MySpace, and YouTube cracked open for the masses the means to produce media and the advertising that sustains it, creating tens of billions of dollars in market value and billions more in new revenues. Now, by sharing Amazon's infrastructure on the cheap, Bezos is taking that same idea into the realm of physical goods and human talent, potentially empowering a whole new swath of businesses byond the Internet itself." (BW)

On Tuesday, Amazon issued a press release announcing three new innovations and an incentive plan:

aStore: Using aStore, Associates "create complete storefronts on their websites quickly and easily. Associates with virtually no technical skills can create an online store that includes products from any of Amazon's 35-plus categories and popular Amazon shopping features such as Customer Reviews, Editor Reviews, Wish Lists, and Listmania."

Omakase Links : With these links, Amazon assumes "one of the hardest parts of operating an e-commerce site--personalization . . . Omakase Links allow Associates to automatically display products personalized to visitors' purchase and browse history on Amazon, as well as the content of the Associate's sites."

Product Previews: Associates can permit Internet users to preview product information without clicking through to When visitors hover over a Product Preview link in a body of text or a small virtual storefront, a window appears that will include the product image, pricing, reviews and availability.

Incentive Program : "Website owners who sign up to be Amazon Associates and take advantage of these new tools will receive referral fees of up to 8.5% when visitors to their sites click on products and complete their purchases on the website . . . Between now [11/14] and 12/31/06, Associates can earn up to $1,000 in additional referral fees by using aStore and Omakase Links. During that time, Associates will earn an additional 4 percent when they refer visitors to using aStore or Omakase Links (up to a maximum of $500 from each feature per Associate).

BusinessWeek Online asks the question: Is Amazon biting off more than it can chew? Only time will tell.

Stay tuned . . .

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