Amazon: We’re a Technology Company

REDWOOD CITY, Calif. — Amazon is typically thought of as an Internet retailing colossus. But not so fast, said Amazon’s Andrew Jassey, senior vice president of Web services.

“Amazon is at its heart a technology company,” said Jassey, an 11-year veteran of the company, during a talk here at the Dow Jones VentureWire Technology Showcase. “We just happened to do retail first.”

Jassey said one of the questions he gets asked often is whether Amazon’s (NASDAQ: AMZN) foray into Web services — with cloud computing, hosted storage and other offerings — is an experiment. Not so, he said: “I can tell you, this is a long-term business for us that we believe will be successful for years to come.”

So far, it’s off to a good start. The customer base for Amazon’s cloud computing services has grown rapidly, though it’s not yet a money-maker for the company.

“This is a very focused business effort that we believe will be cash-flow positive,” he said later in an interview with He pointed to companies, such as pharmaceutical giant Eli Lilly, who are customers of Amazon’s Web services.

“They’re not just dipping their toe — they have lots of applications,” he said.

Jassey expects demand for cloud services to grow, particularly now with the economy in trouble. “It eliminates up-front capital and lets you move faster and get to market quicker,” he said. For instance, when companies get ready to launch a new online service, they typically invest in new computer and storage capacity.

“You have to guess, and it rarely turns out to be what you projected,” he said. In other words, you either buy more than you need or scramble to meet unexpected demand. But Amazon and other cloud service providers charge only for what’s used and you can scale computing resources as needed.

Jassey pointed to another Amazon Web Services customer, Animoto. The company offers a service that enables consumers to make videos from their photo collections with soundtracks and other enhancements. Animoto had been averaging about 40 instances on Amazon’s cloud computing service, called Elastic Compute Cloud or EC2.

Each “small size instance” is the equivalent of approximately one small server, with 1.7 GB of memory and 160 GB of instance storage.

But after launching an application on Facebook, Animoto’s user traffic spiked to 5,000 instances in 55 hours, Jassey said.

“They were able to scale up to meet demand seamlessly,” he said. Within a few days, demand settled back down to a level above its initial average.

Without a service like EC2, Jassey said Animoto would have had to “pay through the nose” for more capacity or saddled its users with “a terrible customer experience.”

Competition and a breadth of services

Amazon faces potential competition from the likes of Google, Microsoft and others for infrastructure services. But Jassey said he expects there to be “multiple winners” in the field, and thinks Amazon’s edge is the breadth of its services.

“Our customer really like the array of services we offer: storage, compute and database. And now we’ve added CloudFront.”

Announced Tuesday, CloudFront is a self-serve, pay-as-you-go content delivery network (CDN) service that aims to put Amazon in the company of tenured CDN providers like Akamai, Limelight and CDNetworks.

The service, currently in beta, is aimed at customers needing frequent access to Web site components, developers distributing software and small businesses publishing media files.

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