Amazon Innovation

Posted on November 9, 2006  Comments (10)

Jeff Bezos’ Risky Bet

And, he hopes, making money. With its Simple Storage Service, or S3, Amazon charges 15 cents per gigabyte per month for businesses to store data and programs on Amazon’s vast array of disk drives. It’s also charging other merchants about 45 cents a square foot per month for real space in its warehouses. Through its Elastic Compute Cloud service, or EC2, it’s renting out computing power, starting at 10 cents an hour for the equivalent of a basic server computer. And it has set up a semi-automated global marketplace for online piecework, such as transcribing snippets of podcasts, called Amazon Mechanical Turk. Amazon takes a 10% commission on those jobs.

In my view Amazon is doing some very interesting innovation. As with most true innovation it is not easy to understand if it will succeed or not. I believe Amazon uses technology very well. They have done many innovative things. They have been less successful at turning their technology into big profits. But I continue to believe they have a good shot at doing so going forward (and their core business is doing very well I think). Innovation often involves taking risks. Bezos is willing to do so and willing to pursue his beliefs even if many question those beliefs. That means he has the potential to truly innovate, and also means he has to potential to fail dramatically.

Related: Bezos on Lean Thinking – Making Changes and Taking Risks – 10 Stocks for 10 Years Update – A9 Toolbar for Firefox Browser

Web 2.0: Amazon.com’s Jeff Bezos:

* O’Reilly suggested that it was a little surprising to Amazon, rather than Google (GOOG) or Microsoft (MSFT), offering services of this variety. Bezos disagreed.”We’re the opposite of a dark horse. A lightly colored horse.”
* Bezos on why Amazon is entering the services business: “For 11 years, we’ve been operating a web-scale application, with high reliability, in a high volume, low margin business, very conscious of our cost structure. I always think high volume, low margin businesses are more defensive – we look at the absolute dollar level of profit and free cash flow…we’re good at it, we know how to do it, and we think it can be a meaningful financially attractive business one day.
* Bezos on Amazon’s biggest costs: “Our biggest cost is not power, or servers, or people. It’s lack of utilization. It dominates all other costs.”

Update: Smugmug explains how using Amazon S3 saves them $500,000 a year

10 Responses to “Amazon Innovation”

  1. Curious Cat Investing and Economics Blog » Is Amazon a Bargain?
    November 10th, 2006 @ 3:21 pm

    Amazon stocks 1 million unique products in inventory, whereas grocery stores stock roughly 50,000, and supercenters stock around 125,000. What’s more, Amazon sells out its entire inventory 14 times per year, which is more than Costco, Wal-Mart, and Best Buy, whose inventory turns are 12, eight, and eight times…

  2. Curious Cat Investing and Economics Blog » Very Good Amazon Earnings
    April 25th, 2007 @ 8:57 pm

    [...] Wow. I have been a believer in Amazon’s long term strategy. Earnings have not been as positive as many expected (over the last few years) but I continued to believe Jeff Bezos’ long term strategy [...]

  3. Curious Cat Management Improvement Blog » Amazon's Amazing Achievement
    July 24th, 2007 @ 11:58 pm

    [...] Amazon Innovation – 10 stocks for 10 years (April 2005) – 12 Stocks for 10 Years Update (June 2007) – Very Good [...]

  4. Curious Cat Management Improvement Blog » Amazon S3 Failure Analysis
    July 26th, 2008 @ 10:08 am

    [...] Simple Storage Service (S3) is a service providing web hosting. The cloud computing solution has been used by many organizations successfully. However the solution has experienced some problems including failing for much of the day on July [...]

  5. Curious Cat Management Blog » Jeff Bezos Goes to the Gemba
    March 28th, 2009 @ 9:42 am

    Jeff Bezos, Amazon CEO, is working for a week in Amazon’s Kentucky distribution center. I hope, and based on his past, I believe, that he is going to learn more about how Amazon operates…

  6. Amazon Soars on Good Earnings and Projected Sales at Curious Cat Investing Blog
    October 23rd, 2009 @ 2:48 pm

    Free cash flow increased 98% to $1.92 billion from $0.97 billion for the trailing twelve months…

  7. Amazon Keeps Spending, Sales Growing But Not Income at Curious Cat Investing and Economics Blog
    April 27th, 2011 @ 12:28 pm

    [...] think this is due to smart choices by Amazon (I would be a bit more focused on current earnings but I understand the vision of Bezos and it is very wise and support [...]

  8. The Newest Kindle DX with New E Ink Technology | Curious Cat Gadgets
    September 6th, 2011 @ 12:12 am

    “Reading books, PDF, magazines, and newspaper has never been this stylish. Rotate the screen just by flipping the Kindle DX and have a landscape full width view of the display. Weighing only 18.9 ounce, the Kindle DX is the book on the go.

    Get rid of bringing all loose documents and replace them with the Kindle DX. Save all files in PDF format and have access to any document you wish…”

  9. Amazon’s Android Tablet, Kindle Fire, is Very Attractively Priced | Curious Cat Gadgets
    September 28th, 2011 @ 7:31 pm

    [...] The Kindle Fire is another in the long list of innovations from Amazon. I am very impressed with their management, leadership and willingness to focus on the long term [...]

  10. Bezos on Internet Boom » Curious Cat Management Improvement Blog
    December 7th, 2011 @ 3:11 am

    compares the boom to the gold rush highlighting the similarities. But then he compares the internet to the development of industry around electricity. I think he is exactly right on the internet: “there’s more innovation ahead of us than behind us.”…

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