Amazon.com's Future Isn't in Books or E-Commerce

EAST PALO ALTO, Calif.—Amazon.com, one of the universally acknowledged Web 2.0 world leaders that has made its fortune by selling books, CDs and DVDs through its online stores, now sees its long-term future in the Web services subscription and storage business—otherwise known as cloud computing.

During the last three years, Amazon has come out with its S3 (Simple Storage Service) online storage and the EC2 online platform for software developers. Both have been wildly successful.

With S3, individual users or companies can "lease" as much storage as they desire to use for saving business documents, photos, video or any other kind of digital data.

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With EC2, developers can save enormous amounts of money using a standard infrastructure and plenty of computing power to build software applications that work in Web environments. It is ideal for startups. 

The empirical evidence that Amazon is going whole hog into the cloud business? It is now using nearly two-thirds of its available bandwidth for that rapidly growing part of the business—even though its stores continue to process thousands of transactions a minute and remain very successful in their own right.

In other words, Amazon.com is doing quite well, thank you, even through this volatile U.S. macroeconomy.

"We just passed the 29 billion object mark in our S3 storage," Adam Selipsky, vice president of product management and developer relations at Amazon, told me at the 2008 Global Technology Leaders Summit here at the Four Seasons. "That's, um, a lot of things stored."

No kidding. Amazon doesn't do a lot of advertising, either, so the main channel of growth here has been good, old-fashioned word of mouth.

"We have this chart back at the office [in Seattle], which shows the amount of overall bandwidth we use on a daily basis for all our businesses," Selipsky told me during a break at the summit. "The online services business bandwidth line crossed over the stores' line a few months ago, so yes, we're right on track, as we see it."

Selipsky should know what he's talking about. He is in charge of all of Amazon's storage and development online services.

CEO and founder Jeff Bezos also told a group of analysts recently that he sees the future in terms of Web services provisioning. So it's plain to see where the company is headed.

"We're working on developing a lot more online services, also," Selipsky said. "Can't really talk about them here, but we'll keep you in the loop."