’s (AMZN) squat Seattle headquarters looks nothing like the country club affairs found in Silicon Valley. There are no free soft drinks or volleyball courts. The light fixtures hanging from the ceiling in the reception area aren’t fixtures at all but rather collections of extension cords fitted with bulbs. The receptionists lack computerized systems for registering guests. They simply write down visitors’ names on a piece of paper. Such is low-margin life in online retail, where Wal-Mart (WMT) stands at the ready, waiting to take away your extension cords.
Most people recognize this Amazon: Jeff Bezos’s hyperproficient Borders-killer; one of the few dot-com initial public offerings that didn’t end up a punch line; fount of millions of smiling cardboard boxes bearing everything from dildos to diapers. Sitting in a sparsely decorated employee cafeteria, Andy Jassy pitches a newer if equally thrifty side of the e-tailing giant. Although all shoppers are welcome, this Amazon, he explains, is for business customers and isn’t well marked on the home page. It’s called Amazon Web Services, or AWS. As senior vice-president, Jassy heads up AWS, which rents out computing power for pennies an hour. “This completely levels the playing field,” Jassy boasts.
AWS makes it possible for anyone with an Internet connection and a credit card to access the same kind of world-class computing systems that Amazon uses to run its $34 billion-a-year retail operation. “This will be a very high-volume, relatively low-margin business,” Jassy says, sipping his third Diet Coke of the morning. He says he’d like to curb his 12-can-a-day habit, but why bother? If ever there were a time to get hopped up at Amazon, it’s now.
AWS is growing like crazy. Although he won’t cite exact numbers, Jassy claims “hundreds of thousands of customers” already use the service, and analysts at UBS (UBS) estimate Amazon will do about $750 million of business on AWS this year. In fact, a whole generation of Internet companies couldn’t exist without it. Netflix’s (NFLX) movie-streaming empire runs on it; Zynga, the social gaming company, uses it to handle sudden spikes in usage. AWS has become such a fact of life for Silicon Valley startups that venture capitalists actually hand out Amazon gift cards to entrepreneurs. Keeping up with the demand requires frantic expansion: Each day, Jassy’s operation adds enough computing muscle to power one whole circa 2000, when it was a $2.8 billion business.
The physical expansion of all that data takes place in Amazon’s huge, specially designed buildings