By Alan Sipress
Washington Post Staff Writer
Thursday, November 9, 2006
SAN FRANCISCO, Nov. 8 -- Jeffrey P. Bezos, chief executive of Amazon.com Inc., outlined his ambitious strategy for selling online storage and computing power before a crowd of entrepreneurs gathered here Wednesday for the Internet industry's marquee conference and annual pep rally.
Speaking to a crowd that seemed almost giddy over the potential of the Web, Bezos detailed a corporate strategy that seeks to transform the Internet retailer into a provider of Web-based storage, computing power and other logistical services for businesses. The idea is to allow other companies to spend less time wrestling with computer infrastructure and more time on their core business.
"We make muck so you don't have to," Bezos said.
Bezos's plan to tap into the surging interest in Web services sweeping the technology industry opened the second day of the Web 2.0 Summit, an annual conference attracting nearly 1,000 paying participants, corporate sponsors and journalists. In its three-year history, the event has become both promoter and barometer of the Internet industry, spotlighting young companies seeking to exploit the Web's latest technology advances.
Earlier this week, hundreds crowded into a large hall to see presentations by 13 small companies judged to be among the most innovative on the scene. These included enterprises that let aspiring musicians play with professionals over the Internet, allow users to share expertise on projects as varied as cooking and kite-making and enable Web sites to sell online advertising directly without a middleman.
But John Battelle of Federated Media Publishing Inc., the conference chairman, opened the three-day event by noting that larger, more established companies have in the past year become more active on the Web frontier. He cited major media companies cooperating with Google Inc. and YouTube Inc. over the use of copyrighted material and Amazon's move toward support of Web services.
Though Amazon has become the world's largest Internet retailer with more than $10 billion in annual sales, the Seattle company is not an obvious candidate to compete with Internet industry titans like Google and Microsoft Corp. in selling services via the Web. But Bezos said the endeavor reflects the technological expertise Amazon has developed over the past 11 years in running its far-reaching retail operations.
"We have to be very efficient at Amazon.com in order to offer the kind of pricing and free shipping we do. We always operate our infrastructure with that mentality," he said.
Bezos highlighted Amazon's release three months ago of a Web service dubbed Elastic Compute Cloud, which puts the company's servers at the disposal of businesses looking for additional computing capacity. The service, still being tested, allows customers to tap capacity on demand, ramping up as needed and then scaling back just as easily. Users are billed only for what they use. The offering joins a growing portfolio of Web services offered by Amazon, notably a year-old initiative that provides flexible online storage in a similar fashion.
"We're a little bit surprised by how excited people seem to be by these services," Bezos told the audience.
Amazon executives said these services have been especially appealing to companies that confront a sudden surge in business or fluctuations that require steep increases in storage and computing.
For instance, they said Linden Lab, creator of the Second Life virtual reality Web site, needed extra storage to accommodate a surge of viewer downloads on the first day of a software release. Powerset Inc., which offers a natural language approach for searching the Web, announced Wednesday that it would use Amazon's Elastic Compute Cloud to run its business.
Some analysts have questioned whether Amazon's endeavors will be profitable or only distract the company from its core retail business. Industry skeptics have pointed to the vast costs associated with running data centers large enough to provide storage and computing power for other enterprises.
Bezos countered that Web services make sense for a company that has invested heavily in building servers that often sit idle. "The biggest cost is not power and it's not servers and it's not the people who maintain the data centers. The biggest cost is lack of utilization," he said.
Bezos also highlighted another new service that takes advantage of the company's existing investment by allowing other businesses to automatically ship their products to Amazon's extensive distribution centers and then have them delivered onward to customers.
Marc Benioff, chief executive of Salesforce.com Inc. and a subsequent speaker at the conference, applauded Amazon's strategy. He said Amazon made a wise decision to expand beyond the applications on its own Web site to provide services for other sites.
"If you want to be a long-term survivor, you need to move from being a killer app to being a killer platform," Benioff said.