Amazon’s ‘Risky’ Web Services ‘Distraction’ Finally Pays Off


From my blog:

When I wrote what was likely the first major magazine story about’s Web services business way back in November 2006, most people thought it was yet another crazy idea from CEO Jeff Bezos.

Heck, even most of my colleagues at the magazine thought I was crazy to bother writing about it. Understandably, many didn’t understand what I was talking about–selling access to Amazon’s huge cloud computing infrastructure for its own operations to outside companies–let alone believe that Amazon Web Services was sufficiently important to merit a cover story. “I have yet to see how these investments are producing any profit,” one analyst griped about the engineering and capital expenses involved. “They’re probably more of a distraction than anything else.”

Today, Amazon revealed just how big that “distraction” is. In its just-reported first-quarter earnings report, Amazon said AWS revenues have hit $5 billion on an annual basis. In the first quarter, revenues rose 49% from a year ago, to $1.57 billion.

Even more surprising, perhaps, it’s making money: $265 million in operating income, up from the $245 million it earned in the first three months of 2014.

That may not be seen as a positive by some investors. In the odd calculus of Wall Street, the more money AWS is losing, the better. That’s because, as Macquarie Securities analyst Ben Schachter wrote in a recent note to clients, it would indicate that Amazon’s main retailing business is more profitable.

Still, Amazon’s shares rose more than 15% in the next morning’s trading. That’s partly because, well, ultimately any profits are good profits.

And the growth of AWS, which now boasts more than 1 million active customers ranging from General Electric to every startup you’ve ever heard of, means it’s now a significant contributor to Amazon’s market value. Schachter values it at $75 billion, nearly half as much as the rest of Amazon’s business at $145 billion. …

Read the rest of the story.

13 Questions For 2013 In The World Of Online Advertising

questionsCross-posted at my blog The New Persuaders:

For the past few years, I’ve offered predictions here and on The New Persuaders for what’s likely to come in the next year. This year, I’m going to shake it up and throw out a few questions instead. I think I know the answers to some of them, but if many won’t be answered definitively by year-end, they remain top of mind for me and probably for many others in online media and advertising.

So in this, the first full week of the new year, here are some questions to which I hope to start finding answers:

* Will image advertising finally take off online? I have to believe that as people spend more and more time online instead of reading print publications and watching TV, brand marketers will want and need to reach them there with ads that are aimed at creating consideration for later purchases, not just eliciting an immediate sale like Google’s search ads and too many banner ads. We’re already starting to see signs of such advertising with the early success of Facebook’s Sponsored StoriesTwitter’s Promoted Tweets, and YouTube’s TrueView ads–not to mention the explosion of tablets, which provide a lean-back experience more compatible with image advertising. This won’t be a sudden change, since brand marketers and agencies don’t move quickly, but you can’t tell me there aren’t going to be increasingly compelling ways for brands to influence people online.

* Can advertisers and publishers make ads more personal without scaring people? That’s the $64 billion question, and it likely won’t get answered in full this year. It’s easy for headline-hungry politicians to make a big deal out of Facebook’s latest privacy gaffe or the Wall Street Journal’s or the New York Times’ latest scare story about an ad that followed somebody all over the Web. That’s especially so since Facebook really does push the privacy envelope too far at times, and too many advertisers idiotically chase one more sales conversion at the cost of scaring off hundreds of others or inviting onerous legislation. But making ads more useful to each individual person is not only crucial to online commerce, it’s potentially better for most consumers as well–seriously, I don’t need to see another ad for a fitness center or a new credit card, but that ad for Camper van Beethoven’s new CD had me in a split-second. The answer lies in these two words, everyone: transparency and choice.

* Will mobile advertising work? Well, some of it already does, to hear Google and Facebook tell it. And while those already devalued digital dimes so far turn to pennies when it comes to ads on smartphones and tablets, this still feels more like growing pains than a crisis in online advertising. Sure, the screens are small and people don’t like to be interrupted in their mobile cocoons. So a different kind of advertising is probably needed–clearly, banners don’t cut it on a four-inch screen. But the value to advertisers of knowing your location and maybe the apps you’re using, coupled with knowledge of what your friends like–all with permission, of course–is huge. That permission may be really tough to earn. But if advertisers can offer tangible value, perhaps in the form of useful services related to what you’re doing or looking for or shopping for–and isn’t that the ultimate native ad?–people may loosen their hold on that information.

I have a lot more questions, but I’ve got to stop before too much of 2013 is gone.

Check out more questions at the full post.

Apple CEO Tim Cook Is Blowing Smoke When He Dismisses Rival 7-Inch Tablets

Apple Introduces iPad Mini... and some new com...

Apple’s iPad mini

From my blog The New Persuaders:

As a company that way more often than not comes out with superior products, Apple rarely appears defensive. Today was an exception.

On Apple’s fourth-quarter earnings call, CEO Tim Cook took repeated potshots at small tablets of the kind that–yes–Apple itself just debuted. The iPad mini is clearly aimed at blunting the appeal of seven-inch tablets such as Google’s Nexus 7 and’s Kindle Fire.

While I think Cook is probably right that the iPad will continue to dominate tablets, and even that it continues to make the best ones, his overenthusiastic criticism of seven-inch tablets struck me as surprisingly defensive. Saying Apple didn’t set out to build a “small, cheap tablet,” he called the competitors “compromised” products. “We would never make a seven-inch tablet,” he sniffed.

Why not? Because they’re too small, he said. The iPad mini is almost an inch larger, which means a 30% larger screen and 50% larger viewing area. I’ll grant that that is noticeable, and appealing.

But c’mon. These are all tablets you can hold in one hand, and acting as if the iPad mini is something utterly unique–“in a whole different league,” as he put it–comes off more than a bit desperate. Apple is clearly playing catch-up here, and trying to position the iPad mini as nothing like the Nexus 7 or Kindle Fire only serves to make us realize that Apple actually does feel threatened by these devices that beat it to what has turned out to be a real market. …

Read the complete post at The New Persuaders.

Facebook’s New Gift Service: Nice, But Not Yet An E-Commerce Game Changer

From my blog The New Persuaders:

Just in time for prime gift-giving holidays like Friday’s World Rabies Day (or if you prefer, Ask A Stupid Question Day), Facebook today launched a social gift service. It’s rolling out to only a select few for now.

I must be one of them, because I was able to send something to my wife to try it out. But in its current form, I doubt I’m going to use it much.

This isn’t the 2.0 version of the Facebook Gifts virtual-gift service that the company shut down two years ago, by the way. In fact, the new Gifts is built upon, and run by, the folks at Karma, the gift-giving service Facebook acquired in May.

It actually looks pretty good. And while I have ordered precisely one gift that obviously has not yet been delivered, so I can’t judge the entire gift-giving process, it worked quite smoothly. I clicked on my wife’s Timeline, clicked the gift button, and off I went to order her some caramels. She can even pick her own flavor–that’s pretty cool.

In this case, I obviously know her address, so one advantage of Facebook Gifts–not having to know or ask for someone’s address–is moot in my case. What’s more, I didn’t get an automatic reminder I might get if it were her birthday, so that bit of friction elimination wasn’t a factor for me either. But it’s fast and easy to send gifts to friends, and that’s great–not just for consumers, but for Facebook, which can use a service that brings in revenues not dependent upon its brand of advertising that many large marketers are still doubtful about.

So what isn’t great, at least for me?

* A lot of the most prominent gifts are pretty vanilla–teddy bears, spa appointments, flowers, cupcakes. Maybe they’re fine products. Maybe they’re the sort of thing most people give their friends. But for a service with a tagline “real friends, real gifts,” too many of these products seem just too impersonal. Products, especially gifts, are not necessarily fungible, and all the less so for close friends for whom you’re supposed to be getting something special. And if they’re not close friends–and let’s be honest, most people don’t have several hundred close friends–I probably won’t be sending them many gifts, from Facebook or anywhere else. …

Read the complete post at The New Persuaders.