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Amazon moves deeper into selling Web logistics
POSTED: 9:18 a.m. EDT, November 4,2006

In a series of projects, some announced and some in public trials this year, the company has assembled the pieces of a strategy that positions Amazon to supply underlying computing, data storage and other services to Web businesses.

Jeff Bezos, Amazon's chief executive, plans to detail his vision for this emerging business at the Web 2.0 Conference in San Francisco next week.

The goal is to create new, revenue-generating businesses for Amazon by allowing both start-ups and established businesses to rent computing and other Web services on demand.

The effort takes advantage of the heavy investments in equipment and Web management expertise that Amazon has had to develop to build a $10 billion annual online retail business.

But it also is an attempt to seize more recognition for its role at the cutting edge of Web services--an arena where Web search leader Google often grabs the spotlight.

"We do get asked a lot about what this has to do with selling books," Adam Selipsky, vice president of product management for Amazon Web Services, said Thursday. "The answer is that it has nothing to do with selling books. But selling books has a lot to with Web technology at the scale at which we do it."

Amazon began by building a Web-based system for selling books online, and then it extended the system to other sales categories. Later, it invited outside merchants on to Amazon. It now counts 1.1 million active merchant accounts on Amazon.

The Seattle-based company's latest Web services push follows this historical expansion, he said.

"We spent 11 years building up a Web-scale business that does a lot of heavy lifting for both our customers and our merchant partners," Selipsky said. "We have built a business that can operate at Web scale in ways that not many businesses can."

The new efforts go by the disarmingly named Amazon Simple Storage Service (S3) and the psychedelic-sounding Amazon Elastic Compute Cloud (EC2). S3 offers fast, inexpensive data storage in virtually unlimited amounts. EC2 provides instant access to computer data-crunching power, whether a company needs one machine or thousands.

This expansion move comes as the company weathers criticism on Wall Street at renewed pressure on profit margins from its stepped-up spending on technology over the past year. In response, its shares are off 20 percent so far this year.

As a percentage of its overall investments in its core retail business, these projects remain small, a representative said,

Introduced in March, S3 is designed for Web entrepreneurs to store and retrieve unlimited amounts of data at any time.

Amazon quietly began offering EC2 to Web developers in August. About 500 developers signed up for EC2 in the first half day and the initial trial was closed to new customers.

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