Amazon Looks to Make a Buck off Muck

Yesterday, I attended the opening day of MIT's annual emerging technology conference. The keynote speaker was Jeff Bezos, the founder and CEO of Amazon.com (Nasdaq: AMZN  ) .

After some perfunctory remarks reminding the audience of the size of Amazon's retailing, distribution, and information technology infrastructure, Bezos spent the remainder of his talk explaining how his company's expertise in the latter area, IT infrastructure, was giving rise to some new business opportunities in web-scale computing -- opportunities that could become integral components of Amazon's long-term success.

Bezos is a skilled executive and a very polished salesman, but after listening to his explanation of three new Web services, I'm inclined to agree with his assessment that they could all provide new streams of revenue.

Mechanical Turk
The three new services are not, however, equal. The least impressive of the three is something called Mechanical Turk. This system creates what Bezos calls "artificial artificial intelligence."

It does so by turning the computing paradigm on its head. Usually, we assume that humans are the ones requesting that a computer complete a task. Mechanical Turk does the opposite and allows computers (and businesses) to ask humans for assistance.

As surprising as it might seem to some, there are actually things for which a person is still more skilled than a computer -- such as identifying photos which may or may not be appropriate for a particular website.

The system works by permitting businesses to submit tasks, via Amazon, that they would like shopped out for completion. Customers then list a price they are willing to pay to have each task completed, and people can then bid on that job through Amazon's website. (As a writer, I noted that there were many jobs that called for my particular skill set. Alas, many were only willing to pay between $0.01 and $0.05 for an hour's worth of work . so I politely declined the opportunity.)

S3
The other two initiatives, dubbed S3 and EC2, are equally unique, but have the added benefits of serving a larger number of customers and being potentially much more lucrative. This is because the two services will allow developers, website operators, merchants, and businesses of all sizes to leverage the hardware that Amazon itself uses to power its own e-commerce business.

S3, which stands for Simple Storage System, allows Internet users to store and retrieve any amount of data, at any time, from anywhere on the Web. In essence, it gives any business access to the same highly scalable, reliable, fast, and inexpensive data storage systems that Amazon, Google (Nasdaq: GOOG  ) , and even IBM (NYSE: IBM  ) use to run their global network of websites.

What this means in more practical terms is that if a small business suddenly needs to grow overnight as a result of, say, a successful viral marketing campaign, the company's website will be able to handle the new traffic because it can just expand into Amazon's existing data storage system.

EC2
The third initiative, EC2, is currently only in the beta testing stage, but it is the one I am personally most excited about because it promises to be a real "game changer." Called Elastic Compute Cloud, it allows businesses of any size to access a CPU for about 10 cents an hour.

The accessing of these servers is, however, both flexible and scalable. Whether the customer needs to use one CPU for 700 hours a month or 700 CPUs for one hour, the cost is about $70. And if they needed to do both, it would only cost $140. The bottom line is that's a lot of computing horsepower for a very reasonable price.

Bezos the muckraker
Think of it as grid computing for the small and mid-sized business, and the reason the service is so significant is because it frees up smaller businesses from having to deal with IT infrastructure issues. Bezos calls such issues "muck," and claims that many businesses are now devoting 70% of their time and resources to such things -- things which do absolutely nothing to help those businesses distinguish themselves from their competitors.

By removing this headache and substantially lowering the cost of IT infrastructure for businesses, EC2 allows them to channel most of their time and energy into what makes them unique -- the things that truly differentiate each business from its competitors.

If Amazon can fulfill this promise, I am confident that it will be able to make some serious bucks off muck -- and it also should give long-term Amazon investors a reason to smile.

Interested in other Amazon-related foolishness? Check out these recent articles:

Amazon has been just one of the many market-beating recommendations to come out of theMotley Fool Stock Advisornewsletter service. If you're interested in signing up for a free 30-day trial, just click here.

Fool contributor Jack Uldrich does not know much about cloud computing, but he has been accused of having his head in the clouds on occasion. He does not own stock in Amazon. The Fool has a strict disclosure policy.


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