Amazon Finds Income in New Places

It looks as though Amazon.com (Nasdaq: AMZN  ) has found a way to diversify its operations a bit and at the same time gain street cred with the young technorati crowd. According to an article in The Wall Street Journal, the company expects to get a meaningful revenue stream out of its low-cost Web-services infrastructure tools by 2008 or 2009, at the latest.

If you haven't heard of S3 and ECC2, they stand for "Simple Storage Service" and "Elastic Computing Cloud," respectively. They're two of the major building blocks of Amazon's Web-service strategy, with which you can buy gigabytes of storage space or hours of processor time on Amazon servers for very reasonable prices. The combined platform is attracting curious entrepreneurs with Web 2.0 ambitions but no access to data centers.

Using standard REST and SOAP interfaces and regular old HTTP or hipper BitTorrent data-transfer protocols, you can store data on Amazon's server cloud for as little as $0.10 per gigabyte, per month. For another dime a month, you can buy an hour of processor time on the virtual equivalent of a 1.7 GHz processor with nearly 2 gigabytes of memory -- and direct access to S3 storage.

Your virtual machine image will run your favorite Linux distribution, such as Ubuntu, Red Hat's (NYSE: RHT  ) Enterprise or Fedora distros, or Novell's (Nasdaq: NOVL  ) SUSE Linux. Sorry, no Microsoft (Nasdaq: MSFT  ) Windows. Hack away, point your users to your service instance, and you have an instant E-business -- or online game, or personal hobby-hacking platform, and on and on.

The geek appeal here is tremendous, and I'm tempted to move my own little projects to this platform because I'd have full control over the virtual system, and it's both simple and cheap. It's worth noting that Amazon might not be the only game in town for much longer, though.

Other digital giants with global computer networks could very well expand their respective developer platforms from the free, basic data access tools they provide today into full-fledged virtual machines in the EC2 mold. I'm talking about the likes of Microsoft, Yahoo! (Nasdaq: YHOO  ) , or Google (Nasdaq: GOOG  ) , all of which have already started down that road with public development APIs of varying popularity.

Still, a first-mover advantage is a first-mover advantage. Enjoy your new revenue stream, Amazon, at least for a while. All those pennies per month can add up to serious cash -- everything counts in large amounts.

Go deeper, Fool:

Amazon and Yahoo! have another thing in common -- they're both Motley Fool Stock Advisor newsletter recommendations. Microsoft is a Motley Fool Inside Value pick. Take a peek at either service free for 30 days.

Fool contributor Anders Bylund is a Google shareholder but holds no other position in any of the companies discussed here. He prefers Ubuntu or Debian over any commercial Linux distribution. You can check out Anders' holdings if you like, and you don't need a fancy computing platform to read our Foolish disclosure rules -- just the same old system you're using right now.


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