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Comment by orf | Hacker News Reader

> So, if this graph is right, then over the last couple of years, somewhere between 50% and 80% of Amazon’s profit has been due to AWS.

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It is important to consider that Amazon probably still considers its retail business a growth business, and that it has not captured enough of the market yet to start raising prices.

I am pretty sure Amazon's retail business is going to completely dwarf AWS in the long term, because they are currently willing to break even on it (and possibly lose money) just to outdo the competition.

Competing on price never pays off imho. You’ll race to the bottom. Amazon already has a massive monopoly on retail, and they wouldn’t dare mess with the prices.

My experience:

I once tried to corner the market on WoW gems by buying out the undercutters and setting my desired price. My money wasn’t long enough.

I really don’t think anyone’s money is long enough :p

Cornering the real world silver market is a tough thing to do as well. Just ask the Hunt brothers. https://en.wikipedia.org/wiki/Silver_Thursday

Yes this example is very pertinent to Amazons profit strategy thank you for sharing.

Waiting for some Eve fans to share their economic exploits.

I think they're viewing it instead as continuing to reinvest profits until they're a cyberpunk level corporate power. It's not that they're cutting prices, it's that they're using the excess to buy companies like Whole Foods and vertically integrate them rather than paying out to shareholders, or building a bigger war chest in an index fund.

> Amazon already has a massive monopoly on retail, and they wouldn’t dare mess with the prices.

By which definition? It’s trivial to switch to a different website to order from, and Target/Walmart/Bestbuy/etc have significant market share.

1. Amazon already has your payment information. I was on my phone looking to order something. The first link that came up was Walmart. I went and searched on Amazon because I could just press “Order Now” and not have to create a new account and dig up my credit card.

2. I’m already paying for Amazon Prime. Why not get full use out of it for shipping?

3. Amazon marketplace has network effects. Third party sellers use it because the buyers are there.

4. I wanted to rent a movie on my Roku TV. Again, Amazon already has my payment information and I’m already signed in to Prime Video.

5. I get 3% discounts on my Amazon card when ordering from Amazon.

I’ve been downvoted to oblivion plenty of times about being against the government interfering in $BigTech whether it be Google, Amazon, or Apple so I’m definitely not proposing they should be broken up because of a “monopoly”.

A monopoly would indicate there exists a lack of options for buyers or control of prices from a very large seller.

As it stands now, Amazon is a glorified Alibaba that sided with buyers in disputes.

You can find the same things on Amazon on Alibaba, Newegg, bestbuy, Walmart, iTunes, Google Play, the Amazon sellers own websites, etc. the buyer is in no way required or affected negatively by not interacting with Amazon.

So I’m struggling to see the point of labeling Amazon a monopoly when it doesn’t convey any useful information.

They're not competing on price — they're competing on logistics, primarily. They're losing money to offer consumers an experience they can't get on any other platform. Way more defensible than price competition.

Hmm.. they might want to look at Sears or Walmart.

Sears is more or less dead. Walmart is struggling to keep market share with amz. With groceries their only saving grace

If price is their long term plan with retail that is a loosing proposal. Once they dominant they might be able to sqeeze the market for a few years maybe a decade but them something else will topple them

Sears was started over 115 years ago and was a dominating force for most of those years.

Walmart is responsible for the 7th, 8th and 9th largest fortunes in the world built before modern monetary policy. Further they completely changed retail in America.

Those seem like weird counter examples.

and a new king is born

"Amazon's retail business is going to completely dwarf AWS in the long term"

It will in revenues but not in profits.

Right now, Wallmart, Exxon, GM etc. 'dwarf' most tech businesses in terms of revenues and the size of their businesses, but the profits are smaller, so tech companies have a higher valuation.

Which Amazon has thanked almost everyone and their grocery stores for jumping on their bandwagon and spending nearly all their VC money on these services.

Those without any significant revenues will have a hard-time paying up that huge AWS bill if they dared to use K8s or auto-scaling features. I would not want to look at the balance sheet of a companies accounts or quarterly earnings if they cannot generate lots of revenue to pay that AWS bill.

Under these circumstances, how is AWS lock-in and cost escalation any different from Oracle of the past?

Why would any startup shackle themselves to AWS or any cloud when it's not portable?

Lambdas, in particular, seem like the worst idea in the history of ideas. Once your org adopts them, how do you keep track of these mysterious, business-critical pieces of functionality? How do you ever plan to port them to something else? It seems like you become an Amazon customer forever.

I am incredibly skeptical of cloud at this point. If the other infrastructure and platform concerns of OS upgrades, patches, etc. were handled in an automated way, I'd strongly consider running Kubernetes on bare metal. Data centers and colocation all the way.

I'm eager for self-management of k8s, DBs, Redis, etc. to be automated with tooling. On-prem, but easy to maintain.

edit: wow, from +3 to 0 after an hour. I maintain that I articulated my opinion well in an unbiased way.

> Why would any startup shackle themselves to AWS or any cloud when it's not portable?

Depending on the startup, that may make sense if it allows for fast iteration.

If a startup is trying to achieve product market fit, having a huge AWS bill is a good problem to have, since it means the product is actually successful.

it’s not even slightly difficult to get a huge AWS bill. people do it on accident because they refuse to put in spend limits.

If you're building on AWS properly, your usage scales with demand. So a huge bill should mean you have huge demand.

Only servers used for client requests. Dev and integration environments but esp data crunching can be a lot more expensive than serving web requests. And they're hard to keep cheap if you scaling is easy.

Lambdas, at least the JS ones, are Node.js based and not hard at all to migrate to an alternative cloud service. You can even use a framework that handles all the cloud-specific functionality for you and works across AWS, Azure, GCloud, etc: https://www.serverless.com/

The lock-in really comes from AWS-specific services. Redis, Mongo, etc will have the same API no matter where you're hosting them, so it's pretty trivial to point your client-side code to a different cloud-hosted Redis instance if you find AWS lacking there.

I agree and just want to add IAM to the list of AWS Lock In services. We provisions environments almost entirely using Config-as-code tools (packer, ansible, terraform) and generally have a good blueprint for what an environment looks like and the parts I’ve had the hardest time thinking about migrating to another cloud provider is all the IAM rules that magically give hosts/services the ability to talk to other services.

I'm not sure about GCP, but Azure does offer role-based access[1] which gives you similar resource authentication magic to what IAM provides. The definition formats[2] even look fairly close to their IAM equivalents.

It's used in combination with Azure Active Directory, so the modality isn't 1:1 with AWS. But Managed Identities[3] is a feature that's rolling out across Azure which simplifies the model a bit, since it negates the need to create service principles in AAD beforehand.

[1] https://docs.microsoft.com/en-us/azure/role-based-access-con...

[2] https://docs.microsoft.com/en-us/azure/role-based-access-con...

[3] https://docs.microsoft.com/en-us/azure/active-directory/mana...

GCP too provides role based access.

IAM is simply one of AWS's killer features. It's just a service that's so good it differentiates itself from the competition. Lock-in based on quality is not the sort of lock-in that I'm most worried about, because it's very clear what I'm getting in return for it. The alternative to using IAM to begin with would be to commit to work comparable in scope to that required to migrate away from it in the future.

Avoiding use of Lambda(example) is possible but for IAM?

Do you realize how many software as a service vendors the average corporation is tied in to?

You’re always tied into your infrastructure once you have any type of scale. The pain of migration is huge.

I once worked with a company whose entire workflow was integrated with six or seven vendors through APIs.

Have you ever worked in the healthcare industry? The level of lock-in they have to their EMR/EHR would make you cry.

Do you remember the days when everyone had their own data center and setting up a server involving drawing up specs then putting in a PO then waiting for it to get delivered on a truck to be racked and formatted? AWS is magic and the price is entirely justified.

Yes and also i clearly remember in 2007 trying ec2 for first time and asking, is it production ready? Could we actually use this vs. building out a cage. And in 2007 the answer was no. Something about no external IP addresses or no load balancer possible. But yes that cage was expensive and the last cage I ever got. AWS is magic and amazing.

You’re basing your experience on AWS from 2007?

did you read what I wrote? It was just a nice little story about trying aws for the first time in 2007 and then never getting a cage again. It was PRO-aws.

There are also dedicated servers for a fraction of the price. The choice isn't AWS or own datacenter, there's a lot in between.

After working for a company that spends millions of VC money on AWS per year I can also say that infinite cloud scaling is a myth. We had all kinds of downtimes due to AWS over the years.

> We had all kinds of downtimes due to AWS over the years.

No, you just had downtime, full stop. Failures are inevitable, regardless of whose datacenter you're using. Failure-tolerant architecture design minimizes (or eliminates, if you're lucky) the downtime caused by failures. I'm not saying that's easy or necessarily appropriate depending on the stage of your company, but foisting responsibility onto AWS is missing the point.

I am not "foisting responsibility". There are fallbacks and fail safes in place to mitigate such issues but that's not my point. My point is that they sell us a dream of infinite scaling, all managed and no more problems, which just isn't the case. I know, it's naive to believe that in the first place but the marketing certainly goes into that direction and some proponents spin this story all the time. Would the alternative be better? Most certainly not, but it's still a question worth asking from time to time considering the extra money spent.

I think you're maybe mixing up different things? "Infinite scaling" doesn't mean your app is failure-free and constantly available. In my experience AWS's scaling features work pretty well, as does their on-demand provisioning. But they have very little to do with tolerating infrastructure failures. That's up to you, regardless of whether you're developing on AWS or on hardware you own.

Let me provide an example. When we recreated a big Elasticsearch cluster, AWS ran out of available instance types in that AZ resulting in the cluster never going into a green state because a node was missing. This is not something you typically worry about when you choose a cloud provider. Your tone is a bit condescending tbh, you don't need to lecture me about the importance of a fault tolerant distributed system.

yeah, kayoone response was to the argument “AWS is more expensive but it scales”. In fact it’s not magic and you still have to manage it so worth looking at alternatives such as bare metal, especially at scale.

> Most certainly not, but it's still a question worth asking from time to time considering the extra money spent.

Esp if you are not vc backed and infra costs are already near the same order of magnitude as most of the dev team and are running into scaling issues…

I hear this a lot, but I rarely see any data or evidence to back this up.

The company I work for used to have most of its revenue come from VC-backed startups. Over time that changed as we courted more well-capitalized enterprises. If our VC-backed-startup customers all went bankrupt tomorrow, it would certainly hurt, but it wouldn't kill us, not by a long shot.

I would expect that to be even more true for a product like AWS, not less.

What's your alternative? Go on prem or build your own competing cloud provider? Probably not. The open markets have set the prices for cloud compute and storage resources.

I'd argue that the existence of cloud providers have only accelerated the growth of the tech industry and has in fact put more money in the pockets of tech workers and VCs than there would have been without the existence of an AWS/Azure/GCP/etc

Bare Metal is cheaper and more effective than running your startup on fumes just to offload your expenses on unsuspecting VCs.

What makes this even more bonkers to me is this is from something most non-tech people haven’t even heard of.

That makes sense honestly, B2B SaaS is lucrative, steady, and honestly probably moreso than a B2C business could be. Many of the big software players most people have never heard of.

As a consumer, you're almost certainly in a Salesforce system somewhere, but most people have no idea what Salesforce is.

I wonder what the equivalent is for tech people. What is an enormous industry-specific business we have never heard of?

Pharmaceutical Distribution - How many people have heard of McKesson?

Oh god. I've worked at a place that uses their apis.

I am always amazed when I listen to my rancher buddy talk about cattle prices on weekly calls. There are so many industries I'm completely oblivious to.

Agriculture, including farming (mid sized or larger), fertilizer distribution and manufacturing and seeds.

I actually have agriculture experience. That's how I paid for college. You're absolutely right but I bet there's more than one AWS.

I think many people have heard of John Deere and Monsanto but what about McGregor? They may not be as big as AWS but even with Ag experience I bet there are bigger similar organizations.

I bet there are big custom harvest operations too. We had a two man operation on the Palouse but I heard stories about huge operations out of Texas that migrated through the midwest following harvest cycles.

Since this is such a great question, I've posted an "Ask HN" about it: https://news.ycombinator.com/item?id=23534529

The steel production and raw materials industry is a whole different world. I am not knowledgable in the area at all but a recent linkedin post by a friend was listing the biggest steel producers by country, I did not recognise any names except Tata from India and Thyssenkrupp from Germany.

Here is a list I found from a quick search, try to guess which country the biggest producers is based in or how many of top 5 you expect to have heard of before opening the link.

https://en.wikipedia.org/wiki/List_of_steel_producers

I didn't even know Thyssenkrupp did things other than elevators.

"In February 2020, Thyssenkrup AG's board announced that it would sell its elevator segment to Advent International ... "

https://en.wikipedia.org/wiki/ThyssenKrupp

This just keeps getting more interesting.

This is actually pretty amazing. I predicted that the top few would be US based companies but I hadn't heard of them because they are rounding errors. I was wrong about that but the first US based steel company on the list is in my neighborhood. I ride up to their plant on my daily bike ride.

That is a lot of Chinese steel, at what looks to be about 25% of the total worldwide production, just by the companies listed in the top 41. It looks like possibly a majority of worldwide production isn't in this list (which seems to gut off at less than 10 million tonnes), so it's possible it's even higher, if there's a lot of small steel companies based in China as well.

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