how much of that stack is proprietary?
This is the most amazing thing going, Amazon is leading the market and continuously innovating, and you don't buy it because of 'switching costs.' Tell me the truth: do you have or are you studying for your MBA?
Long term this business is analogous to the hosting business: low margin and commoditized. is it a market? yes. Is it a big market? no. Why? because there is no lock-in.
If you can't understand this consider the scenario where 5 or 10 years from now Amazon is providing the infrastructure for 20% of the web, taking in 20% margins above the cost to operate the data centers and making a hefty profit. What stops Microsoft or Google or any other player for that matter from getting in on the action by undercutting them in price?
If you look at any (amazon scale) money maker online there is some sort of lock-in involved which is central to their business. Most often its a network effect of some kind. Go ahead, go down the list of the top 10 web companies and take a look yourself.
Just because something is technologically cool does not mean its going to make enough money to be significant to amazon's bottom line.
Also don't insult people if you can't grasp what they are saying.
The "write a better search engine" part is not easy, and Google's algorithms are proprietary, but their success is not really a network effect, is it?
Also, saying Amazon is providing "infrastructure" implies they are going to deliver their current product then stop. But they can continue to build higher levels on top of what they already have. Maybe next will be algorithms baked into Hadoop, so you can throw your data at it without writing any of your own code. They can keep building up like this indefinitely. If Microsoft had released the first version of Windows and stopped, it would have become a commodity eventually (even with network effects).
2. google is a consumer company where brand and user behavior are important (not the case here).
3. most importantly, they make their money with an ad network which has network effects and where they charge enormous margins
you'll notice in all the discussions between yhoo/msft the most important thing for both companies is their ownership share of the search ad network. this is key to the bottom line and long term relevance and its why you see proposals along the lines of we'll give you a bunch of money and a guarantee of a portion of revenues in exchange for ownership of your network
The point on rising above infrastructure only applies if they begin adding some sort of ip or secret sauce. Then they can get network effects if they have people building on a platform that is not easy to replicate, but we've seen nothing like that. Hadoop is not that.
You can install hadoop on your own machine today if you want: http://hadoop.apache.org/core/docs/current/quickstart.html
I understand thats harder and thats why consumers are using them, but its not hard in the sense of competing business.
In fact most large web companies _already_ do all of this stuff internally.
From http://www.wired.com/techbiz/it/magazine/16-05/mf_amazon?cur...:
Bezos doesn't disagree. "I'd be surprised if no one else does this," he says, pausing for effect. "It's a really good idea!" And there may be an ace up his sleeve. Any economist will tell you that a commodity business -- storing and processing data, for instance -- is a mug's game, with prices that plunge inevitably toward the cost of production (in the case of bits, pretty close to zero). That's music to Bezos' ears. "Commodity businesses don't scare us," he says. "We're experts at them. We've never had 35 or 40 percent margins like most tech companies."