YWR: The next Amazon
At the AWS Summit London I learned something about Amazon. Something I wished I’d learned/appreciated 10 years ago.
Maybe I wouldn’t have sold the shares.
I hadn’t realised what AWS was building. Now I do.
But it’s too late.
Or, maybe not.
There could be another bite at the apple.
Because I see the pattern again.
Back in April I attended the AWS Summit in London and was amazed. Amazed 20,000 people showed up at the Excel Center on a Tuesday in East London for a tech conference. It was like going to a Premier league football match except to learn about cloud computing and AI software development. I wrote up my notes from the day in AWS Conference Notes.
The realisation I had that day was the concept of Primitives. I had always thought of AWS as ‘storage’ or ‘servers’ in the cloud. Companies get rid of the servers in their closet and move everything to Amazon. But that’s a terrible simplification. It’s way more than that.
What I now realize is that what Amazon created with AWS was an infrastructure layer. A base layer to build on. A base layer with lego blocks (primitives).
Over the years AWS has built out 240 preassembled lego blocks to make it easier to build a tech company on top of their base layer. S3 is the lego block many of heard of. It was the first and is for storage. EC2, or Elastic Compute (servers), is another. SimpleDB is a ready made database lego. Combine S3, EC2 and SimpleDB with a website and you have the key tech stack for an internet company.
Interestingly, Primitives were the subject of Andy Jassy’s 2023 letter to shareholders. Jassy explains their importance and history and goes back to 2003 to when Amazon learned to build this way:
In the middle of the Target and NPI challenges, we were contemplating building a new set of infrastructure technology services that would allow both Amazon to move more quickly and external developers to build anything they imagined. This set of services became known as AWS, and the above experiences convinced us that we should build a set of primitive services that could be composed together how anybody saw fit. At that time, most technology offerings were very feature-rich, and tried to solve multiple jobs simultaneously. As a result, they often didn’t do any one job that well.
Our AWS primitive services were designed from the start to be different. They offered important, highly flexible, but focused functionality. For instance, our first major primitive was Amazon Simple Storage Service (“S3”) in March 2006 that aimed to provide highly secure object storage, at very high durability and availability, at Internet scale, and very low cost. In other words, be stellar at object storage.
When we launched S3, developers were excited, and a bit mystified. It was a very useful primitive service, but they wondered, why just object storage? When we launched Amazon Elastic Compute Cloud (“EC2”) in August 2006 and Amazon SimpleDB in 2007, people realized we were building a set of primitive infrastructure services that would allow them to build anything they could imagine, much faster, more cost-effectively, and without having to manage or lay out capital upfront for the datacenter or hardware.
As AWS unveiled these building blocks over time (we now have over 240 at builders’ disposal—meaningfully more than any other provider), whole companies sprang up quickly on top of AWS (e.g. Airbnb, Dropbox, Instagram, Pinterest, Stripe, etc.), industries reinvented themselves on AWS (e.g. streaming with Netflix, Disney+, Hulu, Max, Fox, Paramount), and even critical government agencies switched to AWS (e.g. CIA, along with several other U.S. Intelligence agencies).
But, one of the lesser-recognized beneficiaries was Amazon’s own consumer businesses, which innovated at dramatic speed across retail, advertising, devices (e.g. Alexa and FireTV), Prime Video and Music, Amazon Go, Drones, and many other endeavors by leveraging the speed with which AWS let them build. Primitives, done well, rapidly accelerate builders’ ability to innovate.
This is one of the key lines.
In the middle of the Target and NPI challenges, we were contemplating building a new set of infrastructure technology services that would allow both Amazon to move more quickly and external developers to build anything they imagined.
That idea to create building blocks to make it easier for other companies to build services on the internet is now a $20 billion a year business.
But let’s go back in time and frame it another way. A new thing called the internet comes along. Amazon is an early adopter in seeing the potential and builds a bookstore on the internet. While they are building their own business Amazon sees an opportunity. They see an opportunity to be the service provider for the next wave of companies coming to build internet businesses (Airbnb, Dropbox, Instagram, Pinterest, Stripe, etc), and so they build a library of technology primitives to make it easier for everyone else.
And we know now how this turns out. That service layer, AWS, ends up being worth more than the online bookstore.
That was the realisation from AWS Summit London.
Interesting but frustrating. Frustrating because I never really understood the full strategy of Primitives and what Amazon was trying to create with AWS. Frustrating because maybe I would have had a better appreciation for how much the stock was going to go up. Frustrating because it’s too late to be figuring this all out now.
Except I see it happening again.
I see a company using the AWS primitive strategy in another space with a new tech stack, rapid user adoption and lots of companies building. They would say their industry is much like the early days of the internet.
Who is this company?