Jeff Bezos: AWS is a $10bn business made possible by failing frequently
Amazon CEO Jeff Bezos tells shareholders AWS was born from a willingness to take risks.
Amazon Web Services (AWS) is growing faster than Amazon did and is also larger than its e-commerce parent was at the same age, according to Amazon CEO Jeff Bezos.
In just over 10 years, AWS has grown into a business that will reach annual sales of $10bn, Bezos said in his annual shareholder letter for 2015. Despite AWS being on track to hit this financial milestone in 2016, Bezos emphasised that the company would continue to focus on customers, rather than Wall Street and short-term profitability.
For AWS to hit the $10bn mark, its earnings would need to rise. Amazon revealed in its recent fourth quarter update that AWS sales had reached $2.4bn, a quarterly performance that would put it on track for annual sales of $9.6bn in 2016. However, AWS has demonstrated rapid growth in recent years, just two years ago it was a $5bn business. Besides Microsoft and perhaps Google, there are few companies that can come close to toppling Amazon as the leader in cloud computing market.
But Amazon has faced criticism over profitability and failed projects, such as the recent Amazon Fire phone.
Bezos defended the company's record on both issues, holding up AWS as the payoff for being willing to gamble big, fail frequently and buck conventional wisdom.
"Many characterized AWS as a bold - and unusual - bet when we started. 'What does this have to do with selling books?'. We could have stuck to the knitting. I'm glad we didn't. Or did we? Maybe the knitting has as much to do with our approach as the arena. AWS is customer obsessed, inventive and experimental, long-term oriented, and cares deeply about operational excellence," he said.
Indeed, AWS' operating income of $687m in Q4 2015 was more than it made during the whole of 2014. Bezos boasted that in the 10 years since starting as a cloud storage service in the US, it now had 33 availability zones in 12 regions worldwide, with more to come. The company also added 722 new features and services to AWS last year.
"I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins," Bezos said.
"Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you're still going to be wrong nine times out of ten."
Bezos added that AWS data centres had reached 25 percent sustainable energy use in 2015 and it is on track to reach 40 percent by the end of 2016.