Where Does Amazon’s Profits Really Come From?

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The world’s largest electronic commerce company Amazon actually earns its greatest profits through a different subsidiary company, and not through its commerce business. The subordinate company is none other than Amazon Web Services, which offers a suite of cloud computing services that make up an on-demand computing platform. The Asahi Shimbun, a national newspaper of Japan, mentioned on the 28th that Amazon Web Services (AWS) accounts to more than 70% of the entire organization’s profits.

According to Amazon’s income statement for 2016 reported this February, the group’s total profit was about 4.1 billion USD. This is the greatest amount of profit Amazon has ever recorded. AWS accounts to 74% of the entire profit, which is about 3.1 billion USD. On the other hand, Amazon’s online commerce business only makes up one-third of AWS’ profits, making it about 1 billion USD.

AWS aims to provide large computing capacity quicker and cheaper than a client company building an actual physical server farm, making it a very reliable and popular data analysis system. It holds 33.8% of the entire cloud-computing systems market share, making it the leader of this business. Its market share is greater than the combined market shares of Microsoft, IBM, and Google. AWS not only has private organizations such as Airbnb as its major clients, but also government organizations such as the CIA or NASA.

Sushiro, Japan’s conveyor belt sushi restaurant, also uses the AWS system. Customers enter the number of adults and children on a touch panel at the entrance, and that data is used to predict the amount and type of sushi ingredients to be used. This is to prepare sushi before any order comes in, and this also helps reduce the amount of leftover food.

During an interview with Asahi Shimbun, AWS’ CEO Andy Jassy mentioned, “This business first started in the early 2000s when Amazon decided to provide its internet commerce system to logistic corporations. We developed a system to correspond with the rapid growth of our online commerce business, and changed that system into another business of its own.”

Original article available on http://www.koreadaily.com/news/read.asp?art_id=5125262

By Sang-jin Kim

Translated by Ellen Kim