Amazon's New Service to Rain Content From the Cloud

Amazon (Nasdaq: AMZN) pioneered the magic in e-commerce by allowing people to shop for books and music online. Its latest business moves, however, have involved building an infrastructure that allows companies to weave their own Internet spells for customers via online storage, Web services and cloud computing.

Thursday's announcement of a new Amazon content delivery service is another step in CEO Jeff Bezos' strategy of branching out into business-to-business solutions while providing new technology platforms that can attract developers to the company stable. The service ties into its existing S3 storage platform and Amazon Web Services suite of applications, and customers will be charged on a pay-for-what-you-use basis.

In a blog post titled "Expanding the Cloud," Amazon Chief Technology Officer Werner Vogels said the new service "will give developers and businesses the ability to serve data to their customers world-wide, using low-latency and high data transfer rates. Using a global network of edge locations this new service can deliver popular data stored in Amazon S3 to customers around the globe through local access."

The service is expected to be officially unveiled by the end of the year. It is now being tested by private beta customers.

Competing With Akamai and Limelight

Amazon won't initially provide any competition for the top names in the content delivery space, Akamai and Limelight, according to Dan Rayburn, principal analyst for Frost and Sullivan and the author of the "Business of Video" blog. "It will offer HTTP delivery only," Rayburn told TechNewsWorld. "It's not going to support streaming live broadcasting, not going to have transcoding, it won't be able to do proxy streaming. It will be very limited in terms of functionality."

That said, the new service will still be able to target small-to-medium sized businesses, along with a few large companies, that have basic distribution needs. "The margins are very small on content delivery networks. The way they'll do it is based on scale and volume, and who better to be able to scale and offer very cheap rock-solid service than Amazon? That's what they do already with Amazon Web Services."

The regional service providers who operate on a second tier under Akamai and Limelight, however, should be worried about the new Amazon offering. "They're going to be eaten alive because they're not going to be able to compete at the same price point. They'll have to sell customers on professional services, customer service."

Potential Turbulence for Amazon's Cloud Initiative

Rayburn, who started one of the first streaming media companies in 1996 and writes several blogs about the content delivery network business, released a Frost and Sullivan report in August that projected global video CDN revenues of US$400 million for 2008. That number is projected to grow to more than $1.4 billion worldwide by 2012, so Rayburn believes Amazon is positioning itself in the right business segment.

However, Amazon's new storage service suffered technical issues during the summer. "We've seen outages on the S3 service," Rayburn said. "If you're going to do this, it's even more important to have no downtime. The last time you heard about Akamai having a network outage was over three years ago."

Vogels' blog posting promises robust worldwide service in an easily-delivered manner. "You store the data you want to distribute in an Amazon S3 bucket and you use this API (application programming interface) call to register this bucket with the content distribution service," Vogels writes. "The registration will provide you with a new domain name that you can use in url's to access the data through this service with HTTP. When your customer accesses your content through your new url the data it refers to will be delivered through a network of edge servers."