So when you think of Amazon, you probably think of this ugly website or maybe Amazon buying Whole Foods and making avocados cheaper. But Amazon also sits behind ahuge portion of the internet.
It dominates the server side computers that make the internet work. Right now, you’re probablywatching this video on a computer or a phone.But when you click “play,” it isn’t just your computerthat’s doing the work. There’s another computersomewhere out there in the world that’s sending the video to you, playing it along with youfrom hundreds of miles away. And a lot of thosecomputers are run by Amazon. Most people online haveno idea they’re there.
You only see them when youlook at the big picture. So what do those computers look like? They mostly look like this, a loud room with a ton of server racks. But while you mightexpect that Apple servers are run by Apple and Netfix’sservers are run by Netflix, the reality is weirder. See, if your servers arejust all in one room, then any network problem between you and the rest of the internet can bring down your whole system.
So you want to give people as many ways to reach your website as possible, which means a wholeconstellation of servers all around the world. That’s where host networks likeAmazon Web Services come in. AWS has dozens of datacenters in strategic points all around the world. It’s a kind of secondaryinternet that’s completely controlled by Amazon. If someone in Chicago wantsto watch Stranger Things, and the Ohio fiber is tied up, they can get it from Oregon. If Oregon’s tied up, theycan get it from Quebec. You’ve probably heard of cloud computing, and this is what it means. It’s not some abstract cloud; it’s just a bunch ofwarehouses full of thousands of servers networked together and rented out piece by piece.
You can buy a big piece,like Netflix and Apple, or a tiny piece for a singlewebsite or piece of code. That flexibility has made AWS one of the biggest forces on the web, controlling as much as 40 percent of the programs running in the public cloud. When you take that 40 percent away, the internet starts tolook really different. Want to watch Netflix? Too bad, it’s gone. Same thing with Uber, Expedia, Yelp, Pinterest, and tons more. This isn’t just hypothetical.
AWS still has regional blackouts sometimes if the system gets misconfigured. They’re usually fixedwithin an hour or two, but while it lasts, you’restuck with companies like Facebook and Googlethat are big enough to build their own server networks. So how did Amazon end upowning most of the internet? Through the ‘90s, Amazon’s web team was just devoted to making sure amazon.com loaded fast and didn’t go down.
They got good enough that in 2000, they started to sell thatsystem to other companies. So if Target or Walmartwanted to get into e-commerce, Amazon could build them an online store using the same technology. From there, the services kept getting more basic and fundamental. AWS officially launched in2006 just storing files.
A few months later, theylaunched the ability to run programs remotely. They just kept growing,adding more features and data centers and users until it became the monster we know today. It’s hard to say how anonline store ended up dominating the servermarket while competitors like Oracle and IBM fell away. But the simple answer isthat while other companies got good at making dealsand filling contracts, Amazon treated server timelike any other product, making it as fast, cheap,and fluid as possible.
Now, cloud computing isstill really competitive. Microsoft’s Azure serviceis nearly as big as Amazon, and Google’s in there fightingfor more business, too. But AWS is still basicallythe gold standard, and it’s become a reallyprofitable business for the company. In the first quarter of this year, AWS brought in $7.7 billion in revenue, roughly half the company’s profit.
So what does Amazon dowith all that money? Well, the nice thingabout being a massive multiprong company is that you can use profitable parts of thebusiness to funnel money to other parts that are still mature. For Amazon, that means growingservices like Amazon Prime or launching new productsunder Amazon Basics, which can be priced so cheap that they drive competitorsout of business. That’s kind of awkward for Netflix, which is indirectly funding Amazon’s competing streamingservice under Amazon Prime.
But it seems like it’s worked out so far. When Amazon bought Whole Foods in 2017, that same dynamic was on full display. Whole Foods is alwaysgoing to be more expensive than your local grocery store, but Amazon lowered prices up front to reel customers in. And because they had billions of dollars pouring out of the server business, they could afford to.
What does that mean for you? Well for one, it meanswhen AWS does go down, most of the internet just disappears. But as long as it keeps working, Amazon’s basically printingmoney and pouring it into other Amazon products, which means your Netflix binge ends up making your avocado a little bit cheaper. Thanks for watching. If youwant to know more about Amazon and their strangleholdon the avocado industry, we have a whole othervideo about their attempt to start a headquarters in New York that ended up not working out.