Benner on Tech: Amazon Shows Cloud Clout

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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Amazon finally broke out quarterly financial results for Amazon Web Services, the division that rents computer power, storage and software in the cloud; the numbers confirm what we’ve known all along -- AWS is far ahead of rivals like Google and Microsoft, and it’s a big, dominant cloud business.

Bloomberg reports that AWS had nearly $1.6 billion in first-quarter sales revenue, up 49 percent from a year earlier. The division had operating income of $265 million, which offset some of Amazon’s losses in other units. Bloomberg’s Jack Clark writes: “A recent note by Karl Keirstead, an analyst at Deutsche Bank AG, pegged AWS sales at 10 times those of Microsoft’s cloud services.” 

Last year I predicted that Microsoft and (if it wanted to make cloud services a focus) Google could really dent AWS’s business because those companies are so cash rich. They had lots of money to throw at the problem, whereas Amazon runs on super tight margins and has a smaller cash load. And Microsoft has pre-existing and valuable relationships with business customers. Essentially, I thought that Microsoft would buy itself into a leadership role because the cloud was obviously becoming hugely important, and AWS seemed to be like a big money maker.

But I underestimated AWS. It has so far maintained a big advantage. Clark and Bloomberg’s Ashlee Vance explain that AWS achieved a dominant position by appealing to developers, rather than CIOs. You should check out the whole story here.

That doesn’t mean AWS will always dominate the space. Alibaba may pose a real cloud storage challenge to the company. Its Aliyun cloud computing service has 1.4 million customers, vs. 1 million for AWS; plus, it’s embarking on a global expansion plan.

Amazon’s overall revenue and earnings per share beat Wall Street estimates.

Comcast-Time Warner Is Dead, Part II

Bloomberg got the scoop that Comcast has decided to walk away from its $45.2 billion deal to acquire Time Warner Cable amid pushback from regulators that created a 14-month-long deal process. Comcast, which won’t have to pay a break-up fee, likely found it easier to walk away than to continue to appeal to FCC and Justice Department attorneys who were leaning toward voting down the merger. The company has spent more than any other on Washington lobbying efforts, and its Chief Executive Brian Roberts has gone golfing with U.S. President Barack Obama. But, as Bloomberg points out, none of that mattered to regulators in the end. The New York Times notes that once the merger stopped being about cable television and started being about broadband access, the deal started feeling a whole lot less inevitable.

Weekend Reading:

** Inside the decade-long journey to take Box public. (the Wall Street Journal)

So much venture-capital money is sloshing around that firms can wait longer to go public than during the last tech boom. Each funding round helps companies grow but erodes their founders’ ownership and power.

** How a decade of YouTube changed the future of television. (Time)

But just as television was starting to adapt to YouTube, with networks treating the site as a sidebar, the viewers started treating it more like a public access station.

** YouTube is upending the Hollywood star-making machine. (CNET)

These stars might be nobodies to many viewers over 25, but that won't last long. Baffled by how to reach the most coveted and commercially influential audience -- 16- to 34-year-olds -- Hollywood's biggest players are starting to back these invisible celebrities.

** Bitcoin’s male domination could be the currency’s downfall. (Fusion)

The lack of women in Bitcoin isn’t just an issue of equality. It’s a fundamental weakness of the currency itself. As long as the Bitcoin community is dominated by men geeking out about the blockchain, it’s never going to be able to make the human connections that are required for widespread adoption.

Earnings Roundup

Google reported quarterly profit and sales that fell short of estimates, but it kept costs down and ad volume gains soared. (Bloomberg)

Microsoft’s quarterly profit beat analysts’ estimates because growth in cloud software sales and some server programs offset slowing demand for PC-related products. (Bloomberg)

Pandora first-quarter earnings report beat Wall Street’s expectations, but the company’s active listener count fell from the previous quarter. (TechCrunch)

Ventureland

Xiaomi is turning to India with the launch of its new Mi 4i phone. (the New York Times)

Shorting private stocks would be good for the tech sector. (the Information)

Kleiner Perkins will waive the legal fees it could bill to Ellen Pao if she promises not to appeal her gender discrimination case against the firm. (the Wall Street Journal)

People and Personnel Moves

Sara Adler has joined Airbnb as head of corporate development. Adler previously worked at Dropbox in a similar role. (TechCrunch)

Nikesh Arora has brought a Silicon Valley pedigree to SoftBank as the Japanese company ramps up its venture deal-making machine. (the Wall Street Journal)

Eric Schmidt’s family office bought the 20 percent stake in the $36 billion hedge fund D.E. Shaw that was part of the Lehman Brothers estate. (the New York Times)

Companies

Check out this Apple Watch teardown. (iFixit)

Facebook is testing out a new notifications tab for mobile users that acts more like a centralized calendar. (Mashable) The company has signed up seven media partners such as Vice and Disney’s "Oh My Disney" digital to help marketers develop sponsored content for Facebook. (Variety)

Twitter is trying to cut down on all the noise with a new feature called Highlights.

Security Watch

The Pentagon is trying to deter cyberattacks by laying down ground rules for when cyberweapons can be used and naming countries that present the greatest threat, such as China, Russia, Iran and North Korea. (the New York Times)

Media Files

Cablevision is offering cord-cutter-friendly content packages. The company’s slimmed-down options start at $44.90 a month, which includes ultrafast broadband. (the Wall Street Journal)

News and Notes

India’s e-commerce boom won’t be anything like the one we saw in China. (Quartz)

The EU is thinking about creating a new regulator to oversee Internet companies to curb the perceived economic threat posed by companies such as Facebook and Google. (the Wall Street Journal)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Maria Lamagna at mlamagna@bloomberg.net