Amazon Quote by Stephen O’Grady
““By combining software with another, more readily monetized product — services, in this case — Amazon is able to efficiently extract profit from a growing, volume market. What’s more impressive, however, is that because Amazon is building primarily from either free software (in the economic sense) or software it developed internally, it is paying out minimal premiums to third parties for the services it offers. Which means that not only is AWS a volume business, it may be a high-margin business at the same time. Amazon does not break out its AWS revenues, so we’re forced to rely on estimates, but UBS analysts Brian Fitzgerald and Brian Pitz projected in 2010 that AWS’s margins would grow from 47% in 2006 to 53% in 2014. Last year, Andreas Gauger, the chief marketing officer for Amazon competitor ProfitBricks, estimated Amazon’s margins were better than 80%.””
About This Quote
Source Article: "Amazon’s Cloud Business Model" by Stephen O’Grady, 2010
Amazon leverages free or internally built software to pair with services, creating high‑margin, low‑cost cloud revenue.
In simple terms: Free software + services = high profit.
Key Takeaway
Leverage low‑cost tech for profit.
Themes
strategy
profit
cloud computing
Mood
analytical
critical
Type
business
strategic
When to use this quote
- startup financing
- enterprise IT
- tech investment
Key Concepts
margin optimization
platform economics
Questions to Reflect On
- Can this model sustain long‑term?
- What risks exist for low‑margin services?
A Different Perspective
Relies on proprietary tech; competition may erode margins.
