☁️ From 0 to $70B ARR: The AWS Profile
☁️ From 0 to $70B ARR: The AWS Profile
10 Product Growth Lessons from a Giant
In 2002, Amazon launched a side business with little fanfare: cloud infrastructure as a service. 20 years later, it now makes over $70B in annual revenue. It’s a huge business. In fact, AWS’ hefty profit represents well over 50% of Amazon’s total.
It is Amazon’s crown jewel. In a conglomerate full of great businesses, it is the best. One of AWS’ first leaders, Andy Jassy, has now become the CEO of Amazon itself.
So, you’d think AWS was a well-known story. It isn’t. Most of my family members who I chatted with while writing this piece had never even heard of it.
By comparison, Coca-Cola did about $40B of revenue in 2021. AWS is on track for nearly double Coke’s revenue, yet operates in the shadows. Even tiny $4B revenue Zoom is more well known.
Moreover, what has been written about AWS’ history is hilariously wrong. TechCrunch and most other major publications write that AWS began in 2003 after Andy Jassy’s conceptualization of an ‘Internet OS.’ They then say the service itself was launched in 2006.
Both “facts” are completely incorrect. The breadcrumbs of the internet, aided by sites like the Wayback Machine and technology like caching, never disappear. AWS first launched in 2002 and was led by Colin Bryar.
For a business that is doing over $70B in annual revenue, the lack of a lucid and correct history of the company is baffling.
But that’s why I write the Product Growth newsletter, to tell the product stories of today’s most significant technology businesses. Like we did with Stripe, PayPal, Coinbase, and Kayak, we’re going to set the record straight on the product vision, strategy, and roadmap that AWS used to conquer an industry.
I am paritcularly excited to present a collaboration with Ruchin and the team from the Top of the Lyne this week. They write one of the best newsletters on product-led growth and themselves just raised a $15M series A from Sequoia. There’s no better group of guys to analyze AWS.
We have spent the last four months going deep to get you the real history and product lessons from the giant, with a likely $500B+ enterprise value. So let’s get into it.
Lesson 1: Productize Your Strengths
In 1998, Amazon was still a young company. Started 4 years earlier, the company had grown meteorically. But in such a whirlwind of growth, the company perennially planned for the next year - not the next ten. Thinking so far ahead was not even realistic.
As a result, the codebase was mostly a mess. Changes to the codebase to add new features like video streaming took far longer than they should have, because the monolithic application was originally built for the retail business. The company was hiring more engineers, but was not able to build things faster.
One business unit that acutely felt these frustrations was Amazon’s new e-commerce service, to be known as Merchant.com. The way everything on the site was built into a single monolith had become too much to support development.
As a result, an internal engineering document was created and widely circulated, “The Distributed Computing Manifesto.” It became legendary. And the initiative picked up steam. APIs worked to drive a smoother development environment for Merchant.com. They helped with both the speed and difficulty problems.
Specifically, the service architecture represented three key evolutions:
The microservices architectural pattern
One to one database to microservice mapping
Enabled each team to release independently
These evolutions were so dramatic and valuable that by the year 2000, the whole company committed to them. Amazon made the conscious shift to become a “services company,” with a well-documented set of APIs.
Amazon built these API-access systems leanly and efficiently. Under Bezos’ leadership, in which frugality was a core value, these internal services were built with considerable cost advantages compared to alternative options.
The company’s success in developing such a great option for internal teams led to the company testing the external market. In March 2002, led by Colin Bryar, the company released its first AWS product. It was targeted at affiliate marketers. The SDK (software development kit) allowed them to query extensive data about Amazon’s product catalog.
The product was an instant success. Interest from developers was immediate - not just affiliate marketers.
Literally hours after releasing this feature, I knew that we were onto something big and that our experiment would far exceed our expectations
Colin Bryar
Developers across the world were using the web service to develop new web sites and applications. One site quizzed users on the subject of cover art. Another, the whimsical baconizer.com, mapped the connections between any two items in Amazon’s catalog.
AWS’ first feature became a rich service for media sites.
Lesson 2: Work Backwards
While the affiliate service was a hit, that product is no longer even available. It was the feature that started AWS, but not the feature that would grow it. For that, the Amazon leadership had to return to the key tenets of Bezos’ philosophy, now enshrined as a leadership principle: work backwards.
The process of working backwards starts with a fundamental insight. Customers always want more. As Jeff puts it, “Customers are beautifully, wonderfully, dissatisfied.”
Working backwards emanates from this epicenter of dissatisfaction. First, the locus of customer dissatisfaction is clearly defined. Second, the team works backward to invent on the customer’s behalf. Finally, three core artifacts are created:
A Press Release - announces the product that addresses the pain point. Drafted iteratively until it’s convincing enough for the product to be truly sellable.
An FAQ doc - a supplementary document that accompanies the PR release and answers predictable questions from internal stakeholders and potential customers.
A visual representation of the customer experience that distills drives home an endpoint to innovate towards.
The AWS team completed these three in real-time. In July of that year, the team released one of Amazon’s famous press releases. It’s one of those rare product artifacts we as external observers get to see.
What’s remarkable about this press release is how the first two paragraphs encapsulate the vision of AWS for 20+ years to come:
Today Amazon.com (Nasdaq: AMZN) launched its first version of "Amazon.com Web Services," a platform for creating innovative Web solutions and services designed specifically for developers and web site owners.
By using Amazon.com Web Services (www.amazon.com/webservices) developers can build applications and tools that will allow them to incorporate many of the unique features of Amazon.com into their web sites -- free of charge.
It’s proof that in 2002, the AWS team was already working backward. It identified that the affiliate feature was just the “first version,” of a future platform for developers to incorporate the unique features of Amazon into their own websites.
Working backward is deceptively simple. But it forces clarity and helps prevent building for building’s sake (“the build trap”.) For AWS, it narrowed the team’s field of vision to solving real customer needs. Inc. Magazine has gone so far as to call working backward “Amazon’s Secret Weapon.”
As a result of this working backward process, the initial AWS product continued to grow in usage throughout 2002 and 2003, demonstrating the market demand for similar services. Amazon executives noticed the success of both the distributed computing manifesto and AWS.
At a retreat at Jeff Bezos’ house in 2003, the executive team conducted an exercise to identify their core competencies. Infrastructure as a service rated particularly highly. They realized Amazon had gotten particularly good at running reliable, scalable, low-cost infrastructure.
So they decided to invest more in the Affiliate feature to try and build a full-fledged AWS initiative.
To get the rest of the AWS story, smash that red button: