Amazon Reports

The highlights from the Amazon.com earnings call were pretty impressive and here are highlights from the press release:

• Worldwide revenue grew 41% to $3.26 billion, or 38% excluding the $75 million favorable impact from foreign exchange.
• Q3 2007 revenue benefited by approximately 290 basis points of year-over-year growth from Harry Potter VII sales, plus attachments.
• Media revenue increased to $2.09 billion, up 36%, or 32% excluding FX
  In the North America segment, revenue grew 42% to $1.79 billion. This is the highest growth rate in seven years.
• US segment Media revenue grew 38% to $1.08 billion.
• GAAP net income was $80 million or $0.19 per diluted share, compared with $19 million and $0.05 per diluted share
• The Company sold 2.5 million copies of Harry Potter and the Deathly Hallows worldwide, making it Amazon's largest new product release.
• The Company launched a public beta of Amazon MP3, a digital music store with Earth's biggest selection of a la carte DRM-free MP3 music downloads. Amazon MP3 has over two million songs from more than 180,000 artists represented by over 20,000 major and independent labels.

I found the reports on the growth of their services business to be most profound. The company annouced a development fund for companies or individuals that could build commercial applications using the Amazon web services. Amazon will fund expansion and further development of the best of these applications. Without staring a gift horse, etc. the only limitation is that they application has to work with Amazon services. On the back of this they appear to have really spured the growth of people and companies tinkering with webservices. (I might even have a go). A lot of this growth may be people checking in to look around but regardless the growth in registrations in shocking.

• Over 290,000 developers have registered to use Amazon Web Services (AWS), up 25,000 from the prior quarter.
• AWS also launched a limited beta version of the Amazon Flexible Payments Service (FPS). Amazon FPS is the first payments service designed from the ground up specifically for developers, and provides unprecedented flexibility in the movement of money through a set of web services APIs.
• AWS recently introduced several new compute instance types for the Amazon Elastic Compute Cloud, which provide up to eight times more memory, CPU, and storage, enabling developers to support an even broader set of applications. Amazon Simple Storage Service (S3) continues to be rapidly adopted by developers, and objects in storage have doubled to more than ten billion during the last six months. In addition, we have instituted a Service Level Agreement for Amazon S3 that guarantees operational performance levels.
• On the earnings call, Bezos had this to say about webservices:

Obviously if you're building web scale applications, in many cases you have to be able to charge people for things. The Flexible Payment Service is the first payment service specifically designed from the ground up for developers, and it has a lot of features that make it very flexible and easy to use for developers to incorporate payments into their own applications.So that set of services that we're offering to developers is growing very, very rapidly and has gotten an unusual amount of traction. We are very, very gratified to see this early uptake in the development community. It's happening at the very small scale with small software developers; one-person and two-person shops. It's also happening at the middle scale with venture capital-funded startups; and then at the large scale, with enterprise customers all the way from the small up to the big. So it's a very exciting and new product offering. These infrastructure services are things that we needed to build for ourselves in order to run the web scale application called Amazon. While we were in the process of building these things, we decided to build them in an external way so we could charge for them and turn them into a new profit center.

Looking forward to the full year the company stated:

• For Q4 we expect net sales of between $5.1 billion and $5.45 billion, or growth of between 28% and 37%. This guidance anticipates greater than 300 basis points of positive impact from foreign exchange.

Lastly in response to questions on the earnings call were the following:

• A question on Gross Margin: :In terms of gross margins, yes, Harry Potter is having an effect. It was slightly less than a contribution profit breakeven event for us. You should assume that's a lower gross margin than our average, so it is bringing it down."
• A question regarding the legal challenge to 1-Click. Bezos: "In terms of 1-Click, we have a longstanding practice of not talking about such matters outside of our public filings. You should refer to our public filings."
• A question on the Borders web store collaboration that is ending: Bezos "Re Borders: I don't really have any comments on any specific contracts."