It’s a bargain hunter’s dream: the ability to stroll through any store in the country and check your cell phone or handheld computer to see if you can get better prices. Since 2002, former Microsoft executive Dave Anderson has been helping shoppers do just that, by pulling prices out of Amazon.com’s servers and pumping them into the handheld devices to his online business, ScoutPal.
MicrosoftDoes Amazon mind being pitted against every retailer in the land in this way? Hardly. For almost three years the online retailing giant has encouraged innovation by opening up to outsiders like ScoutPal through its Amazon web services program. Amazon benefits because the service drives additional traffic to the main site, provides more inventory, and boosts the number of Amazon purchases.
The program has grown fast. Since Amazon launched in 1994, it has received a steady stream of requests from outside developers to “open up a little,” says Jeff Barr, Amazon web services product manager. Developers had to “scrape” information from Amazon’s web pages. But this isn’t efficient, since Amazon’s web pages are always being updated.
That changed with the July 2002 launch of Amazon’s web services program, which gives programmers consistent hooks into Amazon’s back-end systems based on eXtensible Markup Language (XML), an open, web-friendly data standard. The program has been a hit: the number of developers has grown from 25,000 in the second quarter of 2003 to the current 65,000.
Developers who use the service say that it provides an additional revenue stream for them. Within Amazon’s web services ecosystem there are associates who link their web sites to Amazon and receive a commission for the purchases, companies that create software programs that make e-commerce more efficient, and users who build tools that help sellers increase efficiency. “One of the things that we see is there is a ton of great innovation and creativity out there,” says Mr. Barr. It doesn’t hurt that Amazon’s platform is also free.
In turn, the web sites and businesses that were born from Amazon web services have driven more traffic to Amazon’s site. Mr. Barr won’t say how much Amazon has invested in the program, or how much it has made from it. But clearly, the program has benefits for Amazon. For example, WWWinkazon allows customers to search for Amazon products by highlighting text on Amazon’s entries. Businesses receive a commission of anywhere from 4 to 10 percent from the items sold on Amazon, and Amazon gets a boost in sales.
Nevertheless, Amazon is choosy about what pieces of its platform it exposes through web services. To date it has made available the catalogue, shopping cart, and a handful of other features. “We make sure each different service has a business model to go along with it,” says Mr. Barr.
Mr. Barr says Amazon will begin charging for its new feature,Alexa web information and the Simple Queue Service.It has not announced plans to charge for other services in the future. “We want to make sure each service has a legitimate reason to exist,” Mr. Barr says.
ScoutPal’s Mr. Anderson says he might not use Amazon’s web services if he had to pay. “It would be a bad decision on [Amazon’s] part. It’s just peanuts to them, and it would just stifle innovation,” he says. Bargain hunters everywhere may be disappointed, but it’s hard to argue that Amazon’s web services haven’t been a steal.