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Comment by throwaway2016a | Hacker News Reader

throwaway2016a

As an AWS user I'm a bit disappointed with this. I was hoping their answer would be to cut or eliminated some prices across the board vs just increasing the free tier.

I find most apps are pretty binary. Either they are high bandwidth (like video and backups) or not. If you use 1TB there is a good chance you will use 2TB.

This will certainly make it less likely for the low bandwidth users to get a surprise bill but if you're doing video $85 per TB will get expensive fast. You better make sure your business model can make a profit at those prices. But even then, if the average user pays you $20 a month and only streams 100GB of video you make money but you'd make more money outside of AWS.

It's almost as if AWS wants to active discourage those use cases.

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With reinvent coming up next week, we may not have heard the last of their response to lowering egress fees

Or they want to avoid making pricing more complex than it already is, they do that by significantly marking up egress and using it to cross-subsidize other stuff (like data ingress and internal data transfer), and they've determined that the benefit of that simpler pricing to their other users outweighs the detriment to users with egress-heavy use cases.

I've never operated at Amazons scale so I don't know the wholesale costs involved but at least one estimate puts AWS margins at bandwidth at 99% [1]. And I'm guessing ingress is a fixed cost where they are running nowhere near capacity and that is why it is free. That and they want your data on AWS so they can charge you for storage and when you download it.

I realize business need to make a profit but I don't think AWS is cross-subsidizing. It seems more like there are no loss leaders, they make at least 60% margin on all products (for users not big enough to negotiate rates). They could lower their outbound prices significantly, they just choose not to until the market forces them.

Which is smart business. But I think given Cloud Flare's pressure here, the market is calling for a more aggressive adjustment than just upping the free tier.

[1] https://www.cnbc.com/2021/09/05/how-amazon-web-services-make...

An underestimated chunk of AWSs costs is people. They employ >50k people, and likely have a salary bill of several billion dollars, a significant portion of revenue.

50,000 x 250k = 12.5B

Also, they do cross-subsidize, because many AWS services are either hardly used (CodePipeline) or free (CloudFormation) and the cost to run those services is non-negligible.

Very good point RE people. Running AWS is expensive, I'm sure, but to be clear, I'm not advocating for bandwidth to be free. Just that $0.08 per GB is not competitive.

Also, since CloudFormation is a feature that facilitates creating more resources that you do pay for I'm not sure that is a great example. That is more like saying that the other services subsidize the Web Console. CloudFormation is not a product in-and-of itself, it is more a shared feature that spans product lines.

Code Pipeline is an interesting one in that if it is true it's not widely used and costs more money than it makes, that's a no brainer: shut it down. But there has got to be more to that story why they haven't.

But in any case, with code pipeline there is a clear value chain that ends at ECR/EC2/Lambda/etc. My guess -- and it is just a guess -- would be that someone feels pipeline produces more revenue for EC2 (or similar) and that covers the cost. Or, simply, they have a path for it to be profitable.

You're overthinking it, and Code Pipeline is just one example. As I'm writing this they have close to 300 services!!! Many of them, maybe hundreds of them just straight up lose money.

The Corey Quinn number I keep quoting is that >60% of AWS revenue for large (>100MM) accounts is EC2. That jives with what I hear from people in the industry.

That means that the other 250+ services are splitting less than 40% of AWS revenue....

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