It was early January of this year (2014) and I was on the phone with a guy from Amazon. The conversation was interesting and respectful, but weirdly I was getting agitated.
You know what would really help us? Slash our storage costs so I can take resources off optimizations and put them on helping us grow.
In all fairness, I wasn’t angry at the man on the phone — he was simply checking in, asking about our fundraising plans, seeing how they could be helpful — but there was something that didn’t feel right about the call.
As I thought through how a giant company like Amazon could help my company succeed, it was abundantly clear that they and we could get more leverage from them drastically changing our product’s unit economics, not by them helping us raise more VC money.
Picturelife, a relatively nascent company, will pay Amazon over $1 million just this year. $1 million is a lot of money for a company at our stage, and the way I see it, it’s a million dollars standing in the way of thriving and sending them even more money in the future.
As I sat on the phone, I kept thinking: Just two months prior, Everpix — a promising competitor of ours that raised too little money — died on the vine. Why? According to them: their Amazon bill was too large.
Storage prices always drop and so my plan was to sit back and wait.
Moore’s Law was on our side, I thought, even if it seemed to happen more slowly in the cloud than with PC computing in the 90s. After all, when we started Picturelife we set our pricing with acceptance that Amazon’s costs were high and would only go down slowly. In part, it was our acceptance of this that was leading our business model to succeed where Everpix’s did not.
But this week changed everything.
On Tuesday Google announced dramatically lower prices at their Cloud Platform event in San Francisco.
A day later, Amazon came out with their own announcement, signaling 35% to 65% price cuts for their S3 Standard pricing, putting them nearly in line with Google’s dramatic move the day before.
Shots had fired and two cloud giants were now at war.
Whereas Amazon once enjoyed sole positioning in the cloud computing ecosystem, the speed at which Amazon dropped their prices was telling: Google’s storage and compute platform was now good enough that a major price slash could encourage us to jump ship. And it was. The day of the Google announcement, my CTO and I and fantasized about leaving AWS.
War time is good time
With Amazon now at war with Google, we won’t be thinking about leaving any time soon.
While not everything makes sense about Amazon’s new pricing (how could S3 go down by 65% but Glacier remain unchanged?), the new economics are incredible for companies like ours.
Whereas before we’d try and save tens of thousands a month on storage optimizations, now we can put more resources on enhancing our users’ product experience.
Whereas before I worried that we’d get crushed by a scaling AWS bill, now I feel like we have room in the budget to breathe.
And perhaps most importantly, whereas before I feared our prices weren’t high enough to succeed, and consumers were wary of paying more for our service, now I feel like I have room to reevaluate our pricing and perhaps even pass on the savings to our customers.
The moral of the story is that in these new cloud / storage wars, everyone is a winner.
Innovative companies can spend more time providing an interface between real people and the compute cloud and reserve capital to grow and thrive.
Consumers get better services for less money because developers can spend more time refining products and less time optimizing.
And ultimately Google and Amazon win, because while costs are lower, more people are bought into the pubic cloud.
I’m excited about what this new world looks like, for Picturelife, for our customers, and for Amazon and Google.