Introduction to AWS and Amazon Separation

One prevailing question in the tech industry is whether AWS should be separated from Amazon. Critics argue that AWS' business suffers from competition from the core Amazon operations. As a seasoned SEO professional with a focus on optimizing content for Google, let’s delve into the nuances of this argument.

Market Competition and AWS Performance

Many believe that separating AWS would unlock new business opportunities for both entities. For instance, the recent competition between AWS and Amazon’s other services has led to an erosion of business in certain sectors. Apple, Walmart, Netflix, and other companies that sell products or services might become direct competitors through their own AWS-esque offerings, funded by the very company they compete against.

Speculation abounds regarding the potential value of AWS. Some industry experts estimate that a standalone AWS could be worth between 200 and 400 billion dollars. This valuation hinges on the belief that AWS operates as a robust, standalone entity with the potential to attract more business once it is no longer crowded by its parent company's offerings.

Investment Case for Splitting AWS

Supporters of a split believe that AWS could thrive more independently. One prominent argument is that AWS could corner the market and raise prices significantly. However, with fierce competition from Google and Microsoft, it remains unclear whether AWS can achieve this.

Additionally, critics highlight that Amazon currently faces a cash shortfall, making it difficult to justify continued investments in AWS. This viewpoint is supported by the reduced rate of price cuts in AWS, which either reinforces the argument or might be a mere coincidence.

Historical Context and Estimation

AWS’ value is not just a matter of speculation; it has a historical context. Four years ago, Heroku fetched a significant sum of money (about 212 million to Salesforce), making it reasonable to estimate that AWS, which was likely 20-30 times larger at the time, was worth around 4-6 billion dollars.

Meanwhile, with Amazon's massive growth in cloud computing, the value of AWS has escalated. By accounting for a growth rate of 10% each year, it is plausible to estimate that AWS is now valued around 60-100 billion dollars or even more. Many startups and established companies rely on AWS, contributing to its higher valuation.

Critical Analysis and Market Outlook

While the valuation of AWS is a subjective assessment, it is crucial to examine the market from an investor's perspective. Some might argue that the public cloud market is smaller than believed, which could lead to cost efficiencies. However, this scenario might be a worse outcome than a cash-negative growing business.

For detailed data sources and methodologies, my blog post at the end of the year will document this analysis using publicly available information. This approach aims to provide a comprehensive view of the cloud business, although even the best assumptions are subject to uncertainty.