All Things Digital

There was a certain irony Monday when Citigroup analyst Mark Mahaney jacked up his sales forecast for the Kindle, the electronic book reader developed by Amazon.com Inc. (AMZN)

Ironic because in Silicon Valley–the capital of early-technology adopters and the bleeding-edge users of all things geek–actual sightings of the device are quite rare.

Most of the digerati around here are still obsessed with Apple Inc.’s (AAPL) latest 3G iPhone, which still draws lines wrapping around the block. By contrast, the Kindle is so scarcely spotted that whenever tech analyst Rob Enderele uses his, little crowds tend to gather around him.

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Amazon.com (AMZN) shares are sharply higher today, aided by a bullish note this morning from Citigroup’s Mark Mahaney focused on the company’s Kindle e-book reader.

Mahaney today doubled his 2008 unit estimate on Kindle sales to 380,000 from 190,000. He notes that 380,000 is exactly how many iPods Apple (AAPL) sold in the first year. “Turns out the Kindle is becoming the iPod of the book world,” he writes.

Mahaney thinks the Kindle could turn out to be one of the top “gadget” gifts of this year’s holiday gift season. He thinks the company can sell 150,000 Kindles this holiday season.

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Many entrepreneurs today have their heads in the clouds. They’re either outsourcing most of their network infrastructure to a provider such as Amazon Web Services or are building out such infrastructures to capitalize on the incredible momentum around cloud computing. I have no doubt that this is The Next Big Thing in computing, but sometimes I get a little tired of the noise.

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Amazon.com (AMZN) CEO Jeff Bezos has taken a stake in Twitter, the red-hot microblogging service. Twitter announced the move in a blog post Tuesday. Bezos made the investment through Bezos Expeditions, a vehicle for his personal investments. Also investing in the company is venture firm Spark Capital; partner Bijan Sabet will take a seat on the Twitter board.

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Amazon.com (AMZN) has been aggressively rolling out a variety of Web-based services, including on-demand computing power and data storage. Could the company’s next move be to go after eBay (EBAY) subsidiary PayPal’s dominant franchise on online payments?

Cantor Fitzgerald analyst Derek Brown asserts in a research note this afternoon that Amazon “may soon launch a PayPal-esque Payments service for use by consumers and merchants across the Web, potentially siphoning growth and/or profit from eBay’s crown jewel.” Brown says that Amazon could launch such a service as soon as late summer or early fall of this year.

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How I Realized that Amazon’s Kindle and Sony’s E-Reader Were Exceeding Sales Estimates
When the Kindle first launched there was plenty of predictions about how it and its predecessor the Sony Reader would sell. Over time the chatter died down, halted partly by the Kindle going out of stock. At the end of April, the chatter returned and hit full volume after last week’s Book Expo America in Los Angeles. The catalyst was Jeff Bezos’s speech, which let out some tantalizing, yet cryptic, information on e-book sales volume at the Kindle store. The chatter, as reported in the New York Times, has publishers and others speculating that Amazon has sold somewhere between 10,000 and 50,000 Kindles. I think all the speculations are completely wrong. By my calculations, combined sales of the Amazon Kindle and the Sony Reader will be 1,000,000 units in 2008.

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Fifty years ago, in response to the surprise Soviet launch of Sputnik, the U.S. military set up the Advanced Research Projects Agency. It would become the cradle of connectivity, spawning the era of Google and YouTube, of Amazon and Facebook, of the Drudge Report and the Obama campaign. Each breakthrough—network protocols, hypertext, the World Wide Web, the browser—inspired another as narrow-tied engineers, long-haired hackers, and other visionaries built the foundations for a world-changing technology.

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There are two ways to look at Amazon.com: as a retailer, and as a software company that runs a retailing application. Both are accurate, and in combination they explain why Amazon, rather than a traditional computer company, has become the most successful early mover in supplying computing as a utility service. For Amazon, running a cloud computing service is core to its business in a way that it isn’t for, say, IBM, Sun or HP.

In a brief but illuminating video interview with Om Malik, Amazon CEO Jeff Bezos underscores this point in describing the origins of Amazon Web Services. “Four years ago is when it started,” he says, “and we had enough complexity inside Amazon that we were finding we were spending too much time on fine-grained coordination between our network engineering groups and our applications programming groups. Basically what we decided to do is build a [set of APIs] between those two layers so that you could just do coarse-grained coordination between those two groups. Amazon is, you know, just a web-scale application.”

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Today at the D6:Conference, the corporate doyens and business leaders were out in full force, both on and off stage. Those who were grilled on stage showed were true to their form–Amazon’s Jeff Bezos charmed everyone with optimism for Kindle, Yahoo’s Jerry Yang was all emotion and patience, and Mark Zuckerberg of Facebook showed that he is still a young fella brimming with big dreams.

But it was the wily old Fox, News Corp founder Rupert Murdoch who proved to the most charming, candid, amusing, honest and informative at the same time. Candid enough to admit that there isn’t anyone to really compete with him. Honest enough to point out what a mess both Microsoft and Yahoo made out of their deal, and Google is still a great partner. About Yahoo and Microsoft he said: I’m mystified. I can’t understand the whole thing? Neither can we, Mr. Murdoch. He talked at length about the future of media, both on and offline. His responses to a barrage of questions was lucid and refreshingly without corporate speak. He talked about online video, Hulu and future of movie distribution.

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Amazon (AMZN) shares this morning are getting a boost from Goldman Sachs analyst James Mitchell, who added the stock to the firm’s Americas Conviction Buy List, and upped his price target to $98 from $75. “Based on a measured online-offline strategy; Prime, Kindle, and mobile tapping pent-up demand; and share gains in a growing market, we estimate it can sustain 20%-plus/year unit growth over 5-10 years,” Mitchell wrote in a research note this morning.

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If you pan back and look at how people are getting their music these days, you see that the companies fighting for the people who pay for music are battling over an ever-smaller piece of the pie.

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The launch of Google’s App Engine, which allows developers to build a Web application and then host it on Google’s existing infrastructure, is a watershed moment in the software-development industry. The days of building and hosting your own servers, except for specialized applications, are officially over. This is good news. And App Engine will give everyone, including Amazon, a nice scare, which means that these companies will be forced to take a hard look at what they offer today, and what they need to do to improve it.

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Although some people see a reason to buy a device just to read a book, I don’t. Some have said that Amazon’s Kindle is the savior of the e-book market. I don’t believe it. Others say that e-book readers will kill the book-publishing industry and bring it into the 21st century. I think that’s rubbish. The fact of the matter is e-book readers will never have commercial relevance.

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Wednesday morning I read with some surprise in USA Today that Amazon is “No. 2 in digital [music] sales since opening nearly six months ago.” Amazon’s entry into this market last year was an important milestone in the continuing irrelevance of DRM and the overly restrictive and anticonsumer policies that the music industry has foolishly wielded in this new, digital age. But let’s get one thing straight: outside of iTunes, no one sells more music digitally than eMusic, and we don’t plan on giving up that title anytime soon. So how is it, we wondered, that USA Today came to name Amazon No. 2?

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It was a good day for Web workers who build applications. On the one hand, Google released their Visualization API, which provides sophisticated ways to display tabular data with relatively little coding. On the other hand, we have the launch of the Amazon Fulfillment Web Service, which allows anyone to use Amazon’s network of fulfillment centers and packers to ship physical products to their customers.

Taken together these–and other APIs that are already out there, from Google Charts to Amazon S3 and ECC–are making it increasingly possible to build complex real-world Web applications without supercoders. But there’s a threat, too: the more services you depend on, the more points of failure you have, as demonstrated by last month’s Amazon S3 Outage.

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