Amazon's Less Is More

And while the services are just getting off the ground, they could soon generate some serious cash, given the rise of a new generation of ambitious, bandwidth- and computing-hungry smaller companies. Take ElephantDrive, a startup that offers users unlimited amounts of storage -- a proposition obviously heavy on server space. S3 is on the spot for ElephantDrive, which has seen the amount it spends on the service grow 355% a month since October, according to Michael Fisher, the company's CEO.

Meanwhile, Powerset, a high-profile search startup that aims to outdo Google(GOOG Quote) by offering search that understands natural language, is a huge consumer of Amazon's EC2.

While Amazon is now the first tech company to take advantage of the enormous amounts it spends on its own tech infrastructure, it was in many ways among the least likely. Giants like Google, Microsoft(MSFT Quote) and Yahoo!(YHOO Quote) have more technology firepower than the Internet retailer. "We were waiting for Google or Microsoft maybe -- sitting there thinking, 'Any day now'," says Fisher. "Then the S3 press release came out, and we called Amazon that day saying this is exactly what we are looking for."

But necessity may be the mother of invention in Amazon's case. While Google and Microsoft's tech reserves eclipse those of Amazon, they're not under the gun to stretch tech spending in the same way. For example, while concerns have been raised about Google's rising tech spending, CEO Eric Schmidt waved them off by crediting Google's blowout quarter to the performance made possible by those investments.