[Asia Economy Reporter Byunghee Park] Andy Jassy, CEO of Amazon Web Services (AWS) and the designated successor to Jeff Bezos, Amazon's Chief Executive Officer (CEO), recently sent an email to all employees of Amazon Game Studios (AGS).
The email was intended to clarify a Bloomberg article and encourage AGS employees. Bloomberg recently wrote an article based on interviews with more than 30 current and former Amazon employees. The article included content stating that Amazon is facing difficulties in its gaming business. It also mentioned that AGS has created a male-dominated 'bro culture' by excluding female employees.
◆ Jassy's email: "Believe in the success of the gaming business" = After the Bloomberg article was published, Mike Frazzini, head of AGS, and Jassy sent emails to AGS employees one after another. Both wrote in their emails that the Bloomberg article was exaggerated and that they acknowledged their mistakes.
According to Bloomberg on the 3rd (local time), Frazzini emphasized in his email that the claim of a macho culture at AGS was absurd and absolutely unacceptable. Jassy included content stating that he would continue to support the gaming business. Jassy sent the email on the 1st. Coincidentally, on the same day, Google announced its quarterly earnings and declared it would exit the game development business.
Jassy wrote, "AGS has not yet consistently succeeded, but I believe if we endure a little longer, it will be fine. Some businesses show results from the first year, but others take several years. Success right away certainly reduces stress. However, when success takes longer, the fruits can often be sweeter. I believe AGS can succeed if it continues to focus on what matters."
Amazon entered the game development business in 2012 at Bezos's request. Frazzini has been the head of AGS for over eight years since its founding. Amazon has invested billions of dollars in the gaming business. However, two ambitiously prepared games failed to perform well, leading to the cancellation of many subsequent game-related projects.
Bloomberg explained that right after Jassy sent the email to AGS employees, his appointment as Bezos's successor was officially announced, which gave Jassy's email even more weight.
◆ MS, IBM, and Amazon leaders are all cloud experts = On the day Amazon surpassed $100 billion in quarterly revenue for the first time in history, Bezos announced his retirement and successor.
Amazon generates enormous profits based on AWS's cloud business. In Amazon's Q4 earnings last year, AWS's revenue accounted for only about 10% of total revenue, but its operating profit share exceeded half. Therefore, Bezos said he fully trusts his successor, Jassy. Jassy also made headlines for receiving a salary about 20 times higher than Bezos's in 2016 (approximately 43 billion KRW).
Jassy, born in New York, joined Amazon in 1987 after completing his undergraduate and MBA degrees at Harvard University. He was an early member who joined the year after Amazon was founded. AWS was established in 2006. Jassy had been preparing the AWS business before then and has led AWS to become Amazon's core business.
The Wall Street Journal (WSJ) introduced Jassy as the person who played a midwife role in transforming Amazon, an online retailer, into a giant in cloud computing. It also explained that Jassy's appointment as Amazon CEO reflects the strengthened status of the cloud business.
Recently, in U.S. IT companies, cloud expertise has become an essential course to become a leader. Satya Nadella, who became Microsoft CEO in 2014, also led Microsoft's cloud business before becoming CEO. Nadella is credited with reviving Microsoft by growing its cloud business. Arvind Krishna, who became IBM CEO last year, is also well-versed in cloud business.
◆ Google also makes large-scale investments in cloud = Amazon is currently the No. 1 company in the U.S. cloud market. Its market share by revenue reaches 34%. Microsoft is second with a 20% share. According to WSJ, the market share gap between the two companies is gradually narrowing. The reason Amazon designated Jassy as the next CEO reflects the intention to solidify its No. 1 position in the cloud sector.
Alphabet, which lags behind in the cloud sector, is making large-scale investments despite losses. Alphabet announced its quarterly earnings on the 1st, reporting that Google's cloud business recorded a $1.2 billion loss in Q4 last year. The annual loss for last year was $5.6 billion.
Google explained that the large-scale investment in cloud was the cause of the losses. Ruth Porat, Chief Financial Officer (CFO), said, "A key reason the cloud business recorded losses is that we are focusing on building the organizational foundation for the cloud business rather than revenue. This will help us pursue the huge opportunities in the cloud market." She added that they are currently focusing on investment rather than expecting immediate results.
Although it incurred losses, Google's Q4 cloud business revenue surged 47% year-over-year to $3.8 billion. The gap with Amazon is large. Amazon's operating profit is similar to Google's revenue. AWS achieved $3.56 billion in operating profit and $12.7 billion in revenue in Q4 last year.
IT market research firm Gartner predicts that the global cloud market size will exceed $300 billion this year.
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