— This is the script of CNBC's news report for China's CCTV on September 19, Tuesday.
Overnight, tech-heavy NASDAQ closed slightly up. Clearly at 2pm, we can see technology stocks coming under pressure, once declining to the negative territory before getting a pick up to the green. Analysts believe that this happened because of Amazon. Yesterday,
Public cloud market leader Amazon Web Services on Monday said that on Oct. 2 it will start charging its customers by the second for use of its popular EC2 virtual slices of servers in its data centers.
This price adjustment will then help enterprises to reduce cloud computing costs.
As we know AWS is the main driver of growth for Amazon. It fetched Amazon a $4.1billion revenue, an increase of 42% and a $916 million, an increase close to 28%, in the second quarter of this year. In that quarter, Amazon had 30.3 percent of the cloud infrastructure services market, according to Canalys. In contrast, Amazon's two major competitors Microsoft and Google, only stood at 13.8% and 5.8%, respectively. Indeed, Amazon is the clear leader in this market space.
Since AWS became available in 2006, it has been charged by the hour. Then, in 2013, Alphabet's Google introduced this service charging it by the minutes, after a 10-minute minimum. Soon after, Microsoft followed and launched a pay-per-minute service. Now Amazon is hitting back, one of the most major adjustments to date as it begins to charge
And this time, Amazon's hitting back, which can be said that to be the most granular in history. Not only does it charge by the second, it only needs a minimum of one minute. This is similar to the strategies that Amazon has always been using which remaining price-competitive to capture the market. It is clear that with this, Google and Microsoft's share will take a hit but not only that, Amazon's strategy is going to put pressure on the profits of the entire technology industry. As such, after Amazon's announcement, Nasdaq fell right after Amazon's announcement of the new price strategy.
Alphabet, rose 0.15% in early trading, down more than 1% in afternoon trading but ended down 0.59%. Similarly, Microsoft rose more than 0.8% in early trading, but closed down 0.2%. As this new strategy was interpreted as a price war, Amazon's share price also fell more than 1.2%.
Analysts believe that price cut is Amazon's way of competing with Microsoft, Google and other cloud service providers. Other approaches include the creation of more data centers around the world and the introduction of new services. Will Google and Microsoft respond by launching per-second charging? We will continue to keep watch but one thing for sure is that competition within the cloud service industry has become increasingly intense Google and Microsoft will take this response and had to launch pricing in seconds, we also need to continue to observe, but one thing is certain that the technology giants from the cloud service industry competition has become increasingly intense, even resorting to pricing to compete for market share. In such an environment, businesses and users will emerge as the biggest winners.