One thing Citi analyst Kevin Mahaney didn’t know about earlier this week in his very optimistic sales estimates for the Kindle: Jenifer Aniston is apparently a fan. At least, that’s what it looks like in the picture above published by US Weekly (that is the first time and also the last time that publication will be mentioned here on TechCrunch, promise).

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Amazon has taken a special interest in one of its web service customers: Animoto, the machine-driven music video creator that launched last August and now has over 160,000 users. The online retail giant has decided to fund the startup with an undisclosed amount of money.

Animoto takes photo and music files from users and essentially turns them into souped up slideshows with background music that synchronizes with effects and transitions. The service uses Amazon’s simply queue, S3 and EC2 to store the requisite files and process the videos.

Cloud computing has been so vital to Animoto’s operations that Jeff Bezos even used the company as example of how well EC2 helps web apps scale when their traffic hockey sticks (in Animoto’s case, when its Facebook app took off last month).

To celebrate Animoto’s new influx of money, I’ve compiled the following video with background music by Pink Floyd. My only quibbles when putting it together include the inability to use PNG files or search for photos on Flickr by tag.

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The Kindle, Amazon’s ugly but useful ebook reader that launched in November 2007, may be a burgeoning hit, says Citigroup Analyst Mark Mahaney. Citi expects Amazon to generate between $400 million and $750 million in revenue from the Kindle by 2010, or 1% - 3% of Amazon’s total revenue.

The key points of differentiation with the Kindle and competing devices is the fact that books and other content is delivered to the Kindle wirelessly and that the Kindle has the largest book selection by a significant margin (more than 120,000 books, magazines, newspapers, and blogs, including 98 of 112 current New York Times Best Sellers). Mahaney also points out that the Kindle has more memory than competitors, and supports newspapers, magazine and blog subscriptions. See Mahaney’s comparison chart below for additional details:

Mahaney points to slim public data about Kindle sales to date in making his predictions:

How Is Kindle Doing So Far In The Marketplace?

Our ability to answer this question is very limited. Amazon is the sole retailer of the Kindle and it has disclosed no information about its sales other than to say
that it sold out in the first 5 1⁄2 hours. But we have pieced together four different clues to gain a sense of Kindle’s traction.

First, we note that Kindle has consistently been ranked among Amazon’s Bestsellers in its Electronics category. Ahead of the Apple iPod Nano, the Garmin GPS Navigator, and the Canon Powershot Digital Camera.

Second, we note that the Kindle has received a very large number of customer reviews. Per the exhibit below, we note that Kindle has received more customer
reviews than any of the other Top 10 Bestselling items in Amazon’s Electronics category – 2,537 reviews as of May 12th – vs. 663 for the Apple iPod Nano 4
GB Silver (3G), the #2 Bestseller. This is in part an unfair comparison. Kindle is a new product sold only on Amazon.com, while there are numerous versions of the iPod, and they are sold by numerous retailers. But still, the volume of reviews does indicate material traction for the Kindle.

Third, we see that the quality/tone of the customer reviews the Kindle is receiving is relatively positive. Below we compare the Star Rating Diffusion – 5 Stars vs. 4 Stars vs. 3 Stars etc… – for each of the Top 10 Bestselling Electronics Items on Amazon. What we see is that the Kindle actually receives fewer high scores than the other Bestsellers – 69% of its reviews are 4 or 5 Stars vs. an average of 80% for the other items. And it receives more low scores than the other Bestsellers – 22% of its reviews are 1 or 2 Stars vs. an average of 13% for the other Items. But for a Version 1 of a product “competing” against a several times iterated leading consumer electronics item like the iPod, a 69% Star 4 or 5 rating is relatively positive.

And fourth, we note that the most reviewed Customer Review of Kindle (“Why and how the Kindle changes everything” by Steve “eBook Lover” Gibson) has been reviewed by at least 27,000 people. Specifically, as of May 13th, 26,931 have read Steve Gibson’s review and actually commented on it by pressing the Yes or No button when asked if the review was helpful. And logically, there would be more people who read the review and didn’t bother to vote, although the voting step is hyper-easy. We believe that this helps provide something of a proxy for how many Kindles have likely been sold. We’d peg the number as somewhere between 10,000 and 30,000 Kindles sold to date.

Citi took this indirect sales data and built a model based on the adoption curve of the iPod “Here’s what’s known. Launched in CQ4:01, the iPod went from 129,000 unit sales in its first quarter to becoming a mass market phenomenon, with a current installed base of approximately 100MM.”

They apply similar adoption rates to the Kindle that the iPod saw (starting at a much lower base: 129,000 iPods v. 10,000 - 30,000 Kindles in first three months on the market) and then discount the entire model by 50% - 75% to hedge risk in coming up with the three year revenue model. “So perhaps, if Amazon executes right with its Kindle product and marketing strategy, the iPod analogy for the Kindle won’t be too far stretched,” Mahaney says.

About half the projected revenue is from Kindle sales, half from book sales after purchase.

What’s our take? I was down on the Kindle when it first launched but quickly fell in tepid like with it once it was in my hands for a few weeks. But then John Biggs at CrunchGear borrowed it from me in January, apparently permanently. I’ve learned to live without it. The biggest issue I had with it, once I got the hang of it, was accidental page turns. I’m still buying a lot of normal books, but when I get my Kindle back I’ll happily switch back to the ebook world.

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A fight is brewing between Amazon and the State of New York over who is responsible for collecting state sales taxes on online purchases. Up until now, online retailers have only had to collect state sales taxes in states where they have physical locations—the same way that catalog retailers are treated. Otherwise, it is up to consumers to declare goods bought over the Internet as out-of-state purchases. (Right. I’ll go find those receipts).

Since most people don’t bother to declare online purchases on their tax forms, the State of New York recently passed some legislation (tucked into last month’s budget bill) known as the “Amazon Tax”. This new law conveniently redefines any Amazon affiliate as part of the retailer, and since there are plenty of Amazon affiliates in New York State, puts the burden of collecting the state sales tax onto Amazon. Clearly, this ridiculously stretches the boundaries of what constitutes Amazon and what does not. So Amazon is suing New York State to overturn he law.

Amazon argues that the law is “overly broad and vague” in its attempt to place the company physically inside the state, and also complains that the law unfairly targets Amazon as opposed to online retailers in general. (Although it does apply to all online sales, not just Amazon’s).

The law, as written, is just a bad law. And it would set a dangerous precedent. Not because New York State shouldn’t try to collect the $50 million in estimated uncollectetd sales taxes owed to it. But because the law is tortuous in the way it attempts to do that.

A marketing affiliate is not part of Amazon. If I put some Amazon book recommendations on the side of TechCrunch , set up an affiliate account, and readers click through and buy those books, that does not make TechCrunch part of Amazon. It is a marketing arrangement. Just like someone who sets up an AdSense account does not work for Google.

This still leaves the question of who should be collecting state sales taxes on online purchases. On that matter, I’m on New York’s side that it should be Amazon. It knows what state its customers reside in since it has their credit card information and is shipping goods to them. How hard would it be for Amazon to add a sales tax calculator to its checkout cart that calculates a different sales tax depending on the state of the purchaser? The answer is that it wouldn’t be hard at all, but that Amazon doesn’t want to do it because every additional surcharge at checkout results in more abandoned carts due to last-minute sticker shock.

Unfortunately, New York State has no jurisdiction over Amazon, which is headquartered in Washington. So the way to fix this would be a federal law that applies to all retailers. But Congress only cares about federal taxes and is not going to pass a law that will be unpopular with consumers to put more money into state coffers. Without a federal law, though, more states will pass more bad laws on their own.

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After years of negotiating with the movie studios, Steve Jobs finally got them to agree to put their movies on iTunes the same day as they release them on DVD. Now, in addition to Disney—which has been selling movies on iTunes since September, 2006—Apple is distributing 1,500 films from 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount Pictures, Universal Studios Home Entertainment, Sony Pictures Entertainment, Lionsgate, Image Entertainment and First Look Studio. New movies can now be purchased for $15, or rented for $4 (older movies are $10 for purchase or $3 for rental).

Apple watchers have been expecting this for a long time. It announced a deal to distribute rentals in January, and even that leaked out beforehand. But both Amazon and Netflix already have their own movie download and/or streaming services. And both offer more titles—Netflix has more than 6,000 and Amazon has nearly 12,000. (Although, Amazon may be rethinking its Unbox service).

It was only a matter of time before the studios relented and struck a deal with Apple. They could only stand on the sidelines and watch Disney ring in the coin for so long. The idea of distribution windows is so Twentieth Century anyway. How long before movies appear online the same day they hit the movie theaters? Come on Steve, we’re counting on you.

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The title of this post, a (mis)quote from computer scientist Alan Kay, is the last line in a job listing posted by Jeff Bezos in 1994 to the Usenet group mi.jobs. The title of the job listing was “Well-capitalized Seattle start-up seeks Unix developers.” Via HackerNews.

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The big three gadget blogs (Engadget, Gizmodo and CrunchGear) (ok, kidding about CrunchGear, but it is doing very well) have a little more competition starting today: a new gadget blog called End User. The site is published by Amazon.

The blog authors are all Amazon employees and write for EndUserBlog as well. This is the same model for a few other blogs that Amazon publishes (Omnivoracious, ChordStrike, etc.).

Most posts have links into Amazon to purchase whatever is being discussed, which helps Amazon directly and indirectly sell more stuff.

So far the Amazon blogs don’t have much in the way of a community - most posts have no comments, for example. My recommendation is for them to follow, interact with and link to lots of other blogs in their respective categories, and actually join into the conversation directly.

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Shelfari, the Amazon-backed community network around books, has introduced editable author profiles in hopes that it can become a destination for not only biographical information but interactions between authors and their fans as well.

Each author’s page will feature an open wiki in addition to a message board and a list of written books. Shelfari hopes to set itself apart from other big name wikis (namely Wikipedia) by encouraging authors themselves to join the community and modify their own pages. Many sites tend to discourage this practice because of obvious bias concerns, but Shelfari believes the interaction to be seen between authors and their fans will compensate for this drawback.

With the introduction of these new profiles, Shelfari is poised to become a uniquely rich repository of literary information, and has the potential to become an IMDB for books. At the same time, the success of these wiki pages will rely heavily on author interaction, which will likely be difficult to establish. Without this interaction, users might as well head to Wikipedia to get the dish on their favorite authors.

Besides the new profiles, Shelfari offers book reviews, recommendations, and community groups. Members can browse their book collections in virtual libraries, and books can be easily purchased through links to external sites (Shelfari gets a portion of the revenue from these sales). The site was founded in October 2006, and received $1M in Series A funding from Amazon in Feburary 2007.

Competitors in this space include LibraryThing, Goodreads, and Delicious Monster”.

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Amazon loves to talk about its Web Services because it positions the company as a bold innovator bringing cloud computing to the unwashed masses and other companies still stuck in the land of legacy data centers. But it is coy when it comes to details about the actual business behind Amazon Web Services, which includes its S3 storage service, EC2 compute cloud, and SimpleDB online database.

During its fourth-quarter earnings call, Amazon offered up the tidbit that Amazon Web Services (AWS) now uses up more bandwidth than Amazon.com proper, but not much else. You could infer, however, that the business is not yet very large, accounting for less than $131 million of Amazon’s $5.7 billion in revenues that quarter. The revenues may be small, but they are no doubt growing very quickly.

So who are using these services? A high-ranking Amazon executive told me there are 60,000 different customers across the various Amazon Web Services, and most of them are not the startups that are normally associated with on-demand computing. Rather the biggest customers in both number and amount of computing resources consumed are divisions of banks, pharmaceuticals companies and other large corporations who try AWS once for a temporary project, and then get hooked. That surprised me. These are the types of customers you wouldn’t expect to see running their data through a hosted service. But apparently the cost advantage of paying by the drink versus buying new hardware and staffing up to do a random data run is convincing them to trust more of their data with Amazon. It goes without saying that these are the types of companies who demand the highest security for their data. Banks and drug companies. And they have a lot of data to crunch.

You just hear more about the startups because many are increasingly putting their entire businesses on Amazon, and the economics of cloud computing really levels the playing field for them. They also tend to be more open about their data practices. But cloud computing is already going much deeper than the startup world, and gaining adherents in big IT organizations.

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What’s the first thing Amazon does to counter the launch of Google App Engine? Makes sure its current customers are happy just where they are by providing two premium tech support packages.

AWS users can now pay for either a silver or gold level of support. Both packages offer “fast and predictable response times, an unlimited number of support cases, and personalized support from our team of developer support engineers.” The gold version takes things up a notch by also affording developers with round the clock phone support and a max 1 hour response time to urgent requests.

The silver package will cost $100 per month or $0.10 per dollar spent on monthly AWS usage, whichever is higher. The gold level is either $400 per month or $0.20 per monthly usage up to a certain charge, after which the rate declines.

Amazon hasn’t been slacking in terms of releasing new features, but we can expect that App Engine to drive even more rapid innovation from Seattle-based retail giant.

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