Amazon.com is also aggressively moving into the sale of digital goods as more consumers trade in physical media like CDs for MP3s. In a bid to compete with iTunes, Amazon.com launched downloadable music and video services. The company won a high-profile contract with NBC to distribute the network's TV shows in September, after NBC decided to pull its programming from iTunes due to a pricing disagreement. To further cement its position as the place for consumers to find all forms of media on the Web, Amazon.com is betting on e-books. It also owns a self-publishing service so that writers, musicians and movie makers can publish their work and distribute it through Amazon.com.

Besides expanding its offerings of hard goods, soft goods and digital media, Amazon.com has morphed by finding ways to monetize its vast IT infrastructure. In 2000, the company embarked on a new strategy that built upon its traditional e-commerce business. It sought partnerships with traditional brick-and-mortar retailers, starting with Toys "R" Us, that were struggling to establish e-commerce presences. Amazon.com offered its e-commerce, customer service and fulfillment infrastructure to retailers such as Borders and Target that didn't want to spend millions of dollars reinventing the e-commerce wheel. This business is now known as Amazon Enterprise Solutions.

The alliances with brick-and-mortar retailers, though they've contributed a negligible amount to Amazon.com's net sales, allowed the company to put its stake in the ground as a technology services provider.

"At its core, Amazon is a technology company," says Carrie Johnson, a vice president and research director with Forrester. "Amazon continues to invest in technology and acquire companies that complete its technology platform."

Here's a look back at what was going on at Amazon.com in 1997, compared to today.

How Google influenced Amazon.com's strategy

Amazon.com as a technology services provider took a turn in 2002 when the company began offering its own features and content to a new set of customers, website developers, so that they could incorporate those features onto their sites. This new service called Web Services was intended to tie developers to the Amazon.com brand and drive traffic to the site. Today, Amazon.com offers a variety of Web services to more than 240,000 developers, entrepreneurs and established companies. These Web services include the Elastic Compute Cloud, which gives users access to Amazon.com's computing capacity in a virtual computing environment on a pay-per-usage basis, and the Simple Storage Service, which lets users store data in Amazon's data centers and pay only for the amount of storage they need. The company essentially provides "on-demand" computing to customers through these Web services interfaces.

Scott Devitt, a managing director with Stifel Nicolaus who has covered Amazon.com for six years, says Amazon.com's willingness to open up its technology to external users was a strategic move and partially driven by Google's capacity to "unbundle and fragment the Internet." Even though Amazon.com is charging customers for computing and storage capacity, the short-term financial gain is questionable, says Devitt. "It's a long-term investment," he says. "To succeed in technology or on the Internet long term, companies need to focus on running their businesses with open platforms." The companies that work with open platforms today are succeeding, he adds, while the ones that have remained closed, like Yahoo and eBay, are struggling.