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Amazon just announced the launch of its new S3 service, which allows developers to utilize their highly-scalable storage systems. Of course, web-based storage is not novel. This does appear to be an evolution away from ISP hosting services in favor of content distributors. Yes, believe it or Amazon is a content developer, not just an e-tailer.

This is a bold move by Amazon and seems to be targeting scrappy entrepreneurs in the so-called Web 2.0 segment of the developer community. Why? Well, any well funded startup with fiduciary obligations to its shareholders would never leave its data store on Amazon — albeit a world-class system. More likely, this will serve as a platform for the most fragmented base of web developers, who want scale and reliability, but can’t afford a massive system.

If so, the pricing model seems right. Amazon will be charging $0.15 per GB-Month of storage used and $0.20 per GB of data transferred.

There’s not much money in hosting, so why bother? The answer reveals the true value to Amazon. In essence, by inserting itself in the data layer of these applications, Amazon manages to one up Google, Yahoo and MSN. Rather than simply crawling and indexing sites li’ke the other search engines, presumably Amazon will have access to a richer level of detail, including whether content is fresh — not compared to the last indexing a month ago, but compared to an hour ago. And, whereas search engines struggle to accurately index sites that use sessions, Amazon will have clear insight in to true nature of the site and the content that is available.

It’s surprising, in fact, that Google did not get this app out before Amazon. But, I am guessing that Google, Yahoo and MSN are watching this move closely and will react swiftly.