Yieldex, a New York-based online ad optimization engine for web publishers, grabbed first prize in Amazon Web Services' startup challenge, entitling it to $100,000 in cash and credit and a potential seed investment from Amazon itself.

The competition featured seven web startups, each vying to show which was best leveraging Amazon's cloud computing services to build its  business.

Amazon wittled the list down to seven contestants after receiving close to 1,000 applications. The judges included prominent venture capitalists including Matt McIlwain of Madrona Venture Group, Tom Bogan of Greylock Partners, Vineet Buch of Blue Run Ventures, Prashant Shah of Hummer Winblad, and Saad Khan of CMEA Ventures.

The evening portion of the event at Bell Harbor Conference Center in Seattle began with a "speed dating" session, in which startup teams rotated between tables of VCs giving quick business pitches. They then gave presentations on a stage before the prizes were handed out. First prize is called the "golden hammer" to symbolize the smashing of traditional servers -- in favor of web-based cloud computing (Yieldex execs obliged by taking a few swings at a server).

Yieldex, founded last year, helps web publishers better target their advertising inventory and generate more ad revenue through analysis and scenario planning.

This the second startup challenge hosted by Amazon, which is trying to generate interest in its web services business. Andy Jassy, senior vice president for Amazon Web Services, assured the companies: "This is not an experiment for Amazon. We are in this as a long-term business."

Like other Amazon executives, Jassy made the case that cloud computing, which gives companies access to web-based storage, computing and database management on a pay-per-use basis, makes even more sense in the current economy because it involves no upfront costs.

"If you unload the muck of infrastructure to someone who is reliable and cost effective, that's a huge advantage," Jassy said.

Some of the startups echoed that.

"We paid more for my Macbook Pro than we have for web services so far," said Peter Miron, vice president of Knewton, an online adaptive test prep service from New York.

Amazon says 440,000 developers have registered to use its web services, including 40,000 alone in the last quarter. Interestingly, this startup challenge featured no companies from the Seattle area, Amazon's home turf. East coast startups, primarily from Massachusetts and New York, were well represented among the finalists. The only West coast startup was Zephyr, an online software quality testing company from Sunnyvale, Calif.

TechCrunch has a good rundown of the finalists, with quick business descriptions and web traffic data.

While Amazon has spent a lot of time cultivating startups, it's clear that it also has large enterprises in its sights, particularly as Microsoft and Google beef up their own cloud offerings. Adam Selipsky, another Amazon web services executive, mentioned that pharmaceutical giant Eli Lilly and Phillips Electronics are using Amazon's cloud services.

"At the very beginning stages, we figured small companies and startups would be most receptive to to the business," Selipsky said. But he said he was surprised at "how quickly the enterprise market has developed."