But, Google and Microsoft didn't wake up earlier. You mention it's only in retrospect Amazon knew what they were doing; but we also see Microsoft and Google didn't know what they were doing. It wasn't out of charity to Amazon, they simply lacked vision at the time.
Had major auto manufacturers taken Tesla seriously 5-6 years sooner instead of sitting idle, the Tesla doubters might be the smug ones at this point. But Tesla had the vision and the execution.
In both cases, the competition badly miscalculated while the company executed beautifully.
On Tesla... I'm not sure it's a good analogy. I don't think you can point to Tesla and say they got lucky anywhere. What will GM/Ford/Toyota/Daimler/Volvo do differently now? Tesla is selling speed/sex appeal/engineering/electric - ie all those companies were already all competing on these dimensions. They can't seem to execute.
Google and Microsoft were plenty capable of executing, they just didn't see what the product they needed to deliver was.
Sounds just like the legacy auto manufacturers. Tesla is a great analogy.
[1]: https://www.greencarreports.com/news/1134120_tesla-is-losing...
And as much credit as Bezos gets, the new CEO of Amazon was the one who (as far as I know) was the one who insisted that all Amazons web development be done in a way that made it easy to set up AWS.
Don't know who really thought of it, or designed it well enough to make it work, but hope all those folks were well, well rewarded.
I've heard this too, but I don't think it can possibly be true. That would mean that, at the start, any service or VM etc. you started on AWS would only work during non-peak Amazon hours. So your website or app would be down if the traffic to Amazon's website ramped up. I can't imagine many companies going for that offering. If that was the product that AWS originally offered I can't imagine it would have been successful.
While that's true, at the time I read this "peak Amazon hours" were a few hours on cyber Monday. In fact, that's probably still true.
Disclaimer: I work in non-aws amazon, and my imagination is my own.
>Amazon invented AWS because they had idle computers most of the time to handle peak load, and they thought it would be a good way to monetize them.
That is forward looking.
Google also had zero enterprise experience. Things like MySQL, RFC 1918, VMs were not native by their devs.
So of course boards of these companies held off. Making that move could have tanked the stock as profit went down while they re-invested in their business.
This is the genius of Amazon. Wall Street doesn’t expect growing profit. Instead it’s happy with growing revenues. Allowing Amazon to reinvest into business that have an initial low margin until economy of scale kicks in.
Same was true of Amazon.
At the time, Amazon might not have had enterprise sales teams. But they had deep expertise in running the familiar suite of enterprise software at scale.
which is interesting - because in almost all cases, it's this unproven market that end up upending the business. IBM is an early case, and now electric cars.
So if an existing, well capitalized business would learn from this, they should buck the trend and invest heavily in risky ventures. However, shareholders, esp. conservative shareholders, would not want their existing, certain profit lines be endangered.
In a nutshell, the argument is that successful companies fail to enter new markets because they have good management, not bad one.
In Ford's or IBM's case, a sane manager would not go invest in an unproven market, they rather maximize profits and growth on the market they are most effective at; however, this comes at a cost of missing new opportunities, which makes this a dilemma.
Successful companies could try to create little startups inside the big corporation; however, this rarely works out since you really need the entrepreneural spirit, align compensation to success and freedom without the restrictions of the parent company. The best alternative might be to create a VC arm that can serve later on as merger as acquisitions, but even then, is not guaranteed the startup would want to merge to the parent company nor that it would be the best decision.
Facebook’s approach only works when regulators are asleep at the wheel, but standard oil style monopolies can just print money to cover these costs. Innovation is expensive and can fail regularly just look at Intel or most corporate R&D. Finally milking a dying business model can fail really quickly, just look at say blockbuster.
EVs on the on other hand will, most likely, replace ICE powered cars. With the big difference that existing ICE manufacturers will just switch production to EVs and will be just fine in the new EV world. I do see multiple case studies in that.
I rarely buy anything besides accessories and hard to get groceries on there anymore.
Based on what, anecdotal evidence from squeaky wheels on the internet? I've heard the same claims, but the 10K and 10Q filings the original commentor linked to suggest the opposite.
- do i need it today- Costco, Walmart, Target, Safeway, Dicks Sporting Goods
- can i wait till tmrow- Amzn next day to my doorstep. No? resort to above options
- can i wait 2 days for a better choice- Amzn Prime
- No hurry- a week ok?- Amzn marketplace, eBay
Wal-mart is certainly trying to do just that. Amazon had to drop their the minimum order value for free shipping back down when Wal-mart took the offensive.
As far as I'm concerned, Amazon is already imploding. Their search engine has become nearly useless, returning whatever the hell it wants, rather than what you searched for. It keeps getting worse, not better. Have you compared the item counts when you sort by Relevance versus Price Low to High? Where did they disappear to? What the hell is wrong with their site?
I used to place thousands of orders from Amazon every year, now I'm down to dozens, just occasionally checking them before buying a large ticket item to see if they've got an incredible price on it. And even then I only go through and buy from Amazon when nothing leads me to believe it might be a scam / counterfeit / mislabeled / etc.
That's not the impression I get from this Bezos interview in 2000: https://www.youtube-nocookie.com/embed/6OVdcS4fuuw
It's survivorship bias to assume they had no real plans but lucked out - the gamble was part of the plan.
When you say "digital" do you mean like Prime Video? Or kindle books? Or something else? When you say devices do you mean kindles? I'm struggling to believe that the kindle book line is run at a loss. I'd understand specific titles might run at a loss and I'd understand if the devices run at a loss but kindle books overall? Prime Video "losses" are sort of my point - they can almost be thought of as marketing expense.
As for the capital leases - those are accounted for at the corporate level and mostly run through the cashflow statement. The numbers they quote as operating income for the non aws business don't include those capital lease costs. ie on page 17 of their most recent Q (https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/0001...) those reported operating earnings don't include the capital leases. If you look on page 3 of that filing (Principal repayment of finance leases) you'll see the (big) number there.
All that said - you still could be right. But if you are it's almost like they are going out of their way to deliberately make their numbers look bad on the non-AWS side. There is a big difference between not caring and actively making it look bad.
Because their earnings filings from 2000-2007 certainly suggest that they were making a boatload of money on books. Their Media segment was making a ton of money while their EGM segment (electronics and general merchandise) was losing a ton of money. And then EGM became profitable and they combined the segments together into a single physical retail segment that included their new focus on apparel and fashion.
Amazon started with books, made books profitable and then used that profit to move into the next category (VHS/CD/DVD) and then the next category, etc.
Prime video and amazon studios have been spending over 4 billion a year since 2014 (no idea what the current spend is). The entire point of those billions was to keep people as prime subscribers and keep them spending on physical retail. This strategy only makes sense if physical retail is profitable. It's an LTV play.
Devices were run at a gross margin loss and even worse capitalized loss if you include the capitalized R&D expenses. "We want to make money when you use our devices" - Bezos. The devices themselves were sold at a loss for many, many years.
Amazon used the same strategy of capital leases for funding warehouses and funding AWS data centers. They only started reporting on the capital leases in the last 5-10 years (can't remember the year).
I've been following Amazon's shareholder letters and releases for years. Physical retail has been massively profitable.
https://hurricanecapital.wordpress.com/2015/11/30/business-i...
>HB: So, let’s just establish this once and for all. Can Amazon make money?
>JB: Well, yes, and in fact we have in the past. And you have to understand, there are many ways of thinking about this, but the reality is that Amazon is a collection of several businesses and initiatives. And we have some very significant, very profitable, more established businesses that are free cash-flow generating. Very significantly. And fortunately, the way I think about it, we have lots of opportunities to invest in this new initiatives, and we take advantage of those opportunities. So, it’s kind of like we built this lemonade stand, you know, twenty years ago. The lemonade stand has become very profitable over time. But we also decided to use our skills and the assets that we’ve acquired over time to open up a hamburger stand, and a hot dog stand, and so on and so on. So we’re investing in new initiatives.
>JB: Look, you know. Warren Buffett has this great quote, he says: “You can hold a rock concert, and that’s okay. And you can hold a ballet, and that’s okay. Just don’t hold a rock concert and advertise it as ballet.” Investors come in all shapes and sizes. They have different investment horizons, different approaches, different beliefs about what the right kind of portfolio looks like. And, so it’s not when you know people use Wall Street as a shorthand. But there isn’t one type of investor, they come in different shapes and sizes. You have to be super clear about what kind of company you’re trying to build, what your approach is. We laid that out in our 1997 annual shareholder letter. We said we were going to take big bets. We said they were gonna fail. We said some of them hopefully were gonna work. We said we were gonna to invest for the long term, that we were gonna to take advantage of market opportunities as they arose. And there’s a certain kind of investor who is aligned with that approach. And so again, you could hold the ballet or the rock concert, and both can work. Just be clear about which one you are, and then people can self select.
The problem with this line of reasoning is it assumes you can cut off the loss leaders and just run the profitable lines. Generally speaking, you can't. The customers come to Amazon because everything is there. The second they think everything isn't there, they come less frequently, and those "amazingly profitable" categories become not so amazing or profitable. Rotisserie chicken is a loss leader for many supermarkets, and the supermarket makes a lot of money on those snacks near the register. They can't decide to be in the snacks only business tomorrow. Neither can Amazon.
The story about the ambition and the growth and all that is nice - that story is true for Facebook, Google, Amazon Web Services, Microsoft and so on. They all got profitable within a decade and continued with high growth, high profitability operations.
Amazon's doesn't have many loss leaders in physical ecommerce any more. They used them to build those businesses 10-15 years ago, but they don't need them anymore. The only loss leaders as a category they maintain are digital. And even that is pretty limited to Amazon Video/Studios at this point.
AWS is a genuinely different business, the rest of it is all bundled together. So, they have digital loss leaders. And they may not have many physical loss leaders, but the ongoing argument that they have all these lines which are profitable just doesn't mean anything when customers don't want an online shop for X specific thing. They want an "everything store".
This isn't Jeff bashing because he's obviously a hard working and very smart guy. But it's only obvious in retrospect that Amazon knew what they were doing.