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Not much can be said about Amazon that hasn't been said already. Still,
the internet goliath is starting yet a new chapter in its twenty-six years lifetime. Jeff Bezos,
the man who founded this internet empire and has directed it ever since has stepped down as CEO.
He's not going anywhere, though. His power in the company and his influence in the
American culture will likely remain untouched as he transitions to be an Executive Chair of
the Board. He has said he plans to focus on new products and early initiatives.
But, at least for the records, it is the end of a big paragraph in Amazon's history,
which is ultimately the history of doing business online. Let's look back at some of the good
and the bad in these twenty-six years of tech history, with Jeff Bezos at the head of Amazon.
Welcome to Company Forensics.
Online disruption - from books to everything
Everyone loves that classic story of how Bezos started Amazon,
selling books online from a garage in Seattle and even delivering them himself. From those
humble beginnings to global market domination, with space colonization plans in-between,
the man has driven the company through ups and downs, but mostly ups.
He is well known for his forward-thinking and relentless business character,
always betting big on the future, even if it means taking large losses. With
this mindset and ruthless execution, it took Amazon around twenty years
to have its tentacles pretty much in every major business happening on the internet.
But it all started with books. Bezos got involved in this thing called the internet,
back in the early nineties, while working on a data-driven Wall Street hedge fund.
He soon got obsessed with the emerging internet
technology and the fact that web usage was allegedly growing at 2300% by those days.
Bezos understood the critical role of data in digital businesses from the very beginning.
In 1995, he started a business that would leverage the web's astronomical
growth. He concluded that books were the best product to start selling online.
In his own words: "...there are more items in the book category than there are items in
any other category by far, so, if we have that many items, we can literally build
a store online that couldn't exist in any other way."
And he did build that store with a vast catalog, shook the industry,
and gained the market from regular bookstores with its online model. A few years later, it would
disrupt the industry yet again with the release of Kindle in 2007, the first electronic reader.
With the Kindle success, Bezos signaled that he was not settling for anything. Instead, he would
keep reinventing industries and taking over other markets, which has been the Amazon way ever since.
Not paying sales taxes back then and leveraging the data obtained from consumers on its website
early on allowed Amazon to disrupt the brick and mortar market and take a considerable chunk of it
away from conventional sellers. First books, but then everything else. Quite literally.
About seven years after releasing the Kindle, Amazon would get
set to a new frontier of retail sales, using artificial intelligence. First, through its
website but then through a device named Echo that has its own A.I. personal assistant: Alexa.
With over 100 million Alexa devices standing in customer's homes and making online shopping
even more comfortable for them, Amazon scored yet another landmark in its path to market domination.
Prime: the biggest membership
But before Alexa, one of Amazon's biggest hits and a foundation of its business,
is the Prime membership, with its more than 126 million subscribers. When it started in 2007,
it disrupted everything again by offering to deliver packages in 2 days,
all across the country, and no shipping fees.
It was mind-blowing for consumers, but many investors and executives pushed back as
they thought the initiative would instead cause losses. And they were right, but Bezos knew it,
and he had bigger plans in mind than just making some profits.
Ultimately, time would prove him right again. Prime's logic was pretty simple and genius:
get people to sign up for a recurring payment program and give them fast,
free shipping. That would make them want to get the most value out of it and therefore buy more.
And it worked. So, Amazon warehouses started blooming all over the U.S.
and the world as Bezos kept his eyes set on the bigger picture.
Over time, Amazon has added value to the subscription and invested billions
of dollars in services like Prime Video and Music,
with the ultimate goal of making it even more appealing and secure recurring revenue for life.
Amazon Marketplace - the good and the bad
As the retail industry beheld Amazon's aggressive growth, all kinds of sellers
wanted to participate in the online revolution. So, Amazon opened up its platform to third-party
sellers back in the early 2000s and soon became the most extensive online marketplace.
But for merchants, it would prove to be both a blessing and a curse.
They were able to join the massive platform and sell to its millions of customers,
but they would play under Amazon's rules, for better or worse. The company would provide the
marketplace and be a competitor, ultimately being judge and jury in its eCommerce realm.
Early on, Bezos made a web laboratory out of the Amazon website, making cutting-edge
advances in data analysis, both from customers and sellers on the platform. That gave Amazon a
significant edge and lead to more effective sales strategies and ruthless competition.
Over the years, voices of small-medium businesses have accused Amazon of using monopolistic
and unfair tactics. Like absorbing smaller competitors or allegedly manipulating
prices and online traffic to suffocate those who didn't want to be absorbed.
It gets trickier when you add Amazon Web Services to the mix. That is the Amazon
web infrastructure that powers a huge chunk of the internet, including websites and operations
from all kinds of competitors. Allegations have been made that Amazon leverages its complete
business environment to gain information about them and use it for its benefit.
For the sake of time, we won't get into more details about this. But
know that the legal and civil debate about tech giants' commercial practices like Amazon, Google,
or Facebook is still being figured out by the authorities, more than a decade later.
In late 2020, European regulators filed antitrust lawsuits against Amazon, claiming
that they have gained an unfair advantage over the sellers in its platform. The U.S. Congress
has also been catching up, and regulations are underway to tear apart these alleged monopolies.
Half a million Amazon jobs in 2020
In 2020, Amazon added around half a million employees to its global operations
in only ten months. Its total workforce surpasses a million workers now, becoming
one of the largest employers in the world.
The company has a strong culture of customer obsession that is ultimately powered by this
massive workforce. They have historically delivered on this obsession to customers,
providing excellent service and always good value.
But the cost of this enormous operation often relies on the most vulnerable workers,
like those in warehouses and delivery networks. Employee outcry is no new to Amazon,
and stories from severe working conditions have emerged in many warehouses over the years.
Still, tech companies have their ways to deal with it and have historically been
allergic to worker unions, claiming that these bureaucratic organizations curb innovation.
But it seems like worker organization starts becoming inevitable when you
employ more than a million people. That's what's happening in Alabama, and it may be
the beginning of more civil regulations for other facilities and companies.
In early February, Amazon workers in an Alabama suburb set to vote if their warehouse became the
company's first unionized facility in the U.S. It would be unprecedented and probably put a
path for workers from other facilities and other tech companies if it happens.
AWS - The power of powering the internet
After becoming the king of retail during the early 2000s,
Amazon was set for the next frontier: cloud computing and web services.
In 2006, Amazon Web Services began offering I.T. infrastructure services
to businesses in cloud computing. That is providing on-demand computing power
to run digital businesses without building the whole infrastructure.
Fast forward to 2014, AWS signs a $600M, ten-year
contract with the CIA to provide cloud computing services to the federal
intelligence community. It was huge and solidified Amazon as a trustworthy and elite provider for
computing services. It also shook the world for old-school government contractors like IBM.
The deal was yet another milestone in Bezos's playbook of expansion
that ultimately gave the green light to larger corporate and government clients
to sign up for AWS. Only a few years later, it powers more than 30% of the internet.
The consummation of tech corporations and politics is a delicate topic that we
won't get into this time. But the truth is that Jeff Bezos has a strong foothold in Washington.
Amazon provides computing services to different
government agencies. Bezos also purchased the local paper, the Washington Post, in 2013,
along with the biggest mansion in town, for $23M. Maybe he likes the city a lot?
Or perhaps he has a political agenda? I feel like both could be true, but let's move on.
Growth over Profits: the Amazon way
Amazon not only changed retail forever, but it also set a new standard for companies raising
venture capital. Before the internet, the conventional way of doing business
was to create a profitable company and grow those margins. Pretty classic, right?
But then came tech companies like Amazon, and started being valued by investors for
their potential for exponential growth and market domination instead of their actual
profits. Since the early days, Bezos managed to get Wall Street behind his vision of the future,
and the promise has always been that of long-term value. A decade or three down the road.
As Professor Scott Galloway has put it: "Amazon has essentially changed the relationship
between companies and shareholders, in that it has replaced profits with vision and growth.
And that has changed the entire ecosystem because companies and investors are no longer
satisfied with a profitable company that grows slow".
So, all the money that comes in gets reinvested into new expensive endeavors
and conquering new markets. The list is endless: retail, computing services, video streaming,
And that's why every tech company after Amazon was set to become a unicorn. WeWork, Uber,
Snapchat… and many other tech companies have raised millions with this model.
They sustain losses over time but keep raising money to pursue that growth at all costs.
Amazon was designed to forego profits for some time to gain market share. It
would lose money along the way but also have the muscle to put down
other businesses that couldn't afford to lose money competing with Amazon.
So, Amazon didn't generate any profit for around its first seven years of existence
until 2001. Even after that, its margins have been historically negligible. The year
2020 was terrific for the company, however. Thanks to the pandemic,
it saw a boost in revenue and profits, as eCommerce got solidified as the new normal.
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What else can you learn from Jeff Bezos after these 26 six years of Amazon history?
Things to do? Things not to do? We’d love to hear your thoughts down in the comments.