Two days ago, I started this post:
As I mentioned before, Amazon’s business strategy looks like cheating:
- Sell product for a loss
- Sell a lot of that product
Amazon lost money for many years.
Their most recent financials show them making 3% profit.
That is not very much.
By comparison, Apple makes ~25% profit (though Apple is on the high side of the spectrum).
…then, just today, this report came out:
Amazon profits dive
Perhaps I was on to something.
Two thoughts on Amazon.
First: Amazon’s business strategy seems like cheating.
- Sell product for a loss.
- See a lot of that product.
Something doesn’t add up. Who is being screwed?
I have heard that Amazon uses the Walmart strategy of pinching suppliers. Except Amazon’s suppliers are the content creators, the authors and artists.
Merlin Mann explained the difference between Apple and Google business strategies this way:
Google: Thanks for looking at 100s of ads you hate.
Apple: Thanks for buying 100s of dollars of stuff you love.
So, would Amazon be: Thanks for buying 100s of dollars of stuff for so cheap that someone isn’t getting paid?
Second: Why is the Kindle so primitive and cumbersome?
People who own a Kindle, love it. That might be all that matters. My experience with a Kindle is limited to helping two people set up their Kindles (now called Kindle Keyboard). And it was horrible. The two people were thrilled. But I was literally offended by the primitive, cumbersome way you interacted with it. The keyboard was embarrassingly horrible, navigating was horrible, browsing the internet was horrible.
Almost a third point: Why seven models? (Is the DX still available?) Aside from the fact that every business (except Apple) operates that way: make a confusing number of products; give them confusing names; operate on poor revenue-to-profit margins.
Almost a fourth point: Amazon’s PE ratio. !?
There are too many ads on the internet.
We’ve had sold so much we have sold everything.
Go to http://www.nba.com and you don’t get basketball. You get a little basketball and a violent assault of ads.
Go to http://www.nytimes.com and you don’t get The Times. You get The Times hidden in the midst of a barrage of ads.
Been to Facebook lately? The. Whole. Thing. Is. Ads.
Much has already been written about Google and ads. (Hint: YOU are the product, the advertisers are Google’s customer.)
Amazon’s Kindle is now ad-supplemented.
Selling ads is not as profitable as selling a product. But it certainly scales. Just sell more ads. And then more.
It’s not going to stop. And it’s already too much. What happened? What have we sold?