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Amazon Strategy Teardown

139 points by asanwal 9y ago

deepnotderp 9y ago
This article mentions that AI as a service (aka machine learning, OK, let's be honest, Deep Learning) will be a major pillar of their business in the future. However, the chances that they will be able to beat Google seems vanishingly small. EDIT: to justify why, let me make these points: Google has more machine learning relevant data. It has a strong brand image as "THE company for AI " It has (at this point in time at least) better machine learning hardware. This will change in the near future, but Google is far more likely to take a competitor in this area seriously and acquire them. Google has not one, but two (Deep mind and brain) world class research labs. Google's ML APIs are objectively better.
- SomeStupidPoint 9y ago
  Why? I imagine that data for ML is sort of a logistic curve of benefit, and that Amazon's assorted sources have them "on the plateau", even if not as high as Google. There's good reason to expect that we'll see several major players in ML/AI, just like we do in pretty much every other market.
- discodave 9y ago
  What makes you say that? Google is 'better' at AI? OK, even if you believe that to be true, like every other market AI will be decided by lots of factors other than who has the 'best' tech. Think VHS vs Beta or Mac vs PC. They include: 1. Cost. 2. Platform/Ecosystem development. 3. Regulatory compliance (lots of rules if you want to handle health/gov data). 4. Sales/Marketing (in this case, probably, marketing to enterprises). I would argue that Amazon is a clear leader in 2-4, and has the history as a low-margin retailer to be competitive in 1.
  - mavelikara 9y ago
    +1 Google had the best data centers, yet Amazon won the data-center-as-a-service race.
    - venture_lol 9y ago
      What do you mean by best? In a car race, why would you want to build the best car? I just want my car to cross the finishing line first. Besides, there is no race. This is continuous evolution. The race has barely started, let alone ended
      - discodave 9y ago
        If you're talking about the "best" datacenters... Google hit upon the strategy of scale-out-commodity hardware a few years before Amazon did. Also, Google talks more about their infrastructure than Amazon does, so people often think it's "better" from the outside. Whether it is actually better or not is probably an unknowable question from the outside and even if you had all the data it might depend on how you trade off speed, power efficiency, cost etc.
        justicezyx 9y ago
        Google is very secretive about its DCs... They appear open, just because they are much more advanced than you can imagine...
    - ruleabidinguser 9y ago
      My impression is that GCE is relatively young and growing very fast. To say Amazon won seems premature to say the least. This is an active battle.
- IBM 9y ago
  Why? Isn't the thing about AI that everyone in the field wants to publish? Doesn't that mean all of their competitors will benefit from their research? It seems to me that Amazon will likely win because they're better at serving customers and willing to engage in price wars.
- straightforward 9y ago
  > However, the chances that they will be able to beat Google seems vanishingly small. I'm not sure about that, for one main reason: Google's acquisitiveness regarding data is even more notorious than its habit of losing interest in products and dropping them suddenly. Both are major turnoffs for business customers, to put it mildly. Amazon, while it does have a habit of vigorously competing with its own customers (in the retail "marketplace" space, and in others - I find the whole Amazon vs. Netflix dynamic absolutely fascinating) is at least reliable in provision of services and transparent about the exchange of cash for value. In other words, Amazon is, at heart, a ruthless retailer, where Google is at heart an intelligence agency with occult motives. Google usually has the better tech, but Amazon's the company people are comfortable doing business with. Edit: I should also say, this listicle of an article is mostly bunk. Lab126 is not a great hardware design shop. The Echo/Alexa "ecosystem" is mostly a bunch of (to be fair, well-considered) first-party integration deals to support popular home automation products - "skills" are a joke for discoverability and usability reasons, even if there were a market for them, which there isn't. I do agree that logistics (and operations more generally) is an enormous strength. Probably the key one, because Amazon doesn't usually come with the firstest or the mostest - it just executes relentlessly at complex, labor intensive tasks. It is at its strongest in places where it is not primarily competing on tech or features but on consistent execution and the customer reputation that comes from that.
  - curun1r 9y ago
    > where Google is at heart an intelligence agency with occult motives That seems off to me. Google is, at heart, an advertiser. This leads to Amazon being more customer centric because most Google customers are actually the product Google is selling and most Google "products" are just the lures they use to attract their actual product. Google never loses interest in their products, but they frequently choose to switch their method of attracting the eyeballs they sell. No cloak and dagger explanations needed.
    - straightforward 9y ago
      Google BECAME an advertiser. Some of us remember the pre-advertising, and later pre-Doubleclick-acquisition Google. I'm not implying Google's motives are "cloak and dagger," just that they are not transparent beyond "index all the world's knowledge" (with all that implies.) This is the mission it started with, which isn't in and of itself a complete business model. It's the model of an intelligence agency, and that's what I meant by my statement. Right now, advertising brings in the money, but it'd be a breathtaking failure of imagination and intellect for that to be the "best and highest use" of Google's corpus. An optimist would say "advertising subsidized google's mission which is essentially one of public service." A pessimist would say "who knows WHAT google will do (or may already be doing) with what it knows - but it's probably evil." I'm neither, valuing the services Google provides while distrusting the power it has based on its data and reach.
- venture_lol 9y ago
  And how do you know that? The field is huge and mind boggling. I would think, considering the breadth of AMZN, they stand a better chance of being able to apply AI to for a wider impact
- kryptiskt 9y ago
  You could have made the same argument against AWS in the first place, how could a retailer possibly succeed against the likes of Google? Technical excellency isn't the only factor deciding success.
  - venture_lol 9y ago
    Yes, obsolescence (all aspects) has always been the bane of any leader and entrenched entity. There are many factors that are in favor of AMZN and GOOG and the likes. Factors that are for you can also work against you. Generational shift of competency and drive. People get older, a bit rounder around the waist, wealthier and are also getting more choices. All companies have to deal with this factor. And some will do that better than other. You change the world and the world will change and change you. Are you able to adapt and account for all changes?
- handedness 9y ago
  > However, the chances that they will be able to beat Google seems vanishingly small. The respective track records of the two companies suggests otherwise.
  - tyingq 9y ago
    Google doesn't know how to market and sell when there's competition. Not much sales expertise is required to make people buy into AdWords. I've been in the room when they try to sell GCE. The sales pitch is roughly "you are not smart enough to figure this out on your own, so you need to buy this". That may be the case, but it's not the best pitch. For the one where I was in the room, Amazon won out, even though they were clearly more expensive. They knew what buttons to push, and what buttons not to. And they knew how to at least fake a bit of humility when it mattered.
- ryanSrich 9y ago
  I couldn't disagree more. The entirety of the internet runs on AWS. The rest is an inconsequential rounding error. > Google has more machine learning relevant data Subjective. Relevant to what? ______________ > It has a strong brand image as "THE company for AI " AI is so early there's isn't a recognized brand yet. Maybe to the HN crowd, but that's astronomically small in the grand scheme of things. ______________ > It has (at this point in time at least) better machine learning hardware. This will change in the near future, but Google is far more likely to take a competitor in this area seriously and acquire them. Competing on commodities? Doesn't seem likely. ______________ > Google has not one, but two (Deep mind and brain) world class research labs. Again. Doesn't seem like much of an upper hand. ______________ > Google's ML APIs are objectively better. AWS doesn't need better APIs or Developer UX. That's not what this is about.
  - pg314 9y ago
    > The entirety of the internet runs on AWS. The rest is an inconsequential rounding error. None of the top 5 Alexa websites [1] (Google, YouTube, Facebook, Baidu and Wikipedia) run on AWS as far as I know. I'm not sure what rounding mode you're using. [1] https://en.wikipedia.org/wiki/List_of_most_popular_websites https://en.wikipedia.org/wiki/List_of_most_popular_websites
  - deepnotderp 9y ago
    Ha. DL hardware != a commodity Pretty sure having two of the premier DL labs is an upper hand in deep learning... Well then what on earth does Amazon offer that's different from Google?
- ww520 9y ago
  Amazon probably has more shopping data. More importantly, more credit card fraud data to train an AI fraud detection system.
- empath75 9y ago
  They don't need to be doing cutting edge research to commoditize machine learning as a product.
rrggrr 9y ago
I can't see how Oracle and IBM can compete long-term against the breadth of IT infrastructure Amazon has built. I can't see how Walmart and Target can compete with the distribution network and frictionless transactional model Amazon has developed. I'm not sure any company has the same depth of real-world data for training AI systems... 300 million users "liking" with their wallets and not a simple mouse click for example. Its been 127 years since the Sherman anti-trust act was passed. Its probably time for a serious re-think.
- L_Rahman 9y ago
  Are you a Stratechery / Ben Thompson reader by any chance?
- sol_remmy 9y ago
  It worries me how easily you call for the government to take control of a multinational company and forcefully split it into pieces.
  - rrggrr 9y ago
    I said it was time to re-think anti-trust. You brought your own issues to the table and assumed I was calling for a breakup.
    - pedalpete 9y ago
      Can you give more details on what you are suggesting then?
- user5994461 9y ago
  There are hundreds of shop chains like wallmart that also have millions of customers coming to their shop and spend real money. Warehouses and inventories have been counting the most successful and most profitable products for a very long time. Didn't wait for amazon.
- exolymph 9y ago
  I've written about this take, which I disagree with: https://www.inc.com/sonya-mann/aws-outage-centralization.html https://www.inc.com/sonya-mann/aws-outage-centralization.htm...
justicezyx 9y ago
AI is the pillar for almost everything in the future. AI is the new Internet. I cannot get it why people are still analyzing that some big player is investing in AI...
dkrich 9y ago
I continue to be bearish on Amazon long-term. The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. Most shoppers are extremely price-sensitive and won't buy things before researching the price, save possibly for a few low-price staples like toilet paper or soap. So this idea that Amazon keeps suggesting where people are shopping with just their voices, seems DOA. But even if people do prefer convenience over price, there's no money in delivering groceries to people. Groceries are notoriously low-margin, one of the lowest margin businesses there is, so delivering groceries to people doesn't seem like it's going to make Amazon the trillion-dollar company some people think it will eventually become. Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? Sure, they have distribution facilities, but so does every major grocery and retail chain. As for AWS, I'm not real high on that side of the business, either. Despite being the runaway leader in cloud service, they make very little money in it so I'm not very confident that their margins will increase as competition from Microsoft and Google only intensifies. I'm not at all suggesting that Amazon is going away, and what they've done to this point is nothing short of extraordinary. I just think long term that they will settle in as a large American retailer that reshaped the retail landscape for other stores that will eventually catch up.
- dkarl 9y ago
  Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? 10-20 years, sure, but that's a big spread. What if it takes twenty years for grocery stores to get that stuff and Amazon has it in ten? Given the fragmentation of grocery stores and their focus on actual stores I imagine they will have a hard time catching up technologically, plus businesses with brick and mortar roots don't have a great track record at building ways for customers to bypass the brick and mortar. Imagine the time they'll waste on marketing, astroturf, and lobbying to try to stave off automated home delivery before they give up and actually try to make the technology work. That gives Amazon even more time make money and draw further ahead.
amelius 9y ago
I'm wondering why Google doesn't extend the functionality of their "shop" button (it's right above the search bar), to compete directly with Amazon's 3rdparty retail strategy (?)
- harigov 9y ago
  They tried that and even have a Google Shopping Express subscription that was intended to complement that. It's just Google being Google and not being focused in their efforts.
faragon 9y ago
"Hey Alexa, compute my weekly food/things purchase with optimized cost alternatives"... In my opinion, Amazon will be huge, and it is just starting. What worries me the most is that they will have no competition. Amazon is "killing" many small (and big) businesses because their customer service is excellent. Times when the shop make you felt like a criminal when returning defective stuff are gone, for good. And now, those small (or big) business are improving customer service. So the customer win.
phoneyphone 9y ago
MG Siegler wrote a more exciting version of this on Medium. I'd link to it but on mobile right now.

139 points by asanwal 9y ago

This article mentions that AI as a service (aka machine learning, OK, let's be honest, Deep Learning) will be a major pillar of their business in the future. However, the chances that they will be able to beat Google seems vanishingly small. EDIT: to justify why, let me make these points: Google has more machine learning relevant data. It has a strong brand image as "THE company for AI " It has (at this point in time at least) better machine learning hardware. This will change in the near future, but Google is far more likely to take a competitor in this area seriously and acquire them. Google has not one, but two (Deep mind and brain) world class research labs. Google's ML APIs are objectively better.

SomeStupidPoint 9y ago
Why? I imagine that data for ML is sort of a logistic curve of benefit, and that Amazon's assorted sources have them "on the plateau", even if not as high as Google. There's good reason to expect that we'll see several major players in ML/AI, just like we do in pretty much every other market.
discodave 9y ago
What makes you say that? Google is 'better' at AI? OK, even if you believe that to be true, like every other market AI will be decided by lots of factors other than who has the 'best' tech. Think VHS vs Beta or Mac vs PC. They include: 1. Cost. 2. Platform/Ecosystem development. 3. Regulatory compliance (lots of rules if you want to handle health/gov data). 4. Sales/Marketing (in this case, probably, marketing to enterprises). I would argue that Amazon is a clear leader in 2-4, and has the history as a low-margin retailer to be competitive in 1.
- mavelikara 9y ago
  +1 Google had the best data centers, yet Amazon won the data-center-as-a-service race.
  - venture_lol 9y ago
    What do you mean by best? In a car race, why would you want to build the best car? I just want my car to cross the finishing line first. Besides, there is no race. This is continuous evolution. The race has barely started, let alone ended
    - discodave 9y ago
      If you're talking about the "best" datacenters... Google hit upon the strategy of scale-out-commodity hardware a few years before Amazon did. Also, Google talks more about their infrastructure than Amazon does, so people often think it's "better" from the outside. Whether it is actually better or not is probably an unknowable question from the outside and even if you had all the data it might depend on how you trade off speed, power efficiency, cost etc.
      - justicezyx 9y ago
        Google is very secretive about its DCs... They appear open, just because they are much more advanced than you can imagine...
  - ruleabidinguser 9y ago
    My impression is that GCE is relatively young and growing very fast. To say Amazon won seems premature to say the least. This is an active battle.
IBM 9y ago
Why? Isn't the thing about AI that everyone in the field wants to publish? Doesn't that mean all of their competitors will benefit from their research? It seems to me that Amazon will likely win because they're better at serving customers and willing to engage in price wars.
straightforward 9y ago
> However, the chances that they will be able to beat Google seems vanishingly small. I'm not sure about that, for one main reason: Google's acquisitiveness regarding data is even more notorious than its habit of losing interest in products and dropping them suddenly. Both are major turnoffs for business customers, to put it mildly. Amazon, while it does have a habit of vigorously competing with its own customers (in the retail "marketplace" space, and in others - I find the whole Amazon vs. Netflix dynamic absolutely fascinating) is at least reliable in provision of services and transparent about the exchange of cash for value. In other words, Amazon is, at heart, a ruthless retailer, where Google is at heart an intelligence agency with occult motives. Google usually has the better tech, but Amazon's the company people are comfortable doing business with. Edit: I should also say, this listicle of an article is mostly bunk. Lab126 is not a great hardware design shop. The Echo/Alexa "ecosystem" is mostly a bunch of (to be fair, well-considered) first-party integration deals to support popular home automation products - "skills" are a joke for discoverability and usability reasons, even if there were a market for them, which there isn't. I do agree that logistics (and operations more generally) is an enormous strength. Probably the key one, because Amazon doesn't usually come with the firstest or the mostest - it just executes relentlessly at complex, labor intensive tasks. It is at its strongest in places where it is not primarily competing on tech or features but on consistent execution and the customer reputation that comes from that.
- curun1r 9y ago
  > where Google is at heart an intelligence agency with occult motives That seems off to me. Google is, at heart, an advertiser. This leads to Amazon being more customer centric because most Google customers are actually the product Google is selling and most Google "products" are just the lures they use to attract their actual product. Google never loses interest in their products, but they frequently choose to switch their method of attracting the eyeballs they sell. No cloak and dagger explanations needed.
  - straightforward 9y ago
    Google BECAME an advertiser. Some of us remember the pre-advertising, and later pre-Doubleclick-acquisition Google. I'm not implying Google's motives are "cloak and dagger," just that they are not transparent beyond "index all the world's knowledge" (with all that implies.) This is the mission it started with, which isn't in and of itself a complete business model. It's the model of an intelligence agency, and that's what I meant by my statement. Right now, advertising brings in the money, but it'd be a breathtaking failure of imagination and intellect for that to be the "best and highest use" of Google's corpus. An optimist would say "advertising subsidized google's mission which is essentially one of public service." A pessimist would say "who knows WHAT google will do (or may already be doing) with what it knows - but it's probably evil." I'm neither, valuing the services Google provides while distrusting the power it has based on its data and reach.
venture_lol 9y ago
And how do you know that? The field is huge and mind boggling. I would think, considering the breadth of AMZN, they stand a better chance of being able to apply AI to for a wider impact
kryptiskt 9y ago
You could have made the same argument against AWS in the first place, how could a retailer possibly succeed against the likes of Google? Technical excellency isn't the only factor deciding success.
- venture_lol 9y ago
  Yes, obsolescence (all aspects) has always been the bane of any leader and entrenched entity. There are many factors that are in favor of AMZN and GOOG and the likes. Factors that are for you can also work against you. Generational shift of competency and drive. People get older, a bit rounder around the waist, wealthier and are also getting more choices. All companies have to deal with this factor. And some will do that better than other. You change the world and the world will change and change you. Are you able to adapt and account for all changes?
handedness 9y ago
> However, the chances that they will be able to beat Google seems vanishingly small. The respective track records of the two companies suggests otherwise.
- tyingq 9y ago
  Google doesn't know how to market and sell when there's competition. Not much sales expertise is required to make people buy into AdWords. I've been in the room when they try to sell GCE. The sales pitch is roughly "you are not smart enough to figure this out on your own, so you need to buy this". That may be the case, but it's not the best pitch. For the one where I was in the room, Amazon won out, even though they were clearly more expensive. They knew what buttons to push, and what buttons not to. And they knew how to at least fake a bit of humility when it mattered.
ryanSrich 9y ago
I couldn't disagree more. The entirety of the internet runs on AWS. The rest is an inconsequential rounding error. > Google has more machine learning relevant data Subjective. Relevant to what? ______________ > It has a strong brand image as "THE company for AI " AI is so early there's isn't a recognized brand yet. Maybe to the HN crowd, but that's astronomically small in the grand scheme of things. ______________ > It has (at this point in time at least) better machine learning hardware. This will change in the near future, but Google is far more likely to take a competitor in this area seriously and acquire them. Competing on commodities? Doesn't seem likely. ______________ > Google has not one, but two (Deep mind and brain) world class research labs. Again. Doesn't seem like much of an upper hand. ______________ > Google's ML APIs are objectively better. AWS doesn't need better APIs or Developer UX. That's not what this is about.
- pg314 9y ago
  > The entirety of the internet runs on AWS. The rest is an inconsequential rounding error. None of the top 5 Alexa websites [1] (Google, YouTube, Facebook, Baidu and Wikipedia) run on AWS as far as I know. I'm not sure what rounding mode you're using. [1] https://en.wikipedia.org/wiki/List_of_most_popular_websites https://en.wikipedia.org/wiki/List_of_most_popular_websites
- deepnotderp 9y ago
  Ha. DL hardware != a commodity Pretty sure having two of the premier DL labs is an upper hand in deep learning... Well then what on earth does Amazon offer that's different from Google?
ww520 9y ago
Amazon probably has more shopping data. More importantly, more credit card fraud data to train an AI fraud detection system.
empath75 9y ago
They don't need to be doing cutting edge research to commoditize machine learning as a product.

rrggrr 9y ago

I can't see how Oracle and IBM can compete long-term against the breadth of IT infrastructure Amazon has built. I can't see how Walmart and Target can compete with the distribution network and frictionless transactional model Amazon has developed. I'm not sure any company has the same depth of real-world data for training AI systems... 300 million users "liking" with their wallets and not a simple mouse click for example. Its been 127 years since the Sherman anti-trust act was passed. Its probably time for a serious re-think.

L_Rahman 9y ago
Are you a Stratechery / Ben Thompson reader by any chance?
sol_remmy 9y ago
It worries me how easily you call for the government to take control of a multinational company and forcefully split it into pieces.
- rrggrr 9y ago
  I said it was time to re-think anti-trust. You brought your own issues to the table and assumed I was calling for a breakup.
  - pedalpete 9y ago
    Can you give more details on what you are suggesting then?
user5994461 9y ago
There are hundreds of shop chains like wallmart that also have millions of customers coming to their shop and spend real money. Warehouses and inventories have been counting the most successful and most profitable products for a very long time. Didn't wait for amazon.
exolymph 9y ago
I've written about this take, which I disagree with: https://www.inc.com/sonya-mann/aws-outage-centralization.html https://www.inc.com/sonya-mann/aws-outage-centralization.htm...

justicezyx 9y ago

AI is the pillar for almost everything in the future. AI is the new Internet. I cannot get it why people are still analyzing that some big player is investing in AI...

dkrich 9y ago

I continue to be bearish on Amazon long-term. The notion that shoppers will one day buy things simply with the push of a button or saying "Alexa, get me some paper towels" seems extremely far-fetched to me. Most shoppers are extremely price-sensitive and won't buy things before researching the price, save possibly for a few low-price staples like toilet paper or soap. So this idea that Amazon keeps suggesting where people are shopping with just their voices, seems DOA. But even if people do prefer convenience over price, there's no money in delivering groceries to people. Groceries are notoriously low-margin, one of the lowest margin businesses there is, so delivering groceries to people doesn't seem like it's going to make Amazon the trillion-dollar company some people think it will eventually become. Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? Sure, they have distribution facilities, but so does every major grocery and retail chain. As for AWS, I'm not real high on that side of the business, either. Despite being the runaway leader in cloud service, they make very little money in it so I'm not very confident that their margins will increase as competition from Microsoft and Google only intensifies. I'm not at all suggesting that Amazon is going away, and what they've done to this point is nothing short of extraordinary. I just think long term that they will settle in as a large American retailer that reshaped the retail landscape for other stores that will eventually catch up.

dkarl 9y ago
Looking forward, 10-20 years, maybe the delivery cost issue will be solved with self-driving vehicles and robotic deliveries. But then, why would Amazon be the sole beneficiary of that development and not every grocery store? 10-20 years, sure, but that's a big spread. What if it takes twenty years for grocery stores to get that stuff and Amazon has it in ten? Given the fragmentation of grocery stores and their focus on actual stores I imagine they will have a hard time catching up technologically, plus businesses with brick and mortar roots don't have a great track record at building ways for customers to bypass the brick and mortar. Imagine the time they'll waste on marketing, astroturf, and lobbying to try to stave off automated home delivery before they give up and actually try to make the technology work. That gives Amazon even more time make money and draw further ahead.

amelius 9y ago

I'm wondering why Google doesn't extend the functionality of their "shop" button (it's right above the search bar), to compete directly with Amazon's 3rdparty retail strategy (?)

harigov 9y ago
They tried that and even have a Google Shopping Express subscription that was intended to complement that. It's just Google being Google and not being focused in their efforts.

faragon 9y ago

"Hey Alexa, compute my weekly food/things purchase with optimized cost alternatives"... In my opinion, Amazon will be huge, and it is just starting. What worries me the most is that they will have no competition. Amazon is "killing" many small (and big) businesses because their customer service is excellent. Times when the shop make you felt like a criminal when returning defective stuff are gone, for good. And now, those small (or big) business are improving customer service. So the customer win.

phoneyphone 9y ago

MG Siegler wrote a more exciting version of this on Medium. I'd link to it but on mobile right now.