5 ms·

I think Bezos is a bad argument for us being in a new guilded age. When you look at Rockefeller, Carnegie, Ford, and perhaps even Gates, they had near total co

I think Bezos is a bad argument for us being in a new guilded age. When you look at Rockefeller, Carnegie, Ford, and perhaps even Gates, they had near total control over some aspect of the American Economy. And they used that control to make incredible profits. Amazon is trying to do the same, but they haven't done so yet. Their retail business is not wildly profitable (if at all). They haven't monopolized online retail (and may never be able to do so). Amazon may be the next Walmart, but they're not the next Standard Oil. And the market has priced in huge expectations that Amazon will eventually have to meet, or investor exuberance will wane.

save_ferris 8y ago
> When you look at Rockefeller, Carnegie, Ford, and perhaps even Gates, they had near total control over some aspect of the American Economy According to TechCrunch[1], Amazon controls 49% of the entire e-commerce market, and 5% of the entire retail market overall. They're also in a position to jockey for even more market share as retail continues to move online. Amazon is in the perfect position to completely own e-commerce, so it's quite possible that we're just early in making our comparison. [1] https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-commerce-market-is-now-49-or-5-of-all-retail-spend/ https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-...
- stickfigure 8y ago
  49% could be the high-water mark; we don't know yet. If Amazon doesn't get a grip on the counterfeit product problem, sales could plummet. The switching cost to a new retailer is low.
  - sushid 8y ago
    But Amazon's war chest is near infite. Jet had half a billion in funding but was barely making a dent (while bleeding money) against Amazon and its unprofitable for anyone else pricing. Amazon barely makes a profit with their streamlined system so how can anyone compete with that. And we've seen what they can do when a competitor emerges like diapers.com. They bury them in the ground Walmart of the 90s style.
  - mistermann 8y ago
    > 49% could be the high-water mark; we don't know yet As could have been 25, 26, 32, 35, 37, etc If you were a betting man, would you bet 49% is a high water mark?
zeusk 8y ago
> Amazon is trying to do the same, but they haven't done so yet. They are not wildly profitable (if at all). They haven't monopolized online retail (and may never be able to do so). Please tell me you're being sarcastic. They're hiding profits and just plowing all the revenue back into the business while undercutting both competitors and their own employees.
- nostromo 8y ago
  I'm ex-Amazon and no, I'm not being sarcastic. It's an open question if Amazon will ever be able to raise prices and reap those promised profits without losing marketshare to the many players that would love to take them down. Right now I view Amazon as a very profitable web hosting company and a retail non-profit. Google and Microsoft, for comparison, were both much faster to get to monopoly-level marketshare. Amazon, at 24 years old, still isn't there.
  - deleted 8y ago
    [deleted]
  - CamTin 8y ago
    But a Monopoly on "stuff" and "moving stuff around" is a much more valuable Monopoly (pretty much by definition) than one in "eyeballs to advertise stuff to". Ultimately, the majority of Google's and Facebooks profits are from the advertisement of retail, services, and digital goods, which Amazon is trying (and doing very well) to monopolize. Sure, it may be harder to get there but the rewards are much better if you do. Would you rather be Pullitzer (advertising magnate) or Vanderbilt (transportation)? I'll take the latter every time from a pure $$$ standpoint. Bezos is actually trying to be both.
    - trocadero 8y ago
      Amazon (probably) makes about as much money from advertising as they do from their retail operations. When the margins for advertising is ~50% and retail is ~5% a little bit of ad revenue can go farther than a lot of retail revenue. Of course that analysis ignores that the retail business is what allows Amazon to have an advertising business. But the GP is largely accurate. Amazon is most well known for their retail but it's not really what makes them the money. AWS is their cash cow and advertising is becoming their second.
mudil 8y ago
I agree. In terms of market dominance, Google is a far bigger monopoly. It dominates search, ads, and internet overall.
- dan-robertson 8y ago
  I wouldn’t say google dominates the internet overall. They may dominate your internet as the way into most of the internet for you is google (or some other search provider). For a large number of people, especially in the developing world, Facebook is the internet. But perhaps such people mostly access the internet with android phones and so have sort-of-google phones and perhaps use google maps and google play store and such.
ajmurmann 8y ago
It makes no sense for Amazon to turn a profit. They invest everything back into growth. This way the stock keeps going up, Bezos and co sell their stock and pay long term capital gains tax instead of income tax. This way Bezos can get a better tax rate than his secretary.
- TangoTrotFox 8y ago
  At Amazon's scale you cannot simply turn tens of billions of dollars into economically meaningful growth. If you could, and expect proportional increase in valuation, then nearly every company would be doing the exact same thing. Take for instance Apple. They are netting some $48 billion a year with much more than that on hand. They clearly desperately want to move beyond just the iPhone and have been trying all sorts of ideas, but nothing is really sticking. And so they've been left to resort to spending literally hundreds of billions of dollars on share buybacks to try to increase the stock price that way. If they could just invest their profits into growth and expect proportional benefit, that's precisely what they would be doing!
  - imtringued 8y ago
    If they have no use for their money they should give it back to the shareholders who then invest it into companies that actually need it.
    - Denzel 8y ago
      That's sort of what a stock buyback is. Think about it.
  - ajmurmann 8y ago
    The bulk of Amazon's "investments" are leaving profits on the table and thus undercutting competitors and in essence buying market share.
    - TangoTrotFox 8y ago
      "Undercutting competitors" and "buying market share" is literally what defines competition. And this is phenomenally good both for the consumer and for the companies that are able to slim themselves down enough to succeed. Comcast, for instance, isn't really a monopoly. There are numerous other big players in that industry. But the thing is that instead of "undercutting competitors" and "buying market share" the competitors all agree to cooperate and split up the market. The result is when you buy something from Amazon, you're hitting quite close to the wholesale cost of that item. And when you pay your high speed internet bill to Comcast, what you're paying is some large multiple of the real cost of service.
mrb 8y ago
«They are not wildly profitable (if at all).» Often repeated, but wrong. Their financials might show almost no net income (just $3B) but that's just because they choose to reinvest every dollar of gross profits into themselves to grow. Just look at their income statement: in 2017 they invested $23B into "R&D". These are profits they could have just taken. Obviously, reinvesting in themselves has been a fantastic choice. That's how they were able to grow their revenues ~10× over the last 10 years ($20B to $180B)... As long as reinvesting works so well, you will keep seeing a "meager" net income of $3B yearly.
- baybal2 8y ago
  You can expect that these RnD expenses just being regular opex. Classic dotcom era trick
  - sjg007 8y ago
    I wonder if the irs would crack down on this.
  - mrb 8y ago
    Highly doubtful. You don't even have to trust the word of their financial auditors to get convinced. Just knowing that AMZN's growth over the last 10+ years was entirely self-funded is clear evidence they have cash laying around to reinvest into the company.

save_ferris 8y ago

> When you look at Rockefeller, Carnegie, Ford, and perhaps even Gates, they had near total control over some aspect of the American Economy According to TechCrunch[1], Amazon controls 49% of the entire e-commerce market, and 5% of the entire retail market overall. They're also in a position to jockey for even more market share as retail continues to move online. Amazon is in the perfect position to completely own e-commerce, so it's quite possible that we're just early in making our comparison. [1] https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-commerce-market-is-now-49-or-5-of-all-retail-spend/ https://techcrunch.com/2018/07/13/amazons-share-of-the-us-e-...

stickfigure 8y ago
49% could be the high-water mark; we don't know yet. If Amazon doesn't get a grip on the counterfeit product problem, sales could plummet. The switching cost to a new retailer is low.
- sushid 8y ago
  But Amazon's war chest is near infite. Jet had half a billion in funding but was barely making a dent (while bleeding money) against Amazon and its unprofitable for anyone else pricing. Amazon barely makes a profit with their streamlined system so how can anyone compete with that. And we've seen what they can do when a competitor emerges like diapers.com. They bury them in the ground Walmart of the 90s style.
- mistermann 8y ago
  > 49% could be the high-water mark; we don't know yet As could have been 25, 26, 32, 35, 37, etc If you were a betting man, would you bet 49% is a high water mark?

zeusk 8y ago

> Amazon is trying to do the same, but they haven't done so yet. They are not wildly profitable (if at all). They haven't monopolized online retail (and may never be able to do so). Please tell me you're being sarcastic. They're hiding profits and just plowing all the revenue back into the business while undercutting both competitors and their own employees.

nostromo 8y ago
I'm ex-Amazon and no, I'm not being sarcastic. It's an open question if Amazon will ever be able to raise prices and reap those promised profits without losing marketshare to the many players that would love to take them down. Right now I view Amazon as a very profitable web hosting company and a retail non-profit. Google and Microsoft, for comparison, were both much faster to get to monopoly-level marketshare. Amazon, at 24 years old, still isn't there.
- deleted 8y ago
  [deleted]
- CamTin 8y ago
  But a Monopoly on "stuff" and "moving stuff around" is a much more valuable Monopoly (pretty much by definition) than one in "eyeballs to advertise stuff to". Ultimately, the majority of Google's and Facebooks profits are from the advertisement of retail, services, and digital goods, which Amazon is trying (and doing very well) to monopolize. Sure, it may be harder to get there but the rewards are much better if you do. Would you rather be Pullitzer (advertising magnate) or Vanderbilt (transportation)? I'll take the latter every time from a pure $$$ standpoint. Bezos is actually trying to be both.
  - trocadero 8y ago
    Amazon (probably) makes about as much money from advertising as they do from their retail operations. When the margins for advertising is ~50% and retail is ~5% a little bit of ad revenue can go farther than a lot of retail revenue. Of course that analysis ignores that the retail business is what allows Amazon to have an advertising business. But the GP is largely accurate. Amazon is most well known for their retail but it's not really what makes them the money. AWS is their cash cow and advertising is becoming their second.

mudil 8y ago

I agree. In terms of market dominance, Google is a far bigger monopoly. It dominates search, ads, and internet overall.

dan-robertson 8y ago
I wouldn’t say google dominates the internet overall. They may dominate your internet as the way into most of the internet for you is google (or some other search provider). For a large number of people, especially in the developing world, Facebook is the internet. But perhaps such people mostly access the internet with android phones and so have sort-of-google phones and perhaps use google maps and google play store and such.

ajmurmann 8y ago

It makes no sense for Amazon to turn a profit. They invest everything back into growth. This way the stock keeps going up, Bezos and co sell their stock and pay long term capital gains tax instead of income tax. This way Bezos can get a better tax rate than his secretary.

TangoTrotFox 8y ago
At Amazon's scale you cannot simply turn tens of billions of dollars into economically meaningful growth. If you could, and expect proportional increase in valuation, then nearly every company would be doing the exact same thing. Take for instance Apple. They are netting some $48 billion a year with much more than that on hand. They clearly desperately want to move beyond just the iPhone and have been trying all sorts of ideas, but nothing is really sticking. And so they've been left to resort to spending literally hundreds of billions of dollars on share buybacks to try to increase the stock price that way. If they could just invest their profits into growth and expect proportional benefit, that's precisely what they would be doing!
- imtringued 8y ago
  If they have no use for their money they should give it back to the shareholders who then invest it into companies that actually need it.
  - Denzel 8y ago
    That's sort of what a stock buyback is. Think about it.
- ajmurmann 8y ago
  The bulk of Amazon's "investments" are leaving profits on the table and thus undercutting competitors and in essence buying market share.
  - TangoTrotFox 8y ago
    "Undercutting competitors" and "buying market share" is literally what defines competition. And this is phenomenally good both for the consumer and for the companies that are able to slim themselves down enough to succeed. Comcast, for instance, isn't really a monopoly. There are numerous other big players in that industry. But the thing is that instead of "undercutting competitors" and "buying market share" the competitors all agree to cooperate and split up the market. The result is when you buy something from Amazon, you're hitting quite close to the wholesale cost of that item. And when you pay your high speed internet bill to Comcast, what you're paying is some large multiple of the real cost of service.

mrb 8y ago

«They are not wildly profitable (if at all).» Often repeated, but wrong. Their financials might show almost no net income (just $3B) but that's just because they choose to reinvest every dollar of gross profits into themselves to grow. Just look at their income statement: in 2017 they invested $23B into "R&D". These are profits they could have just taken. Obviously, reinvesting in themselves has been a fantastic choice. That's how they were able to grow their revenues ~10× over the last 10 years ($20B to $180B)... As long as reinvesting works so well, you will keep seeing a "meager" net income of $3B yearly.

baybal2 8y ago
You can expect that these RnD expenses just being regular opex. Classic dotcom era trick
- sjg007 8y ago
  I wonder if the irs would crack down on this.
- mrb 8y ago
  Highly doubtful. You don't even have to trust the word of their financial auditors to get convinced. Just knowing that AMZN's growth over the last 10+ years was entirely self-funded is clear evidence they have cash laying around to reinvest into the company.