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Can you justify the claim that Amazon is mostly software? Is it because they hire a lot of well-paid software developers? Microsoft produces a lot of value fro

Can you justify the claim that Amazon is mostly software? Is it because they hire a lot of well-paid software developers? Microsoft produces a lot of value from software, but how much new technology are they producing? Some for sure, but how much? I don't think your metrics prove the claim... Facebook has developed a software product, and earned a lot of value from advertising. They've also developed several new technologies along the way, but I'm not sure their advertising revenue or market cap are good trackers of their R&D output. Software products obviously scale very well, which makes them very valuable. But are you counting new technologies in terms of dollars earned? That's very different than just the number of innovations, because it depends on the size of the market for them, your capacity to exploit it, etc.

Grimm1 7y ago
Not OP but, it is my understanding Amazon Web Services is their biggest money maker, that's where I think that claim comes from.
- jariel 7y ago
  'Market cap' is not the best choice of metrics here, it's really a measure of investor surpluses, ignore the rest of the equation. Wallmart, Exxon, Amazon retail revenues completely dwarf the 'tech sector' - it's just that their margins are more narrow, in most cases, surpluses to consumers are vast. Honestly 'profit to investors' should be one of the last metrics most of us care about. Most individuals should be far more concerned about surpluses they receive through lower prices or higher wages, as they'll nary get any real material lift via investment income. In this way, it's kind of odd how 'market cap' is so widely used and perceived as some kind of great measure. It's good for investors, and unless you're an investor, it's bad for you. Every dollar that goes into the pocket of Amazon's investors should be a dollar in your pocket in the form of lower prices or better products/services. Have a look at the biggest companies by revenue [1] The only 'tech' companies on there are Apple and Amazon. Amazon makes the hardware, and most of Amazon's revenue is retail goods. There are not mostly software companies on that list. Actually, a lot of HNer discussions tend to veer into this magical surplus world as well, I'd encourage anyone to have a look at 'big revenue companies' because it gives a much clearer picture of how the world works outside our bubble. [1] https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...
  - jariel 7y ago
    Edit: meant to write 'Apple makes hardware'.
  - jldugger 7y ago
    I'm curious why you think revenue matters more than profits. Take two hypothetical companies, say ebay` and amazon`. They both provide a marketplace, but slightly differently. ebay` allows manufacturers to list directly on their market for a fee. Amazon` buys from manufacturers and sells on their market for a markup equivalent to ebay's fee. Are these two companies substantially different? I don't think so but the revenue frame of reference says they are,
    - jariel 7y ago
      Revenue will give an indication of the size of the business activity. Valuation is just a measure of profits, which can vary a lot. From an economic standpoint, what matters more will be revenue, it's a better indication of how meaningful what is done impacts the world. As for Ebay vs. Amazon - for 3rd party listings, it doesn't matter that much, it's all accounting, but when Amazon actually does buy and sell stuff, it's very material because of a) cash flows: they send off cash (or get huge credit) to buy stuff b) they have inventory, warehouses, workers c) they are the merchant of record and take on chargeback risk, returns etc.. At the scale that is meaningful. But I don't think that this comparison really highlights the difference between 'high margin' and 'high revenue' so much as for example AirBnB vs. Toyota. Even though Toyota is not worth that much more than AirBnB, it's considerably important to the economy whereas AirBnB is almost irrelevant.
  - triceratops 7y ago
    > The only 'tech' companies on there are Apple and Amazon. And Samsung, Foxconn, and Alphabet. So 10% of the list.
triceratops 7y ago
> Can you justify the claim that Amazon is mostly software? For starters, Amazon derives most of its profits from AWS.
- jbay808 7y ago
  Of course a lot of software goes into making AWS work. Is AWS a software business or a hardware business though? It certainly lets me get away from hardware. But I don't think that's true for AWS itself... I mean, this conversation can keep going - I'm not really interested in digging in deeply to find the answer, because I don't think there's anything meaningful to be found. But I do object to scratch-the-surface level analysis like "Amazon is a valuable company these days, I guess the innovation happening in software outpaces all other fields of research combined" or "AWS makes most of Amazon's profit these days, which makes Amazon a software company". Amazon might be a software company, but it might not be; it might be a logistics company, a consumer electronics company, a retail company, a data analytics company, a media company, a server farm company... it's not enough to say that AWS makes the most money, thus it's a software company.
- ksec 7y ago
  >For starters, Amazon derives most of its profits from AWS. Amazon has over $200B of revenue from e-commerce, $1 Profits. AWS Generate ~$25B revenue, $1M Profits. Here is the headline. AWS ( Its Cloud Division ) Generating 1 Million times more profits than Amazon Retail!. Or AWS Generate more profits than all of other Amazon Department combined! What this mean is that Amazon is a vertically integrated Retail company ( Where Retail here includes Online ), with logistics, and transportation. Amazon is mostly software / AWS is a Silicon Valley / I.T / Tech view bubble. Forgot to mention AWS is actually lots of hardware, land cost for DC, etc. i.e Not Software.
  - triceratops 7y ago
    > Forgot to mention AWS is actually lots of hardware, land cost for DC, etc. i.e Not Software. Cool, yeah, so you're saying if I go buy a bunch of servers and land I too can compete with AWS? It doesn't matter what software it runs? The hardware and datacenter stuff is commodity. Table-stakes. Everyone has to have it. That's why they don't even manufacture the servers themselves. Software is where the value add is. This goes for any cloud provider, BTW.

Grimm1 7y ago

Not OP but, it is my understanding Amazon Web Services is their biggest money maker, that's where I think that claim comes from.

jariel 7y ago
'Market cap' is not the best choice of metrics here, it's really a measure of investor surpluses, ignore the rest of the equation. Wallmart, Exxon, Amazon retail revenues completely dwarf the 'tech sector' - it's just that their margins are more narrow, in most cases, surpluses to consumers are vast. Honestly 'profit to investors' should be one of the last metrics most of us care about. Most individuals should be far more concerned about surpluses they receive through lower prices or higher wages, as they'll nary get any real material lift via investment income. In this way, it's kind of odd how 'market cap' is so widely used and perceived as some kind of great measure. It's good for investors, and unless you're an investor, it's bad for you. Every dollar that goes into the pocket of Amazon's investors should be a dollar in your pocket in the form of lower prices or better products/services. Have a look at the biggest companies by revenue [1] The only 'tech' companies on there are Apple and Amazon. Amazon makes the hardware, and most of Amazon's revenue is retail goods. There are not mostly software companies on that list. Actually, a lot of HNer discussions tend to veer into this magical surplus world as well, I'd encourage anyone to have a look at 'big revenue companies' because it gives a much clearer picture of how the world works outside our bubble. [1] https://en.wikipedia.org/wiki/List_of_largest_companies_by_revenue https://en.wikipedia.org/wiki/List_of_largest_companies_by_r...
- jariel 7y ago
  Edit: meant to write 'Apple makes hardware'.
- jldugger 7y ago
  I'm curious why you think revenue matters more than profits. Take two hypothetical companies, say ebay` and amazon`. They both provide a marketplace, but slightly differently. ebay` allows manufacturers to list directly on their market for a fee. Amazon` buys from manufacturers and sells on their market for a markup equivalent to ebay's fee. Are these two companies substantially different? I don't think so but the revenue frame of reference says they are,
  - jariel 7y ago
    Revenue will give an indication of the size of the business activity. Valuation is just a measure of profits, which can vary a lot. From an economic standpoint, what matters more will be revenue, it's a better indication of how meaningful what is done impacts the world. As for Ebay vs. Amazon - for 3rd party listings, it doesn't matter that much, it's all accounting, but when Amazon actually does buy and sell stuff, it's very material because of a) cash flows: they send off cash (or get huge credit) to buy stuff b) they have inventory, warehouses, workers c) they are the merchant of record and take on chargeback risk, returns etc.. At the scale that is meaningful. But I don't think that this comparison really highlights the difference between 'high margin' and 'high revenue' so much as for example AirBnB vs. Toyota. Even though Toyota is not worth that much more than AirBnB, it's considerably important to the economy whereas AirBnB is almost irrelevant.
- triceratops 7y ago
  > The only 'tech' companies on there are Apple and Amazon. And Samsung, Foxconn, and Alphabet. So 10% of the list.

triceratops 7y ago

> Can you justify the claim that Amazon is mostly software? For starters, Amazon derives most of its profits from AWS.

jbay808 7y ago
Of course a lot of software goes into making AWS work. Is AWS a software business or a hardware business though? It certainly lets me get away from hardware. But I don't think that's true for AWS itself... I mean, this conversation can keep going - I'm not really interested in digging in deeply to find the answer, because I don't think there's anything meaningful to be found. But I do object to scratch-the-surface level analysis like "Amazon is a valuable company these days, I guess the innovation happening in software outpaces all other fields of research combined" or "AWS makes most of Amazon's profit these days, which makes Amazon a software company". Amazon might be a software company, but it might not be; it might be a logistics company, a consumer electronics company, a retail company, a data analytics company, a media company, a server farm company... it's not enough to say that AWS makes the most money, thus it's a software company.
ksec 7y ago
>For starters, Amazon derives most of its profits from AWS. Amazon has over $200B of revenue from e-commerce, $1 Profits. AWS Generate ~$25B revenue, $1M Profits. Here is the headline. AWS ( Its Cloud Division ) Generating 1 Million times more profits than Amazon Retail!. Or AWS Generate more profits than all of other Amazon Department combined! What this mean is that Amazon is a vertically integrated Retail company ( Where Retail here includes Online ), with logistics, and transportation. Amazon is mostly software / AWS is a Silicon Valley / I.T / Tech view bubble. Forgot to mention AWS is actually lots of hardware, land cost for DC, etc. i.e Not Software.
- triceratops 7y ago
  > Forgot to mention AWS is actually lots of hardware, land cost for DC, etc. i.e Not Software. Cool, yeah, so you're saying if I go buy a bunch of servers and land I too can compete with AWS? It doesn't matter what software it runs? The hardware and datacenter stuff is commodity. Table-stakes. Everyone has to have it. That's why they don't even manufacture the servers themselves. Software is where the value add is. This goes for any cloud provider, BTW.