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> The other inescapable conclusion is that whenever the quality of the shopping experience on Amazon and the needs of Amazon's advertising business clash, adver

by s17n 4y ago

> The other inescapable conclusion is that whenever the quality of the shopping experience on Amazon and the needs of Amazon's advertising business clash, advertising will win (just as it has on Google). Saying that the e-commerce arm is worthless isn't really the right way to think about it - the ads business only exists to due the e-commerce product. Both Amazon and Google are well aware that their ad revenues depend on their having users, who will ultimately leave if the product (ecommerce and search, respectively) isn't compelling. Both of them know that long-term success requires them to prioritize user experience. Do they make bad decisions, either due to misaligned incentives internally or due to simply making mistakes? Undoubtedly. But it's also worth considering that they probably get the tradeoff right a lot of the time and most people simply aren't bothered by ads nearly as much as you'd like them to be.

Thursday24 4y ago
Excellent perspective. Organisations are similar to individual human minds in structure, but scaled. They will make mistakes, just like people do, but also correct themselves over the long haul so that they can survive.
deleted 4y ago
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fmajid 4y ago
Obviously Amazon's e-commerce division is not worthless, but it often happens that conglomerates are worth less than the sum of their parts. Many activist investors have been calling to split AWS from Amazon.com, but the ad business can't be split from the store that brings it eyeballs.
- repsilat 4y ago
  > less than the sum of their parts At least with e-commerce and advertising it's clear they're worth more together. Without advertising the profits would be thin, and without e-commerce the advertising couldn't exist.
robocat 4y ago
Hard to know what fmajid means - although mentioning revenue is a serious black flag. Google’s search is a cost-centre and their advertising is a profit-centre. You could say Amazon is similar because in 2021 AWS made all the income and e-commerce made zero income[1]. I would be interested to see an analysis of income per business sector*, including their advertising sector, for Amazon. fmajid would need that information to be able to make the conclusions they drew. From article: “After selling $31 billion in ads last year, Amazon became the third-largest online ad company in the United States” Hard to know what this means, since we can’t know how much it “cost” Amazon for those ads (especially the cost of consumer dissatisfaction as the article mentions, and what is opportunity-cost?) * and ideally assets per sector as well, plus a metric for internal capital reinvestment (VC style). [1] https://www.investopedia.com/how-amazon-makes-money-4587523 https://www.investopedia.com/how-amazon-makes-money-4587523 Amazon unfortunately seems to only report on their segments: North America, International, and AWS.
Terretta 4y ago
> Both of them know that long-term success requires them to prioritize user experience. Of course user experience is prioritized: below advertiser experience. Prioritization doesn't just mean things are on top, for everything but the top item it means things are below other things.
- csa 4y ago
  > Of course user experience is prioritized: below advertiser experience. I’m not sure how much you’re into the Google ads world, but they have screwed the pooch on that recently as well (e.g., by gimping “exact match” keywords).
ClumsyPilot 4y ago
> it's also worth considering that they probably get the tradeoff right a lot of the time How did we arrive at this conclusion? No argument or evidence was put forward! My persobal experience on both Google and Amazon has declined to the point where I now prefer aliexpress - most of the time its the exact same item but cheaper

by s17n 4y ago

Thursday24 4y ago

Excellent perspective. Organisations are similar to individual human minds in structure, but scaled. They will make mistakes, just like people do, but also correct themselves over the long haul so that they can survive.

deleted 4y ago

[deleted]

fmajid 4y ago

Obviously Amazon's e-commerce division is not worthless, but it often happens that conglomerates are worth less than the sum of their parts. Many activist investors have been calling to split AWS from Amazon.com, but the ad business can't be split from the store that brings it eyeballs.

repsilat 4y ago
> less than the sum of their parts At least with e-commerce and advertising it's clear they're worth more together. Without advertising the profits would be thin, and without e-commerce the advertising couldn't exist.

robocat 4y ago

Hard to know what fmajid means - although mentioning revenue is a serious black flag. Google’s search is a cost-centre and their advertising is a profit-centre. You could say Amazon is similar because in 2021 AWS made all the income and e-commerce made zero income[1]. I would be interested to see an analysis of income per business sector*, including their advertising sector, for Amazon. fmajid would need that information to be able to make the conclusions they drew. From article: “After selling $31 billion in ads last year, Amazon became the third-largest online ad company in the United States” Hard to know what this means, since we can’t know how much it “cost” Amazon for those ads (especially the cost of consumer dissatisfaction as the article mentions, and what is opportunity-cost?) * and ideally assets per sector as well, plus a metric for internal capital reinvestment (VC style). [1] https://www.investopedia.com/how-amazon-makes-money-4587523 https://www.investopedia.com/how-amazon-makes-money-4587523 Amazon unfortunately seems to only report on their segments: North America, International, and AWS.

Terretta 4y ago

> Both of them know that long-term success requires them to prioritize user experience. Of course user experience is prioritized: below advertiser experience. Prioritization doesn't just mean things are on top, for everything but the top item it means things are below other things.

csa 4y ago
> Of course user experience is prioritized: below advertiser experience. I’m not sure how much you’re into the Google ads world, but they have screwed the pooch on that recently as well (e.g., by gimping “exact match” keywords).

ClumsyPilot 4y ago

> it's also worth considering that they probably get the tradeoff right a lot of the time How did we arrive at this conclusion? No argument or evidence was put forward! My persobal experience on both Google and Amazon has declined to the point where I now prefer aliexpress - most of the time its the exact same item but cheaper