3 ms·

It took Amazon around six to seven years to see its first profitable quarter, and they still went into the red sometimes when doing major investments thereafter

It took Amazon around six to seven years to see its first profitable quarter, and they still went into the red sometimes when doing major investments thereafter.

paulluuk 2y ago
I could be wrong, but I believe Amazon's business model was very simple: do everything as cheaply as possible, run at a loss until all competition is dead, and then raise prices once we dominate the market. I don't think OpenAI has that option.
- dukeyukey 2y ago
  I don't think that's true, even in rural areas without choices Amazon is pretty cheap.
- karmakurtisaani 2y ago
  Also, I think Amazon invested everything into growth, for which there was a lot of potential. Seems different for the AI companies.
- delecti 2y ago
  Eh, it's more that per-transaction they were profitable, so they needed to scale enough to make up for their fixed costs. OpenAI's fixed costs are enormous, and they're only bringing in pennies from subscriptions.
- rongrobert 2y ago
  This wasn't the business model. The business model was you could sell books over the internet at a much cheaper cost compared to Barnes and Noble or Borders because they weren't paying for physical locations and there was no sales tax on the transactions because it was on the internet.
jasode 2y ago
>It took Amazon around six to seven years to see its first profitable quarter, A key difference from OpenAI is that Amazon was cash flow positive from very early on and before that first profitable quarter. They only needed one funding round Series A of $8 million instead of repeatedly trying to raise extra rounds of funding from new VC investors. The Amazon startup already had enough free cash from operations to internally fund their warehouse expansions. The "Amazon had no profits" was an accounting side-effect because of re-investment. Anybody seriously studying Amazon's financial statements in the late 1990s would have paid more attention to their cash flow rather than "accounting profits". On the other hand, OpenAI doesn't have the same positive cash flow situation as early Amazon. They are truly burning more money than they take in. They have to get billions from new investors to buy GPUs and pay salaries. ($40 billion raised in latest investment round.) They are cash flow negative. The cash flow from ChatGPT subscription fees is not enough to internally fund their growth. [1] https://en.wikipedia.org/wiki/Free_cash_flow https://en.wikipedia.org/wiki/Free_cash_flow
- nl 2y ago
  Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. ChatGPT was released in Nov 2022. They are expecting $12B in revenue this year[2]. [1] https://adainsights.com/blog/when-did-amazon-start-making-money https://adainsights.com/blog/when-did-amazon-start-making-mo... [2] https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-triple-to-12point7-billion-this-year-sources-say.html https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-...
  - jasode 2y ago
    >Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. Thank you for the correction. My memory was faulty and Jeff Bezos actually said, "we always had positive gross margins". Deep link: https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s The positive gross margins allowed enough discretionary use of cash to take out loans and service that debt. I just looked at the 1998 10k filing and the page on "Consolidated Statements of Cash Flows" has "Net cash provided by (used in) operating activities" of positive $31 million compared to negative -$6 million in 1996.
rchaud 2y ago
This is the textbook definition of survivorship bias. Amazon out-priced everybody when it arrived, because it didn't charge any sales tax for years, until the laws had to be re-written to close the loophole. It didn't have the eye-watering sums poured into it that AI has had, nor did it have any significant competition internationally. Things couldn't be more different for OpenAI.

It took Amazon around six to seven years to see its first profitable quarter, and they still went into the red sometimes when doing major investments thereafter.

paulluuk 2y ago

I could be wrong, but I believe Amazon's business model was very simple: do everything as cheaply as possible, run at a loss until all competition is dead, and then raise prices once we dominate the market. I don't think OpenAI has that option.

dukeyukey 2y ago
I don't think that's true, even in rural areas without choices Amazon is pretty cheap.
karmakurtisaani 2y ago
Also, I think Amazon invested everything into growth, for which there was a lot of potential. Seems different for the AI companies.
delecti 2y ago
Eh, it's more that per-transaction they were profitable, so they needed to scale enough to make up for their fixed costs. OpenAI's fixed costs are enormous, and they're only bringing in pennies from subscriptions.
rongrobert 2y ago
This wasn't the business model. The business model was you could sell books over the internet at a much cheaper cost compared to Barnes and Noble or Borders because they weren't paying for physical locations and there was no sales tax on the transactions because it was on the internet.

jasode 2y ago

>It took Amazon around six to seven years to see its first profitable quarter, A key difference from OpenAI is that Amazon was cash flow positive from very early on and before that first profitable quarter. They only needed one funding round Series A of $8 million instead of repeatedly trying to raise extra rounds of funding from new VC investors. The Amazon startup already had enough free cash from operations to internally fund their warehouse expansions. The "Amazon had no profits" was an accounting side-effect because of re-investment. Anybody seriously studying Amazon's financial statements in the late 1990s would have paid more attention to their cash flow rather than "accounting profits". On the other hand, OpenAI doesn't have the same positive cash flow situation as early Amazon. They are truly burning more money than they take in. They have to get billions from new investors to buy GPUs and pay salaries. ($40 billion raised in latest investment round.) They are cash flow negative. The cash flow from ChatGPT subscription fees is not enough to internally fund their growth. [1] https://en.wikipedia.org/wiki/Free_cash_flow https://en.wikipedia.org/wiki/Free_cash_flow

nl 2y ago
Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. ChatGPT was released in Nov 2022. They are expecting $12B in revenue this year[2]. [1] https://adainsights.com/blog/when-did-amazon-start-making-money https://adainsights.com/blog/when-did-amazon-start-making-mo... [2] https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-triple-to-12point7-billion-this-year-sources-say.html https://www.cnbc.com/2025/03/26/openai-expects-revenue-will-...
- jasode 2y ago
  >Amazon was founded in 1995 and became cash flow positive in 2002[1], seven years later. Thank you for the correction. My memory was faulty and Jeff Bezos actually said, "we always had positive gross margins". Deep link: https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s https://www.youtube.com/watch?v=zN1PyNwjHpc&t=36m11s The positive gross margins allowed enough discretionary use of cash to take out loans and service that debt. I just looked at the 1998 10k filing and the page on "Consolidated Statements of Cash Flows" has "Net cash provided by (used in) operating activities" of positive $31 million compared to negative -$6 million in 1996.

rchaud 2y ago

This is the textbook definition of survivorship bias. Amazon out-priced everybody when it arrived, because it didn't charge any sales tax for years, until the laws had to be re-written to close the loophole. It didn't have the eye-watering sums poured into it that AI has had, nor did it have any significant competition internationally. Things couldn't be more different for OpenAI.