Amazon: The company that doesn’t make money

Updated : Nov 11, 2019 in Articles

Amazon: The company that doesn’t make money

If you had invested just 90 dollars in Amazon
when it went public, back in 1997. Your investment would worth today over 100
thousand dollars. And if you would have been a little more generous
and raised that number to 900 dollars, you would have been today officially a millionaire. But how is it possible that such a huge tech
company with hundreds of thousands of employees doesn’t make money. Technically it’s profitable, but its income
is absolutely insignificant compared to its size. In 2017 for example, it made a little over
3 billion dollars, that number might seem a lot, but when you consider that it was valued
at 600 billion dollars, that number becomes irrelevant. And it’s not because the market was down. A year before that it made 2.3 billion dollars,
and for the rest of its existence, it was either at a loss or making just a few hundred
million. If you Compare that to other tech giants,
it will seem like Amazon is about to go broke. When Apple was valued at 600 billion dollars
for example, in 2016, it made over 45 billion dollars. If you take a look at any other tech giant,
you will realize that all of them are multiple times more profitable even though their market
cap is smaller. But guess what?! No one really cares! Even if Amazon makes only few hundred million,
no one will panic, and investors will keep throwing money into Amazon, and the stock
price will keep rising, and it will defiantly surpass apple in the coming future, because
of Bezoses strategy. In his first letter to shareholders in 1997,
he said – its all about the long run! In other words, Amazon would prioritize long-term
advantages over short-term profits. And focus on delivering as much value as possible
to the customers, by lowering the prices to their minimum. The philosophy behind it is simple. Attack any industry aggressively until your
competitors start bleeding and running out of cash until you dominate the market, even
if that means losing money in the short-run. And once you are on the top of the hill, rewards
are incredibly huge. Then you can raise the prices and do whatever
you want. In 2010 Amazon decided to get into a diaper
business and was the leading online retailer. So, Amazon simply chose to acquire that company,
but the founders refused to sell. Amazon threatened to drive diapers price to
zero if they wouldn’t sell and guess what?! That’s precisely what they did. They lowered their prices and offered amazon
prime for free for 3 months for parents to the point where literally started
bleeding cash and was forced to either shut down or sell to Amazon. I think you can guess what happened. But that’s just one of many industries that
Amazon tried to dominate. There is Whole Foods Market, twitch, audible,
IMDB, Alexa, Zappos, Amazon web services, Amazon studios, and the list goes on and on
where Amazon is already leading the industry or competing to get there. If there is an industry that Amazon isn’t
competing in yet doesn’t mean they aren’t planning to take over it. However, this incredible successes didn’t
come cheap. In 2014, Amazon introduced the fire phone
and was ready to conquer the smartphone industry, at least that’s what they thought. The phone wasn’t really bad, it had a lot
of new features that many phones didn’t have at its time, and it was priced just under
200 dollars ($199) with a 2-year contract. After spending hundreds of million dollars,
even though Amazon reduced their prices significantly over time to the point where phones were sold
at a loss, the project turned out to be a complete disaster and Amazon had to shut it
down a year later. ( 2015). Its just one of many examples of how Amazon
failed. There was once a company named Standard Oil
Corporation that was founded by John Rockefeller. The company took over its logistics and everything
else and drove the prices to their bare minimum to the point where they crushed their competitors
and dominated the entire oil industry. It had all the resources to control the global
oil supply, but in 1911, the US Justice Department sued the company and broke it down in 34 little
companies. And since Amazon is taking over one industry
after another, will it grow so big one day that it will be unstoppable or end up like
Standard Oil Co.? we will have to wait and see If you have enjoyed this video, make sure
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