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Amazon: The company that doesn’t make money

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 daipers.com 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 daipers.com 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
you subscribe and hit that bell Button so that the next will appears on your homepage. Thanks for watching and until next time.

100 comments

1. JD Rockefeller never owned the whole US market, let alone the global market. 2. Predatory pricing is a myth. 3. All natural monopolies (as opposed to govt enforced ones) eventually collapse themselves without any intervention needed.

ok but it still had 177 billion dollars in revenue by 2017 and it was a company that just finally was profitable

I wonder when Amazon will finally rebrand itself into the Shinra Corporation…..perhaps they are on track to build a raised city above one of their large headquarters where their wealthy shareholders can bask in the sun baked exploits that come with running those lesser weaker small businesses into the ground. The world may never know O_0

Standard oil should have paid off them lobbyists and it would have most likely been a very wise investment. Control of government = king.

amazon is monopolizing which is illegal so i rlly dont know why it still exists.. its also way creepier than eg google or facebook with data and otherwise

Amazon's strategy is illegal but lets see the government do anything about it. Nope. Apparently we forgot somewhere along the way that the "free market" depends on having competitors, and monopolies are illegal PRECISELY SO this strategy doesn't work. If you control the market and can therefor jack prices up however you please, you're in direct violation of the law and capitalism as a whole.

In Europe they would have been fined hundreds of millions for predatory pricing. Meanwhile in the US… Federal Trade Commission is shut down, because someone really wants a wall 😀

You missed the obvious glaring reason. Its all about tax avoidance!
Investing revenue into infrastructure increases value and negates profits upon which tax should be paid. Simple.

Amazon are cooking the books… they don't want to pay their taxes, along with Google and Starbucks. That's why they appear to make little profits but their CEOs are still some of the richest in the world.

So amazon is trying to build a monoply? That isnt gonna work out so good since the last great monoplies got destoyed by the government.

I think your info is a bit inaccurate. There are over 100 million Prime members that pay an average of $10 per month for membership (do the math). Amazon reported first quarter earnings results (April 2018) with eye-popping sales of $51 billion, up by nearly 43 percent year over year, and a net profit of $1.6 billion.

Did you just call amazon a fucking tech company?? Thats like calling coca cola a fashion company because they make tshirts and other products

Good video idea, but you're confusing terms like net profit and income to fit your "doeesn't make money" title. They are making money, they just decide to use it in reinvesting

cant come to be Standard Oil (TM) because of the Anti-monopoly act made by FDR. though it only applied in the US.

am i correct?

fact check me ppl. dont just read and go and get the wrong idea.

you have to take look on what they invested, actually you invest on a company's potential not just what it's making at time.

Amazon prime is such a steal. Just for the free two day shipping it's worth it but also getting a video and music streaming service along with their ebooks and twitch prime with all of those perks make it amazing for $100 a year

Are you the mexican guy from that 70s show? Bro english is not my first language so i understand but i worked hard on it. Like when u say ''focus'' u make it sound like ''fuck us''

Its fooocus….and videoooo. Not faaawkus and videaww

Great vid! Kinda surprising you haven't just made your great website with WIZ DOT COM in it. I was kinda expecting it on last 20 seconds of your video 😀

wait what, 233 billion was the revenue for 2018 according to wiki. But amazon doesn't really make it's money like apple selling products, it's selling services.

I didn't think of it before but going the route of Rockefeller just might be Bezos's plan. If I remember correctly due to 1911 division his net worth skyrocketed into him being arguably #1 richest man ever.

This video starts with a pretty stupid middle school kid understanding of what a business is. Amazon's business model is extremely very very profitable. The difference between Amazon and other big giants is that Amazon reinvests into itself. It's not satisfied with just having high profit, Amazon is constantly trying to be at the forefront of its industries and also expanding into new profitable ventures. So Amazon is willing to sacrifice net profit for expansion. Investors love this because it makes their investments MUCH more valuable in the long run and much less risk of Amazon folding over.

If advertising bubble burst (think dot com), Facebook and Google would be totally fucked. Amazon would be absolutely fine. If tech cloud bubble burst, IBM and Google and Microsoft would be dead, Amazon is fine. If hardware tech all moves to Korea/China, Apple and Intel would be dead, Amazon is okay with that. If retail completely dies (2008 recession), Walmart and all brick and mortar stores are dead, Amazon would be deeply wounded but ultimately okay.

Business in the modern era is not just to be profitable. It's to be profitable, expansive, stable, and dominating. And that's Amazon's model.

The problem with amazon: The prizes on tech for example are too high! Many smaller sies and price comparing companies will always be 15% cheaper

They want to dominate to many industries. But that means they keep the profits low. One day can be the next Standard Oil who will become broken in littler company is.

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