Amazon.com announces fourth quarter results [pdf]
s2.q4cdn.com
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It's a pretty common theory that their retail division is just around the corner from reaping massive economies of scale. But they just had one of the biggest retail years ever had by a company in history and might have lost money overall.
I don't miss it at all. I do miss the amazon of 10 years ago though.
Why? What about it do you miss?
The "2 day guarantee" doesn't really exist anymore, so I have to ask - what am I paying for?
For me, I go without, and I only buy things with free shipping, so having Prime would not save me money; it would cost me money.
(I also buy less things when I do not have Prime, so that saves me additional money!)
Added bonus is I found myself impulsively ordering less useless crap since it requires more thought to order and isn't delivered immediately.
I buy all sorts of one day/same day items that I would need to go to a store for otherwise (virtually anything that isn’t fresh food that you might want same day like toothpaste or soap or bandages), so I could never give it up.
Though I do have a pharmacy in walking distance so it's not much effort for me.
Just earlier today, I was looking to buy some isopropyl alcohol spray. There was one that was listed as "Get by Sun Feb 6". Out of curiosity, I applied that filter.
Now that item had disappeared. And a much smaller list of items where none of them were actually available tomorrow, and in fact, most were a week slower than the first I found.
The faster delivery is a nice bonus, but I have prime for the live tennis content mainly.
(Personally I keep Prime mostly for Prime Video, and a few other perks. I typically only buy a few things from Amazon each month, so the free fast shipping is a bonus for me, not a must-have).
So the statement you challenged makes perfect sense.
Their point was you might have erroneously assumed you had to make a decision now.
"Paid members who haven't used their benefits are eligible for a full refund of the current membership period. We'll process the refund in three to five business days."
https://www.amazon.com/gp/help/customer/display.html?nodeId=...
I have received a pro-rated refund when I cancelled in the past.
Also last year was expensive for logistics, very expensive in part due to the supply chain bottlenecks and delays and using alternative shipping like flying more than ships etc. However prices for shipping on Amazon has not really gone up that much, the lack of profitability may reflect that as well.
Advertising, by its nature, derives it's value from the sale of other goods.
It should be concerning that more and more companies, major household names, make their money off of advertising. It fundamentally doesn't make sense.
How much of advertising revenue comes from companies that themselves ultimately don't make a profit? So much of our current economy is an illusion created by shuffling around huge amounts of investor capital to make it look like there is money flowing everywhere.
Turns out that advertising is inherently more scarce than consumer goods; while you can manufacture as many consumer goods as the market will absorb, you cannot just manufacture more human attention. Instead you must compete for the limited pool of attention that already exists, and established players like Google and Facebook control vast amounts of attention without much effort.
This supports a huge differential between the "cost" of serving an ad and its market value, whereas if you're charging $500 for a toaster somebody else will be selling them for $400 by the end of the month.
As for the huge sums of money: it's just a cost of doing business. As long as the manufacturers have still have nonzero profit margins, and as long as advertising delivers as much value as it costs, it's a stable equilibrium.
Damodaran keeps a table of industries by net margin:
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
You could say the same thing with about every other expense of running a business.
So, big advertisers like Google and FB make money off almost ANY company that becomes successful trough ads. The funny thing is: If there are competitors then google or FB is making even more money, because they are all bidding for the add-spot. And google is walking away with the money. And, yeah, some companies lose money to try to push the competitors out of market. Through ads.
e.g. Any television channel (e.g. BBC, CNN, ESPN, MSNBC, SiFi), any newspaper/magazine (NYT, Life, etc), all of radio, every storefront and its flyers (e.g. Safeway, Wallgreens, Costco).
These are all directly or indirectly advertising companies that have been household names for the last 100+ years.
The only difference now is (unlike for billboards), digital real-estate is very cheap and can be owned by a single conglomerate, rather than a decentralized group of capital holders.
1. To profit they'd have to slow down investments in improvements to logistics, and they didn't. It doesn't seem like the year to do it? 2. Increased labor costs.
You can't figure this stuff out from first principles; you have to look at what they're doing.
Advertising grew 32% year over year to $9.7 billion during the quarter, which puts them third after Google ($61.2 billion) and Facebook ($28.3 billion).
I think that the market is happy for three reasons:
1. Algorithms misreading the high earnings ($11.8B out of the $14.2B is just a Rivian accounting adjustment).
2. AWS experiencing 40% YoY growth (accelerating QoQ for a while, while both Azure and Google Cloud are decelerating).
3. Advertising doing well.
This is true.
Azure YoY Growth:
Q2: 51%
Q3: 50%
Q4: 46%
Google Cloud YoY growth:
Q2: 53%
Q3: 45%
Q4: 45%
AWS YoY Growth:
Q2: 37%
Q3: 39%
Q4: 40%
Analysts estimates are made by Wall Street predicting performance of the company without insider info (in theory), top analysts generally get access to companies they cover while company management are not supposed to disclose any material non public information in such meetings, even when following the law to letter lot of indirect information would become available, Matt Levine has written often on Regulation FD [1] . The point is estimates have some basis in fact and information as well.
[1] https://www.bloomberg.com/opinion/articles/2021-03-09/sec-go...
Net income increased to $14.3 billion in the fourth quarter, or $27.75 per diluted share, compared with $7.2 billion, or $14.09 per diluted share, in fourth quarter 2020. Fourth quarter 2021 net income includes a pre-tax valuation gain of $11.8 billion included in non-operating income from our common stock investment in Rivian Automotive, Inc., which completed an initial public offering in November.
The Netherlands is like a quarter of the area of New York state alone, and has about the same population.
They are up half the entire value of Facebook in after hours trading.
They are up about the GDP of Finland in after hours trading.
Prime is really losing its stickiness for me:
The only things I get from Prime that are of value to me are:
1) 5% off all purchases using a Prime CC. - I can get 2% with other cards and have the freedom to pick and choose where I buy from.
2) Free shipping (that once was quick, but now it isn't and I have had no communication as to why and when it will return) - $139 pays for a lot of shipping - particularly if I am patient and aggregate orders.
Dropping Prime gives me the moral benefit of kicking a monopolizing data thief to the curb. Starting to sound like a no-brainer.
Even things marked as Prime are taking 1-2 weeks for me. (I'm ~1hr from a major city)
I'm probably ditching my Prime sub when it comes up for renewal.
and it is seen as sticky enough to not lose tons of subscribers.
To me it is like a steal
Obviously Amazon is not invincible, but it's hard to imagine a scenario where they get beaten. It's going to take the ground shifting out from under them.
Here, you dropped 3 zeroes: 6T.
If anything, I would point to Firebase and GCP as the tools that have driven the most innovation over the last few years, and AWS is looking more and more like a utility with a very big service cost (bandwidth) that can absolutely be disrupted.
But WM has been extremely competitive for us. AMZ went from same day to 2 day for us around COVID and never came back.
WM standard delivery is 2 days and way more reliable. Moreover, if they have items in the store, they'll just bring it to you...in an hour or so. Food, clothes, games, fishing poles, medicine, you name it. That's a huuuge advantage that AMZ just doesn't have in most places.
And sadly to say, WM generally has more reputable products for widget X than Amazon, which are often just 10 rebranded knockoffs of something.
I keep prime and appreciate Amazon, but to say WM isn't competing is vastly underestimating the landscape. If anything, I see WM overtaking AMZ for most typical orders.
Sendgrid vs SES, Auth0 vs Cognito, SNS vs Twilio.
Amazon however has this logistics empire built over past decade. It would remain untouchable for a long time.