At 20 Amazon is bulking up. It is not yet slowing down | Hacker News Reader

At 20 Amazon is bulking up. It is not yet slowing down

economist.com

89 pointsrahimnathwani37 comments

I'm amazed by Amazon. Some of their moves follow a playbook. Books -> Clothes -> Diapers. A non-technical CEO turning the company into an API machine that outsources it's own technology... Every textbook would say crazy, but he's on to something. Makes one wonder about the drones.

Bezos graduated with a CS degree from Princeton. I wouldn't call that non-technical. He is extremely sharp.

Monstorously smart. I consider him one of the top CEOs of all time because he succeeds on so many levels: Business design, technology enablement, hiring, surviving market ups and downs, investor relations...

I had (wrongly) assumed he was a business person first since he had most recently worked at Bankers Trust and DE Shaw. Thank you for the clarification. This explains his insights that would drive AWS.

DE Shaw is a quant firm and tends to hire out of STEM fields, not arts like business.

Yes. I should have caught this.

>I'm amazed by Amazon

I, on the other hand, am underwhelmed.

Their AWS services is a pretty cool tech and business.

But as for their other stuff:

1) Their core business (the store) barely makes any profit. Their profit margins are razor-thin, and until recently operated at a loss IIRC.

2) Their ebooks and music store are ho-hum.

3) Their hardwares, Kindles (Fire and plain) are simply loss leaders for content sales. Which (1) is not that profitable in itself anyway. Not that difficult to sell stuff like readers and tablets at a cost or slight loss.

Anything else I forget about?

That's the genius though. They are the ultimate Walmart, and that is one of the best things to be. Even better, they are Walmart with the option to expand into anything, because they don't have the stigma of being cheap. They can sell luxury goods (at small margins), highly complex technical solutions (at small margins) etc etc. What Amazon have managed to do is essentially to brand a bunch of things that were highly commoditized before. The potential in that is amazing, and almost scary.

I think all that things are considered investment in the future by Bezos. Amazon will probably eclipse Apple, Microsoft, Google etc in 5-10 years.

Or it will be the same as it is now -- because I don't think there's any magical path to make a low-margin, comoditized, operating at almost break even business in a highly profitable one.

Amazon MWS, their horrible piece of an API. If I were to give someone an example of a bad API it would be Amazon MWS, because it has everything:

-XML only (which is often strucured in the most obscure ways, and inconsistent through the API)

-shared reqeust throttling across all authorized applications (which turns the API from "barely useful" to "I can be lucky if I get a valid response")

-inconsistent across all marketplaces (of course I can't use the "fullfilmentLatency" attribute on the US-marketplace like in the rest of the world)

-unreliable (yeah Amazon, just ignore the list of prices I just sent you and mark them as processed, I am used to it)

That and many more things(e.g. hiding competitors in the responses) makes the API so useless that many people resort to just scraping the Amazon pages. An API that is so bad that nobody uses it is almost as bad as none at all.

I'm sorry, I didn't mean to rage but seeing that Amazon treats 3rd party developers and merchants like shit while doing everything to make the customers happy always makes my blood boil.

> 1) Their core business (the store) barely makes any profit. Their profit margins are razor-thin, and until recently operated at a loss IIRC.

The choose to do this. I read an excellent article on it some months back but can't find it again, but suffice it to say there is far more to their low margins than you think.

Yes - the general idea is they could monetize their business to get profits now, at the expense of future growth later. They write to their shareholders to be patient, so it's transparent.

The Kindle e-readers are excellent products in their own right. With the Paperwhite they've perfected the category IMO. The software -- e.g., the Xray feature, and the overall gesture UI -- and the hardware are equally good.

Reasons not to buy from Amazon:

https://stallman.org/amazon.html

Hmm. Every time I see the name Stallman I just conclude it's all about materials not distributed freely. Essentially, don't buy anything from anybody who don't support free redistribution (iTunes, App store, Play Store, etc).

To conclude something from a name without reading the works and criticizing it factually is just prejudice.

But in cases like this, it's useful prejudice.

I for one don't need to read every rant by RMS against Digital Restrictions Management, even if I agree with him by and large. I have much better things to do with my time. A lot of useful prejudice work that way in a lot of domains.

I have my own personal boycotting policies, and one of them is to never, ever buy digital media with DRM. Which, strangely enough, Amazon has long allowed me to avoid if the rights holder allows, e.g. I have a nice set of MP3s I got from them for a CD of Scandinavian music that in physical form was by then out of print and way too expensive.

They also tell you if a Kindle digital book has no DRM at the bottom of it's description. They don't really care, and I respect their choice to abide by rights holder's restrictions and sell the stuff anyway.

No it is not useful in this case, because Stallmanns page is much more about than just materials not distributed freely. For your convenience the headers of his page about Amazon:

* Restricting and Shafting Customers

* Censorship

* Exploiting workers mercilessly

* Shafting others in the publishing world

* Dodging taxes

* Political harm

The additional stuff pretty much falls into categories of:

Already covered by my policies.

Don't believe it.

All big companies have some insanities; if that bothered me I'd be living off the grid.

Don't think it's a problem.

And RMS and I have very different political views ... and a lot of his are remarkably uninformed (disclaimer: I knew him rather well in the early '80s, e.g. we were roommates when he started the GNU Project).

This covers the whole Political Harm section, I'm "right wing" myself, so it's not axiomatic I'd mind ALEC's lobbying, the Left's campaign against "voter suppression" is a existentially dangerous campaign for more voter fraud, and Stand You Ground laws have nothing to do with any sort of "Shoot First" policy. Heck, I'm not sure I've even seen that insane phrase before, but the gun-grabbers are ever inventive in their total dishonesty. (RMS is also one of the last people in the world you should be paying attention to when it comes to the self-defense area, it's a miracle he's still alive.)

Note, there's a relevant point in going into details below; this is an area of personal expertise going back to the early '70s:

Stand Your Ground is shorthand/American value invoking propaganda wording simply for having no duty to retreat, nothing more or less, although I suppose if you're a rabbit it's antithetical. It's extremely valuable against abusive prosecutors who insist in the calmness of a courtroom there was some plausible way for you to retreat:

In two Massachusetts cases I'm familiar with, convicting when retreat wasn't really possible, or would have required abandoning a child to the tender mercies of a home intruder. As of late, it's been noted that more blacks have benefited from Florida's Stand Your Ground law than whites....

The major point I'm trying to make is that RMS's sophistication about things outside the domains where he's good, the ones relevant to me limited to computer stuff, is very poor, sometimes to the point of implicitly suicidal, and I have nothing to gain from reading them, as I have just reconfirmed.

But e.g. when he coins a new relevant meme, like Digital Restrictions Management, I do pay attention.

Thankfully a lot of bother care about insanities. They are in the grid of thinking, good people. The whole free software movement is a an evidence that a lot of people care about insanities. RMS is the founder and forerunner of this impressive socio political movement.

Interesting: how little was said about AWS.

AWS was 4% of Amazon's revenue for 2013. I think about 4% of the article was about AWS too... Seems appropriate.

That said, AWS has something like 80% profit margin [1] vs almost no margin for the rest of the business :)

[1] http://venturebeat.com/2013/09/05/amazons-mountain-of-margin...

I agree that AWS almost certainly has a great profit margin.. but that article includes no details. He says AWS has X in costs, trust me. I have no idea how he arrived at that number.

Disclaimer: I'm a software engineer working for AWS. But not on EC2.

I feel the margin number conclusion is deeply flawed for variety of reasons.

There are some questions the author cannot have answers for, that greatly change the margin numbers for EC2. A couple that comes to mind are:

1. What percentage of time are customers being charged for the available servers? 2. What percentage of instance hours are being charged at on-demand prices, vs reserved instance?

Also it completely ignores services that makes EC2 stand out from plain hosting, and adds much value, such as AutoScaling, CloudWatch, Elastic Load Balancing, OpsWorks, and Elastic BeanStalk. And believe me when I say that support cost is NOT trivial. In many cases, the number of engineer hours involved makes the support pricing look like a real bargain.

Even if this analysis was correct, it doesn't say anything about the margins of the rest of the business. There is plenty of gross margin in almost every business Amazon is involved in, but it will never show up in the net profit line until Amazon decides to stop reinvesting every cent of cash flow.

Bezos has said he believes AWS could be amazon's biggest business.

http://techcrunch.com/2013/11/13/jeff-bezos-believes-aws-cou...

Well he's a cs grad. And one thing nearly all cs grads have in common is the idea that software/software products will dominate economies "real soon now". And they usually believe it's their own software that will do so. I actually found a 1950's article claiming that.

But let's face facts here : IaaS might dominate the hosting industry (I think not, but maybe ), but that's the furthest it can possibly go. Amazon's other businesses are way bigger.

But no way you're going to convince IT people of that.

I think PaaS vendors, the biggest of which will be Oracle/SAP/Salesforce (maybe, maybe salesforce) will realize their margins will be better served by not participating in any public cloud. I don't have good figures though.

Small, but relevant for history. In 2006, AWS was the first cloud. At the time, a datacenter with extremely low prices, super-massive customer base and where you could spin off/shut down instances on demand was crazy. The impact changed the way we think about computing.

I admit that, had they not been there, someone else would probably have invented it. Some dodgy website hosting service, for example.

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