Citizens 139
which The New York Times ran with the headline: “A Surprise from
Amazon: Its First Profit”.
53
As has been recognised since then, however,
and which Michael Porter first drew attention to back in 2001, Amazon
was pursuing a very different strategy: observing that the technology of
the Internet provided “better opportunities for companies to establish
distinctive strategic positionings” that previous generations of IT, and
that, in any case, “creative accounting” techniques had distorted revenue, cost, and share price data throughout the 1990s, Amazon was taking advantage of online distribution to spread itself as widely as possible
rather than simply generate profit.
54
The extent of this strategy was not
entirely clear to Porter, who believed at the time that the integration of
Internet and traditional bricks-and-mortar consumption would provide
the winning strategy (and which Amazon does indeed seem to be dabbling with via its physical stores); moreover, his observation that “as all
companies come to embrace Internet technology … the Internet itself
will be neutralized as a source of advantage”
55
failed to see how this
would come into effect a mere decade and a half later. The advantages of
many hundreds, or even dozens, of retailers were increasingly nullified
not by the dispersal of technology across those companies but by their
domination by one. Outside of China, at least, Amazon was the king,
memorably described by Joshua Mou as a company “built for greatness,
not … profitability”.
56
The company’s low profit margins became part of a deliberate
strategy: while using technology to pare costs back wherever possible, Amazon could deliver greater savings to consumers – driving up
its popularity and, in turn, generating huge operating revenues which
were not redistributed to shareholders but instead ploughed back into
further purchases in its attempt to become the “store of everything”.
This process began with Telebook.de and Bookpages.co.uk in 1998,
which became Amazon.de and Amazon.co.uk, and further acquisitions
included: IMDB (1998), the big data company Alexa.com (1999), Audible (2008), the footwear and apparel site Zappos (2009), Goodreads
(2013), and Whole Foods Market (2013). Some of these purchases ran
into the billions ($13.7 billion for Whole Foods Market, for example)
and clearly extended Amazon’s activities into new markets, while others removed competitors or consolidated its operations (Goodreads, for
example, founded in 2006 had become the largest online reviewing and
recommendation site by the time it was bought by Amazon for an undisclosed amount
57
). Alongside these expansions into retail, Amazon also
established itself as an incredibly important disruptor in another area:
web services. In the late nineties, Bezos realised that much of Internet
structure would not be able to provide the level of operations that he
required and so the company invested heavily in infrastructure, making
this available to third parties as Amazon Web Services in 2002, and by
mid-2018, 40 per cent of public sites were run on AWS (compared to 20
which The New York Times ran with the headline: “A Surprise from
Amazon: Its First Profit”.
53
As has been recognised since then, however,
and which Michael Porter first drew attention to back in 2001, Amazon
was pursuing a very different strategy: observing that the technology of
the Internet provided “better opportunities for companies to establish
distinctive strategic positionings” that previous generations of IT, and
that, in any case, “creative accounting” techniques had distorted revenue, cost, and share price data throughout the 1990s, Amazon was taking advantage of online distribution to spread itself as widely as possible
rather than simply generate profit.
54
The extent of this strategy was not
entirely clear to Porter, who believed at the time that the integration of
Internet and traditional bricks-and-mortar consumption would provide
the winning strategy (and which Amazon does indeed seem to be dabbling with via its physical stores); moreover, his observation that “as all
companies come to embrace Internet technology … the Internet itself
will be neutralized as a source of advantage”
55
failed to see how this
would come into effect a mere decade and a half later. The advantages of
many hundreds, or even dozens, of retailers were increasingly nullified
not by the dispersal of technology across those companies but by their
domination by one. Outside of China, at least, Amazon was the king,
memorably described by Joshua Mou as a company “built for greatness,
not … profitability”.
56
The company’s low profit margins became part of a deliberate
strategy: while using technology to pare costs back wherever possible, Amazon could deliver greater savings to consumers – driving up
its popularity and, in turn, generating huge operating revenues which
were not redistributed to shareholders but instead ploughed back into
further purchases in its attempt to become the “store of everything”.
This process began with Telebook.de and Bookpages.co.uk in 1998,
which became Amazon.de and Amazon.co.uk, and further acquisitions
included: IMDB (1998), the big data company Alexa.com (1999), Audible (2008), the footwear and apparel site Zappos (2009), Goodreads
(2013), and Whole Foods Market (2013). Some of these purchases ran
into the billions ($13.7 billion for Whole Foods Market, for example)
and clearly extended Amazon’s activities into new markets, while others removed competitors or consolidated its operations (Goodreads, for
example, founded in 2006 had become the largest online reviewing and
recommendation site by the time it was bought by Amazon for an undisclosed amount
57
). Alongside these expansions into retail, Amazon also
established itself as an incredibly important disruptor in another area:
web services. In the late nineties, Bezos realised that much of Internet
structure would not be able to provide the level of operations that he
required and so the company invested heavily in infrastructure, making
this available to third parties as Amazon Web Services in 2002, and by
mid-2018, 40 per cent of public sites were run on AWS (compared to 20