Amazon’s fabled eCommerce platform needs no introduction, but it may surprise some to learn that the company has made at least 91 acquisitions across numerous different industries since it was founded in 1994.
Amazon completed its acquisition of movie studio Metro-Goldwyn-Mayer (MGM) in March 2022 in a deal worth $8.45 billion. In an interview with The Washington Post, senior vice president of Prime Video and Amazon Studios Mike Hopkins said that “MGM has a nearly century-long legacy of producing exceptional entertainment, and we share their commitment to delivering a broad slate of original films and television shows to a global audience.”
The acquisition would allow Amazon to bolster its content library with MGM’s decades of production experience on titles such as Legally Blonde and Rocky. More importantly, it would allow the company to compete with established competitors such as HBO Max and Netflix.
The move was one of the company’s first serious forays into bricks-and-mortar retailing after noting that consumers stubbornly preferred to buy items such as meat and fresh produce in person.
Zoox decided to take one of the hardest and most complex paths in the industry, building a self-driving passenger vehicle from scratch in addition to the associated AI and software.
According to Amazon, the acquisition took place to provide Zoox with the necessary funds to bring its vision of autonomous transportation to life. However, some pundits believe the technology could also easily be used in Amazon’s logistics operations.
One Medical is a subscription-based primary care provider that combines digital, virtual, and in-person services that are most convenient to consumers.
Amazon paid handsomely for the company which, at $18 per share, was 77% above that day’s closing price. The motivation for the purchase was the company’s belief in a tech-based, human-centered approach to healthcare.
Zappos was a small competitor at the time and nowhere near making a profit. What’s more, the deal was seen as somewhat unusual since Amazon promised to stay out of management decisions so long as financial objectives were met.
Bezos approached CEO Tony Hsieh with an offer to buy the company as early as 2005 and was ultimately declined. Four years later, however, and one year after the GFC, cash became harder to come by and Hsieh was more amenable to selling. The deal was eventually struck one year later.
Key takeaways:
Amazon is best known for its eCommerce platform and associated services, but it has made around 91 acquisitions since its inception in 1994.
Amazon completed its acquisition of movie studio Metro-Goldwyn-Mayer (MGM) in March 2022 as a way to bolster its streaming line-up and become more competitive. The record acquisition of Whole Foods in 2017 marked the company’s first serious foray into bricks-and-mortar retailing.
Additional Amazon acquisitions include autonomous driving tech company Zoox, shoe company Zappos, and medical subscriptionplatform One Medical.
Amazon has a diversified business model. In 2023, Amazon generated nearly $575 billion in revenues while it posted a net profit of over $30 billion. Online stores contributed over 40% of Amazon revenues. Third-party Seller Services and Physical Stores generated the remaining. Amazon AWS, Subscription Services, and Advertising revenues play a significant role within Amazon as fast-growing segments.
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
In the Amazon Shareholders’ Letter for 2018, Jeff Bezos analyzed the Amazon business model, and it also focused on a few key lessons that Amazon as a company has learned over the years. These lessons are fundamental for any entrepreneur, of small or large organization to understand the pitfalls to avoid to run a successful company!
With 64,588,418 shares, Jeff Bezos is the primary individual investor. Owning 12.7% of the company. Other top individual investors include Amazon’s CEO Andy Jessy, who has 94,729 shares. Top institutional investors include mutual funds like The Vanguard Group (6.6% ownership) and BlackRock (5.7% ownership).
Amazon generated over half a trillion dollars in revenue in 2023, of which $231.87B from online stores, over $140.05B from third-party seller services, $90.76B from AWS, $46.9B from advertising, $40.21B from subscription services, $20.03B billion in physical stores, and $4.96B from other sources.
Amazon was profitable in 2023. On nearly $575 billion in revenue for 2023, Amazon generated a net profit of over $30 billion. Since 2014, Amazon hasn’t recorded a net loss, but it did record a net loss of over $2.7 billion in 2022, while it recouped that in 2023. Indeed, in 2014, Amazon reported a net loss of $241 million, and it would be profitable until 2021. In 2022, Amazon turned unprofitable again and highly profitable again in 2023.
Amazon AWS follows a platform business model that gains traction by tapping into network effects. Born as an infrastructure built on top of Amazon’s infrastructure, AWS has become a company offering cloud services to thousands of clients from the enterprise level, to startups. And its marketplace enables companies to connect to other service providers to build integrated solutions for their organizations.
Amazon subscriptionrevenue in 2023 was over $40 billion, compared to over $35 billion in 2022 and nearly $32 billion in 2021. Amazon Prime grew from a $4.5 billion revenue segment in 2015 to an over $40 billion segment in 2023.
The Amazon Working Backwards Method is a product development methodology that advocates building a product based on customer needs. The Amazon Working Backwards Method gained traction after notable Amazon employee Ian McAllister shared the company’s product development approach on Quora. McAllister noted that the method seeks “to work backwards from the customer, rather than starting with an idea for a product and trying to bolt customers onto it.”
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
In the letter to shareholders in 2016, Jeff Bezos addressed a topic he had been thinking quite profoundly in the last decades as he led Amazon: Day 1. As Jeff Bezos put it “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”
A regret minimization framework is a business heuristic that enables you to make a decision, by projecting yourself in the future, at an old age, and visualize whether the regrets of missing an opportunity would hunt you down, vs. having taken the opportunity and failed. In short, if taking action and failing feels much better than regretting it, in the long run, that is when you’re ready to go!
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model’s success.
Jeff Bezos was best known for founding eCommerce giant Amazon in 1994. However, the entrepreneur owns companies in several industries, including health care, retail, robotics, real estate, and media. Many of these companies have been acquired by Amazon over the years, but some have been the result of direct investment from Bezos himself (through his investment arm is called Bezos Expeditions).
Amazon is a consumer e-commerce platform with a diversified business model spanning across e-commerce, cloud, advertising, streaming, and more. Over the years Amazon acquired several companies. Among its 12 subsidiaries, Amazon has AbeBooks.com, Audible, CamiXology, Fabric.com, IMDb, PillPack, Shopbop, Souq.com, Twitch, Whole Foods Market, Woot! and Zappos.
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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