1994-2005: in the early day Amazon, through the vision of Jeff Bezos was among the most prominent Internet players. Amazon had placed substantial bets on various companies and it had quickly scaled its operations. Starting from books, by the late 1990s, Amazon had already expanded into other categories, and Jeff Bezos had placed investments in various Internet startups. As the dot-com bubble burst, though, Amazon not only lost substantial amounts of money into failed bets (the epitome of that was the bankruptcy of Pets.com one of the key bets the company had placed) but it shrank in value, and many analysts predicted its demise. However, in those years, especially in the early 2000s Amazon changed its business playbook. It cut all the investments in things it could not directly control and it started to move from an e-commerce company to a platform business model.
2005-2015: By the mid-2000s Amazon had set the stage for a complete change in its businessmodel. The company had also started to experiment with various programs and products. Some were a complete failure (like the Kindle Fire Phone) and others would turn out into incredible products, and business segments (Amazon Prime, Amazon Advertising, and Amazon AWS).
2015-2020: By the year 2015, Amazon had turned into a tech giant already, and it showed the world, finally, that not only it had survived but that it had the ability to scale at an international level. In these years, Amazon showed the world the incredible numbers behind Amazon AWS (most business players were astonished and other companies like Microsoft and Google started to double down on cloud computing as they saw the success of AWS). And the company managed to expand in Europe, Mexico, and India and tried hard also to break into China.
Amazon’s e-commerce is a two-sided marketplace, with sellers on the one hand, and consumers on the other hand.
Third-party sellers are prompted to host their stories on top of Amazon’s infrastructure, thus enabling them to expand their distribution and leverage Amazon’s fulfillment capabilities.
Thus, I also defined Amazon’s e-commerce as a B2B2C. Indeed, it leverages other businesses (third-party sellers) to revamp its product offerings to consumers.
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.
In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits.
Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services, Amazon AWS, Subscription Services, Advertising revenues, and Physical Stores.
As of 2021, AWS contributed to most of Amazon’s operating income.
While Amazon is still profitable without AWS, AWS contributes to most of Amazon’s operating profits.
In 2021, Amazon generated almost $25 billion in operating profits. However, if you removed AWS, Amazon would have reported an operating profit of just over $6 billion.
And a surprising thing happened in Q3 of 2022, where Amazon without AWS would have posted a substantial operating loss.
In Q3 2022, Amazon would have posted an operating loss of almost $2.9 billion without AWS’s contribution to the overall operating income of $2.5 billion.
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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