Amazon rocked last quarter
Amazon announced earnings and it turns out they kicked everyone’s butt. I suspected as much - that all the brick and mortar retailers showing their suffering was not because people weren’t shopping, but because people were shopping online. It’s easier and often cheaper to find what you want online - I pretty much did nearly everything online this year. And when you shop online, chances are you’re buying stuff from Amazon.
Of course, of course, Wall Street punishes them with a 12% drop in their stock price. Not because they didn’t exceed analyst expectations (they did). Not because they didn’t surprise with a strong forecast for the upcoming quarter (they did) but because their margins were down. Sigh. Remember when analysts hated Amazon for expanding its range of offerings back in the day? Yeah, that turned out to be a good call, oh wait - no it didn’t. Amazon expanded before anyone else could really entrench itself the place to go in that niche and now Amazon is a top destination if not the top destination in so many online niches.
Remember when the analysts repeatedly punished them for investing so much in technology? Why do you think Amazon’s website hands down crushes it’s other competitors in terms of utility and ability to make people buy stuff? Why do you think Amazon’s web services division now serves more bandwidth than all of Amazon’s core e-commerce stuff combined? Yeah, because it was a brilliant thing to be doing.
Remember when analysts punished Amazon for starting Amazon Prime? Are they still talking about that? I haven’t heard anyone… why? Because it’s awesome. Because it keeps people loyal to Amazon and makes them buy stuff they otherwise would not have.
Yeah, Amazon’s kinda like Apple used to be. It’s got a great story and bright future so when things are going well, they get pushed up (witness their meteoric rise last year). But anytime there’s a nit to pick or worry about, they love to jump all over that.
Here’s what I think about Amazon. They have so many areas to grow that I can’t believe that people are skeptical of them. The obvious one out of this earnings is their web services. That’s huge and growing - 330,000 registered developers. Startups are being built completely in the cloud now. Amazon’s cloud. This is a paradigm that people have been talking about forever, but no one could really build till now. Seattle just keeps adding one service after the next and it makes their offering increasingly compelling. S3 was great, but EC2 and S3 combined? Forget it! And now with SimpleDB? DevPay? Facebook Apps??
Then there’s all the digital content. To me this is the big noise. Amazon is awesome at selling physical products - they’ve got that down in terms of the buying experience and the distribution network. With digital content coming of age (music, books, magazines, movies, tv…) the selling experience carries over and now with all their cloud computing experience their digital distribution is going to be peerless as well.
They’re getting a boost in music because everyone’s afraid of Apple. I suspect something similar may happen with video (although with all the networks caving to Cupertino because of Apple TV2 who knows…) But they are genuinely defining the e-publishing business with the success of the Kindle. This is a first generation product that is selling faster than Amazon expected and is getting rave reviews from the people who bought one. Remember when all the critics hated the first iPod? They hated it all the way until everyone bought one and then they loved it? Yeah.
Amazon just didn’t have much experience building a consumer product from a hardware and software perspective - so the Kindle isn’t the most polished device and it’s got its issues. On the other hand, Amazon got enough things just right that it’s selling well and I suspect that the 2nd generation will correct much of what was wrong with the first and as e-ink matures, well… e-publishing most likely has a very bright future. Oh and they just bought Audible.
Oh analysts. I’d buy more stock now if I had any cash.
