Reminder: Amazon isn’t Apple, they’re not attempting to run a high margin business
Amazon announced their Q4 2012 financial results yesterday. How much money did they make? $97 million. That doesn’t sound like a lot, but here’s a number that does sound pretty damn incredible: $21.27 billion. That’s how much money Amazon took in during the last three months of 2012. Some tech sites that we’re not going to mention seem to think that because Amazon doesn’t have high double digit margins like Apple, that they’re somehow screwed. The thing is, that’s not how Amazon works.
Different companies have different ways to make money. Apple ships objects that cost something to make. They want to sell those objects for more than what it took to produce them. Simple, right? Google loses money on just about every web service they run, but that’s not the point. They use those services to collect data about you so they can serve you better ads. It’s the ads that keeps the company alive. Amazon is in the middle. They sell objects, but they also sell digital goods. Electronic book sales are already a multibillion dollar business for them. Know how hard it is to host a 2 MB file of the hottest book on the market? Amazon doesn’t care about profit, they care about sustaining themselves.
People have a hard time wrapping their heads around this, and we understand why, but to insult Amazon is just wrong. Their tablets may not be the best on the market, but they’re some of the most used, right behind the iPad. And their ability to sell you pretty much everything you’ll ever need for the rest of your life has huge value that can’t be underestimated.
Jeff Bezos, Amazon’s CEO, doesn’t get the same amount of attention that Tim Cook or Mark Zuckerberg or Larry Page gets, but don’t ignore him. He’s a relentless genius who knows how to win. It’s taking him a while to reach the top of the hill, but he’ll get there.
We’re sure of that.
Recommended Reading: “FCF is evil” by Benedict Evans