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Web 3.0 & Amazon (Part 1)

Posted on Monday, Dec 10th 2007


I posed a question to ponder: Is eBay or Amazon a better company? Recently, I have covered eBay in detail, and this week, we will analyze Amazon. I will reserve the answer to the question until after. Meanwhile, I do encourage you to think about the question. I will give you my analysis later., Inc. (NASDAQ: AMZN) is an e-commerce company based in Seattle, Washington. It was founded by Jeff Bezos in 1994, and launched in 1995. Amazon began as an online bookstore but soon diversified its product lines by adding VHSs, DVDs, music CDs, MP3s, computer software, video games, electronics, apparel, furniture, food, toys, and more.

Amazon was one of the first major e-commerce companies, and has profoundly impacted how business is conducted online by millions of people all over the world. Initially, Amazon was criticized for its business model, but it made its first annual profit in 2003. The firm has been profitable since then and earned $190 million in net income in 2006. However, the firm has accumulated deficit of $1.58 billion as of September 30, 2007. Revenues of the Company have been growing due to product diversification and international expansion. The profitability equation, however, remains a looming question mark.

Amazon has established separate websites in Canada, the United Kingdom, Germany, Austria, France, China, and Japan. It ships globally on select products. Its other online properties include,,, (search and navigation), (comprehensive movie database) and

Amazon also offer services such as Amazon Enterprise Solutions, co-branded credit cards, web services, fulfillment, outsourced services for third-party retailers, and miscellaneous marketing and promotional capabilities. powers and operates retail web sites for Target, the NBA, Sears Canada, Sears UK, Benefit Cosmetics, Bebe Stores, Timex Corporation, Marks & Spencer, Mothercare, Lacoste, etc., with a share of 11.49% was ranked first in terms of market share in the U.S. among the Retail 100 index.

Net sales at Amazon increased 41% to $3.26 billion in the third quarter, compared with $2.31 billion in third quarter 2006. Operating income increased 207% to $123 million in the third quarter, compared with $40 million in third quarter 2006. Net income increased 313% to $80 million in the third quarter, or $0.19 per diluted share, compared with net income of $19 million, or $0.05 per diluted share in third quarter 2006.

Low prices, new categories, free shipping, and the benefits of Amazon Prime drove revenues and profits. During the quarter total active customer accounts exceeded 72 million up 17% year over year, where as the seller accounts stood at over 1.2 million. According to, Amazon attracts approximately 50 million U.S. consumers to its site on a monthly basis

Operating cash flow was $1.0 billion for the trailing twelve months, compared with $587 million for the trailing twelve months ended September 30, 2006. Free cash flow was $800 million for the trailing twelve months, an increase of 118% compared with $366 million for the trailing twelve months ended September 30, 2006.

In March 2007, Amazon launched an online video on demand service, which has been criticized for its use of digital rights management. In August it launched Amazon Vine, which allows top product reviewers free access to pre-release products from vendors participating in the program.

In August 2007, Amazon announced Amazon Fresh, a grocery service offering perishable and nonperishable foods. Customers can pick up orders or have them delivered to their homes. It also launched a payment service specifically targeted at developers. Amazon FPS has facilities for developing many different charging models including micro-payments. The service also gives developers easy access to Amazon customers.

In September 2007, the Company launched a public beta of Amazon MP3, a digital music store with Earth’s biggest selection of a la carte DRM-free MP3 music downloads. Amazon MP3 has over two million songs from more than 180,000 artists represented by over 20,000 major and independent labels.

In November 2007, Amazon launched Amazon Kindle, an e-book reader which downloads content over “Whispernet,” a free EV-DO wireless service on the Sprint Nextel network. Initial offerings include approximately 90,000 books, newspapers, magazines and blogs. The screen uses E Ink technology to reduce battery consumption. This is new and innovative in the books world but not really new when we think of what Apple did with iTune and iPod.

We will take a look at Amazon’s business in the following posts, with a particular focus on the vertical strategy.

(To Be Continued)

This segment is part 1 in the series : Web 3.0 & Amazon
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I’m Gerry.

Just saying hi – I’m new.

oOgerryOo Saturday, December 15, 2007 at 3:30 AM PT

Just wondering why you didn’t talk about Amazon Services S3, such as its hosting service?

Jason Sunday, December 16, 2007 at 1:32 PM PT

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This what i looking for. Thank for the info.

Jack Carol Thursday, August 14, 2008 at 4:27 AM PT