It’s typical for a new businesses to go several years making losses but Amazon has barely made a profit over the last twenty years despite being valued at $150 billion by the stockmarket.
That luck could be running out though as the Amazon’s stock fell nearly 10% last week after the company announced it had slipped back into losses last quarter.
Amazon’s losses are largely due to Google starting a price war on web services which is a warning that other deep pocketed web giants are now lining up for the company.
Google’s actions in crippling Amazon are somewhat ironic given how Amazon disrupted the publishing industry by using its deep pockets to subsidise its loss making bookselling business.
Amazon’s problem is it operates in commoditised industries where deep pocketed players are prepared to challenge the company’s market position.
Companies like Google and Apple have incredibly profitable products like Adwords and the iPhone while Amazon relies on the largesse of investors hoping to turn a future profit, that is a clear weakness against strong, well funded businesses.
For a tech company, twenty years is clearly the future and now Amazon has to define exactly where the profits are in its business.
Sometimes, just being a disruptor isn’t enough.
Paul I wish I understood this better – are some of those losses just about accounting?
There’s some accounting adjustments that have put Amazon back into the red, Dionne. The main take away from the company’s results is the margins on cloud services are falling; having spent so much time building the market and taking losses in the process, it may be Amazon itself is being undercut by Google, Microsoft, Apple and others.