The Story of Amazon.com: How a Bookstore Conquered the Internet

Summary

The video script narrates the journey of Amazon from its modest beginnings to becoming a dominant e-commerce giant. It highlights Jeff Bezos' decision to start Amazon, the strategic choice to sell books initially, and the company's expansion into a vast marketplace. The script also delves into Amazon's business model, revealing that it operates at a loss on direct sales but compensates through profitable subsidiaries like Amazon Web Services (AWS). It touches on controversies surrounding Amazon's tax practices and working conditions, and concludes with a promotion for a new startup marketplace, joysk.com, offering an alternative to Amazon's competitive platform.

Takeaways

• 🛒 Jeff Bezos is the founder of Amazon.com, an online marketplace known for its vast product selection.
• 📈 Amazon offers over 100 million different products and shipped about 5 billion items in a year, accounting for nearly 40% of all internet sales.
• 💸 Contrary to popular belief, Amazon operates at a loss on nearly every purchase made through their website.
• 🚀 Amazon started with modest beginnings in the 1990s, focusing on selling books due to their high demand and large title availability.
• 📚 The company expanded its product range beyond books in 1998, a move that significantly increased its revenue to nearly one billion dollars.
• 📈 Amazon went public in 1996, with its stock IPO'ing at around $1.50 per share, which would be worth approximately $10 million today.
• 📉 The company faced challenges during the dot-com bubble, with its stock price dropping from a high of $113 to a low of $5.51.
• 🛍️ Amazon introduced Amazon Prime in 2005, offering free two-day shipping on select products, which initially caused the company to lose money on each shipped item.
• 🌐 Amazon Web Services (AWS) was launched in 2005 as a subsidiary, providing cloud computing services and becoming a significant profit driver for Amazon.
• 💼 Amazon has been criticized for not paying taxes, having anti-competitive practices, and poor working conditions in their warehouses.
• 🆕 The script also mentions a new startup marketplace called Joyce.com, which is in the alpha testing stage and aims to offer an alternative to Amazon for both buyers and sellers.

Q & A

Who is the founder of Amazon.com and what is their claim to fame?

Jeff Bezos is the founder of Amazon.com, which is known as an online marketplace where consumers can buy a wide variety of products.

How many different products does Amazon offer for sale?

Amazon offers over 100 million different products for sale.

What percentage of internet sales does Amazon account for?

Amazon accounts for nearly 40% of everything sold on the internet.

How does Amazon make money if it loses money on nearly every purchase made through their website?

Amazon makes money through various subsidiaries, such as IMDb, Audible, Zappos, Twitch, and Whole Foods, as well as through Amazon Web Services (AWS), which provides cloud computing services.

What was Amazon's original name before it became Amazon.com?

Amazon was originally named 'Cadabra, Inc.', but the name was changed after a lawyer misheard it as 'Cadaver, Inc.' Bezos then considered 'Relentless' before finally settling on Amazon.com.

Why did Jeff Bezos decide to start an e-commerce company?

Jeff Bezos decided to start an e-commerce company because he noticed the massive growth opportunity presented by the internet and did not want to have regrets later in life about not pursuing it.

What was the first product category Amazon focused on selling?

Amazon initially focused on selling books due to their high demand, the large number of titles available, and the low price point.

When did Amazon go public and what was its initial stock price?

Amazon went public in 1996 and its stock IPO'd at the equivalent of a dollar and fifty cents per share.

How did Amazon expand beyond just selling books?

In 1998, Amazon decided to expand beyond books and started selling a wide variety of products, which was the first step towards becoming the 'everything store'.

What is Amazon Web Services (AWS) and how does it benefit Amazon's overall profitability?

Amazon Web Services (AWS) is a subsidiary company that provides cloud computing services, hosting websites and applications for customers and businesses. It has a high profit margin and makes up nearly all of Amazon's profit, compensating for losses incurred by Amazon Marketplace.

What challenges has Amazon faced in terms of public perception and business practices?

Amazon has faced challenges such as allegations of not paying taxes, anti-competitive advantages over other businesses, and poor working conditions in their warehouses.

What is the relationship between Amazon's Marketplace and AWS in terms of revenue and profit?

While Amazon Marketplace makes up a larger portion of Amazon's revenue, it operates at a loss. AWS, on the other hand, has a significant profit margin and contributes the majority of Amazon's overall profit.

Outlines

00:00

📚 The Origin and Growth of Amazon

Jeff Bezos, the founder of Amazon, discusses the company's humble beginnings as an online marketplace for books in the 1990s. Originally named 'Cadabra, Inc.', the name was changed to 'Amazon.com' after a series of mishaps. Bezos chose to focus on books due to their high demand and the vast number of titles available. Within two months of launching, Amazon had expanded its reach to 45 countries and was generating significant revenue. The company went public in 1996, and despite facing legal challenges from competitors like Barnes & Noble and Walmart, Amazon continued to grow rapidly. Bezos' 'regret minimization framework' played a crucial role in his decision to leave Wall Street and pursue the massive growth opportunity presented by the internet.

05:01

🛒 Amazon's Expansion and Challenges

In 1998, Amazon made a strategic decision to expand beyond books and start selling a wide variety of products, marking its first step towards becoming the 'everything store'. This move significantly increased Amazon's revenue, attracting investors and leading to Jeff Bezos becoming a billionaire. However, the company faced a major setback when the tech bubble burst, causing Amazon's stock price to plummet from $113 to $5.51. Despite this, Amazon managed to survive the dot-com bubble burst and began making modest profits. In 2005, Amazon introduced Amazon Prime, offering free two-day shipping on select products, a move that would eventually contribute to the company's profitability despite initial losses on each shipped product.

10:02

🌐 The Launch and Impact of Amazon Web Services (AWS)

Amazon's most significant strategic move in 2005 was the launch of Amazon Web Services (AWS), a subsidiary company providing cloud computing services. AWS allows businesses to rent servers based on their needs, offering an affordable solution for hosting large-scale websites. This service became crucial for Amazon's growth, as it now accounts for nearly 100% of Amazon's profit, despite making up only 9.8% of its revenue. AWS's success has allowed Amazon to absorb losses from its marketplace and expand services like Amazon Prime, giving it a competitive edge over other e-commerce platforms.

15:02

🚀 The Future of E-commerce Beyond Amazon

The script concludes with a look towards the future of e-commerce, highlighting the potential of new startup marketplaces like Joyce.com. The creator of the video is developing this platform, which aims to offer a competitive alternative to Amazon by providing free two-day shipping and a marketplace for small businesses to sell their products without the risk of undercutting by a monopoly like Amazon. The video encourages viewers to support the channel by checking out Joyce.com, either by purchasing items or starting to sell their own products on the platform.

Keywords

💡Amazon.com

Amazon.com is an e-commerce platform and technology company known for its wide variety of products and services. The platform is central to the video's theme as it represents the journey of a startup to a global e-commerce giant. The script describes Amazon.com's evolution from selling books to becoming a marketplace offering over 100 million different products.

💡E-commerce

E-commerce refers to the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet. The video's theme revolves around the growth of Amazon as a major player in the e-commerce industry, illustrating the company's transition from a simple online bookstore to a vast marketplace.

💡Regret Minimization Framework

The 'Regret Minimization Framework' is a concept mentioned in the script attributed to Jeff Bezos. It's a decision-making strategy that involves considering potential future regrets to make current choices. Bezos used this framework to decide to leave his Wall Street job and start Amazon, highlighting the importance of seizing opportunities.

💡NASDAQ

NASDAQ is an acronym for the National Association of Securities Dealers Automated Quotations. It is a major American stock exchange known for listing technology and retail companies. The script refers to Amazon's IPO on NASDAQ, which was a significant milestone in the company's journey to becoming a publicly traded entity.

💡Amazon Prime

Amazon Prime is a subscription service offered by Amazon that provides members with benefits such as free two-day shipping on select products. The video discusses Amazon Prime as a strategic move by the company to enhance customer loyalty and expand its shipping and logistics capabilities, which has contributed to its dominance in e-commerce.

💡Subsidiaries

Subsidiaries are companies that are owned or controlled by another company, known as the parent company. The script mentions several subsidiaries owned by Amazon, such as IMDb, Audible, Zappos, Twitch, and Whole Foods, illustrating Amazon's diversification strategy beyond its core e-commerce business.

💡Amazon Web Services (AWS)

Amazon Web Services (AWS) is a subsidiary of Amazon that provides on-demand cloud computing platforms and APIs to individuals, companies, and governments. The script highlights AWS as a significant revenue and profit generator for Amazon, emphasizing its role in hosting websites and applications for customers and businesses.

💡Profit Margin

Profit margin is a measure of a company's profitability, calculated as the profit divided by the revenue. The video explains that despite Amazon Marketplace having a loss margin, AWS has a substantial profit margin, which is crucial for Amazon's overall profitability.

💡Dot-com Bubble

The dot-com bubble refers to the period of excessive speculation in the late 1990s during which the stock prices of many internet-based companies soared to unsustainable levels before crashing. The script discusses the impact of the dot-com bubble on Amazon's stock price and the challenges faced by the company during that period.

💡Competitive Advantage

A competitive advantage is an attribute that enables a company to outperform its competitors. The video mentions Amazon's alleged anti-competitive practices, such as creating their own versions of popular products and undercutting small business sellers, which has been a point of contention for some.

💡Joyce.com

Joyce.com is mentioned in the script as a new startup marketplace being developed by the video's narrator. It is presented as an alternative to Amazon, offering free two-day shipping and a platform for small businesses to sell their products without excessive competition from the marketplace owner.

Highlights

Jeff Bezos is the founder of Amazon.com, an online marketplace known for its vast selection of products.

Amazon offers over 100 million different products and shipped about 5 billion items in a year, accounting for nearly 40% of all internet sales.

Contrary to popular belief, Amazon loses money on nearly every purchase made through their website.

Amazon's growth began in the 1990s with Jeff Bezos leaving his Wall Street firm to capitalize on the internet's potential.

Bezos used a 'regret minimization framework' to decide to start an e-commerce company.

The company was initially named Cadabra, Inc., but later renamed Amazon.com after a lawyer misheard it as 'cadaver'.

Amazon started with a list of 20 product categories and chose to focus on books due to their high demand and variety.

Within two months of launching, Amazon had sold books in 45 countries and was making over $80,000 per month.

Amazon went public in 1996 on NASDAQ with an IPO price equivalent to $1.50 per share.

Investing in Amazon's IPO in 1996 would have resulted in a return of approximately 1000x by today.

Amazon faced lawsuits from Barnes and Noble and Walmart but continued to grow rapidly.

In 1998, Amazon expanded beyond books to become the 'everything store', significantly increasing its revenue.

Amazon's stock price reached $113 per share in 1999, making Jeff Bezos a billionaire and Time's Person of the Year.

The tech bubble burst in the late '90s, causing Amazon's stock price to drop from $113 to $5.51.

Amazon survived the tech bubble burst and began making modest profits, introducing Amazon Prime in 2005.

Amazon Prime offers free two-day shipping on select products, though it initially caused the company to lose money on each item shipped.

Amazon Web Services (AWS) was launched in 2005 and has become a significant profit driver for the company.

AWS provides cloud computing services, allowing businesses to rent servers based on their needs at a reasonable cost.

AWS contributes nearly 100% of Amazon's profit, compensating for losses from Amazon Marketplace and Prime.

Amazon has faced criticism for not paying taxes, alleged anti-competitive practices, and poor working conditions.

The video introduces joysk.com, a new startup marketplace offering free two-day shipping and a platform for small businesses to compete.

Transcripts

hi there who are you i'm jeff bezos and

what is your claim to fame

i'm the founder of amazon.com

amazon most of you know it as the online

marketplace where you can buy anything

from six foot tall 150 pound bigfoot

statues to

nicholas cage pillowcases

yeah amazon sells pretty much everything

in fact they currently have a selection

of over 100 million different products

to choose from and they also shipped

about 5 billion items last year alone

that accounts for nearly 40

of everything sold on the internet but

even though amazon is known by consumers

as a company that makes money by selling

products online that actually isn't how

amazon makes money in fact amazon loses

money on nearly every single purchase

that is made through their website so

how did amazon make its money how is it

profitable and how did they become the

mammoth of an e-commerce company like

they are today well it actually started

off with fairly modest beginnings

this is the story of amazon

let's take you all the way back to the

1990s when the top fads were beanie

babies tamagotchis and yes

the internet alison can you explain what

internet is it's a giant computer

network oh i thought you were going to

tell us what this was looking at

it is true that when i was a kid the

information superhighway as we called it

was an unknown but growing sector of the

economy

[Music]

[Applause]

actually the term growing may be a

little bit of an understatement in this

case because the growth of e-commerce in

1994

was nearly 2

300 percent a young wall street

executive named jeff bezos had been

paying attention to the growth of the

internet and decided to leave his wall

street firm in order to start an

e-commerce company he did this because

he had something which he called a

regret minimization framework which

meant that he never wanted to wake up

one day when he was 70 years old and

regret not trying to start a business

with a massive growth opportunity like

the internet so mr bezos packed up moved

to seattle and began to work on a

business plan for his new e-commerce

company which he called

cadabra

inc not what you were expecting i'm

guessing he then went to legally

incorporate the company cadabra inc

except that his lawyer misheard the

company name and incorporated it as

cadaver

inc which was a little bit too dark for

bezos's liking so he came up with

another name relentless again i'm

guessing that's not what you were

expecting bezos purchased relentless.com

in september of 1994

but after his friends told him that it

sounded too sinister he ended up

settling on

amazon.com

one little side note or fun fact here is

that if you were to type in

relentless.com into your address bar or

into google you'll find that it

redirects you to

amazon.com so the next thing bezos did

was he created a list of 20 categories

of products that could be sold on his

website and he specifically wanted a

wide variety of products to exist within

each one of those categories he then

narrowed it down to five categories they

were compact discs computer hardware

computer software videos and books

eventually he decided to focus in on

books due to the high demand of books

the large amounts of titles available

and the low price point within two

months of launching amazon.com the

company had sold books in 45 countries

and was making over 80 000

per month little did they know that

within 25 years amazon would soon be

making 80 000

every 14

seconds revenue for amazon continued to

grow over the next couple years so they

decided to go public in 1996 and they

were listed on the nasdaq amazon stock

ipo'd at the equivalent of a dollar and

fifty cents price per share and when you

look at amazon stock price today which

is a cool 1

500

you can do the math and calculate that

if you invested ten thousand dollars in

amazon's ipo in 1996

it would be worth roughly 10

million dollars today however amazon

would hit a few rough patches over the

next few years barnes and noble sued

amazon in 1997 alleging that amazon's

claim to be the world's largest

bookstore was false because it isn't a

bookstore at all it's a book broker the

suit was settled out of court and amazon

continued to call itself the world's

largest bookstore amazon was then sued

again by walmart in 1998 alleging that

amazon stole some of walmart's secrets

by hiring former walmart executives the

suit was also settled out of court

despite these lawsuits amazon continued

to grow at a tremendous rate by mainly

selling books but selling just books was

not good enough for jeff bezos so later

in 1998 the company made a big decision

to expand beyond books and started

selling a little bit

of everything this was the first step

that amazon took towards becoming

the everything store the decision to

start selling everything made amazon's

revenue jump to nearly one

billion dollars cementing itself as one

of the giants of the e-commerce industry

investors soon became very fond of

amazon and its upside potential which

made amazon's stock price reach

113 dollars per share in 1999 and

indirectly making jeff bezos a

billionaire and times person of the year

it very much seemed like nothing could

go wrong for amazon however amazon was

amongst many other tech companies that

seemed to be going through a golden age

of tech sector investing within the

stock market but this was the exact

opposite of a golden age at the time

investors thought investing in new tech

startups with zero profit and very

little revenue was a fantastic idea in

fact most investors didn't even know

much about what they were investing in

they just heard about the crazy returns

that these tech investments were getting

so they just decided to go with the flow

and gamble with their money without

knowing much about how they were getting

their returns luckily today we don't

have anything like that out there so

don't worry about this this senseless

investing in the late 90s from wall

street caused a massive tech bubble or

dot-com bubble in the stock market for

proof of how crazy some of these tech

investments were here are some companies

that were valued at near or over 1

billion at the time with little to no

revenue

broadcast dot com geocities theglobe.com

healthy on inktomy actua verticalnet

think tools infoseek global crossing

commerce one and there are actually tons

of other ones but covering all of the

billion dollar tech companies that went

bust during the tech bubble would take

all day so how does this relate to

amazon well after investors came to

their senses and realized that companies

that don't have a product yet shouldn't

be worth two billion dollars they

decided to pull their money out of the

overvalued tech sector this caused

amazon's stock price to fall from 113

dollars at its high

to

5.51

at its low that's a 95

drop this may not seem like it should

mean much to a company because the stock

price has very little to do with the

day-to-day operations of a company even

dramatic swings like that but it does

certainly affect a company's access to

capital and financing which are usually

vital for startup tech companies like

amazon needless to say most young tech

companies did not survive the tech

bubble bursting however ebay priceline

sandisk shutterfly and amazon were some

of the few that managed to make it out

alive over the next few years amazon

would start making very modest profits

nothing too special but they weren't

growing as fast and they became somewhat

stagnant as a company so they had to try

something else in 2005 they thought what

if we offered free

two-day shipping within the united

states on select products they called

this

amazon prime however this was the second

most important move that amazon would

make in 2005 but we will come back to

that in a second the move to give free

two-day shipping on a lot of products

would actually make the company lose

money on every single product that was

shipped due to the increased cost of

this fast shipping and to this day in

2018 amazon still loses money on every

single product that is sold on their

website so how does amazon make a profit

imdb audible zappos twitch whole foods

what do these companies have in common

well all of these companies are worth

over a billion dollars and all are owned

by amazon

even though these subsidiary companies

do not affect amazon's bottom line that

much in terms of revenue what i wanted

to show you is that a lot of giant

companies have a business strategy where

their main product or service is not

profitable like amazon's marketplace but

several of their smaller subsidiaries

products or services are profitable so

let's bring this back remember when i

said that amazon prime was the second

biggest decision that amazon made in

2005 well that's because the biggest

decision at least in my opinion was

starting a subsidiary company called

amazon web services or aws for short aws

does a ton of different things but to

try and simplify it aws is a cloud

computing company that hosts websites

and applications for customers and other

businesses for example let's say you

have a great new business idea tinder

but for dogs let's call it

dogger in order for you to build dogger

and have it be connected to the internet

you will need to put it on a server

there are plenty of companies that will

cut corners and let you host a personal

blog on part of a server for about four

dollars and ninety five cents a month

but if you want to build a big company

you will likely need one to ten full

servers to start and each one of these

will cost you between two thousand and

five thousand dollars apiece and for a

lot of small businesses that are just

starting out that can be really

unaffordable so

aws lets you rent out servers based on

your needs and the price is variable

depending on your usage but it usually

ends up being around five hundred to a

thousand dollars per year depending on

your company that's much more reasonable

for a startup like dogger so to

summarize what aws does is they offer a

very affordable way for businesses to

host large-scale websites this would

become very vital to amazon in the

future in fact over the next 13 years

aws would end up growing at a rate

faster than amazon marketplace roughly

34 of all websites today use amazon web

services as a platform meanwhile the

next three biggest competitors microsoft

google and ibm own 11

8

and 6 of that share respectively so how

important is aws to amazon as a whole

well let's break down their financial

information

amazon marketplace made a hundred and

sixty billion dollars in revenue last

year but had a loss of 200 million

dollars largely because of the shipping

costs this means that they had a loss

margin of 0.125

which also means that on every single

product that is sold through their

website amazon loses on average 0.125

that doesn't sound like a great business

strategy to me

step in amazon web services aws made

17.5 billion dollars in revenue last

year 4.3 billion of which was profit

meaning that aws has a profit margin of

24.5 percent so

even though aws makes up only 9.8 of

amazon's revenue it makes up nearly 100

of amazon's profit and cancels out any

losses that amazon marketplace may

acquire from expanding its control over

online shipping using amazon prime and i

cannot stress the importance of this

enough because aws gave amazon

marketplace the ability to take losses

on all of its transactions while

expanding amazon prime to what we know

it is today this allowed amazon to

really leave other e-commerce

competitors like ebay in the dust

however while amazon was on the path to

becoming this e-commerce giant it also

had some downsides along the way for

example amazon has gotten in trouble for

allegedly not paying taxes and for

having an anti-competitive advantage

over other storefront businesses because

amazon was not really forced to pay

sales tax up until 2011. they have also

gotten in trouble many times for

allegedly having poor working conditions

one time in 2011 warehouse workers in

pennsylvania had to carry out work in 38

degrees celsius heat which allegedly

made some employees suffer from

dehydration and even faint this was

allegedly because loading bay doors were

not allowed to be open to allow fresh

air inside the warehouse because of

amazon's concerns over theft so what did

amazon do they paid for an ambulance to

sit outside on call to cart away any

overheated employees the company

eventually installed air conditioning at

this warehouse another gripe with amazon

comes from businesses that sell on

amazon half of amazon marketplace is

populated by small business owners and

people who make a living off of selling

things online you may have actually

heard me talking about why you should

sell things on amazon in past videos

however in the past few years when

amazon sees that a product is selling

well on their website they make their

own version of that product and undercut

the original seller and rank their

product ahead of the small business

owner that originally posted the product

this has made small business owners

unable to compete on the amazon's

website and lose an essential portion of

their income but what if you could sell

your products online without having too

much competition from a big monopoly

company like amazon or what if you could

buy a product online and have it shipped

to you in two days without needing to

spend a hundred bucks on amazon prime

well joyce.com is a new startup

marketplace that i'm currently building

it is still in the alpha testing stage

and free two-day shipping is only being

tested in a few cities in canada at the

moment but if you want to support this

channel i would really appreciate if

you've gone to joysk.com just check it

out maybe buy something if you'd like or

start selling something and maybe make

some cash yourself or you can just buy a

cheap product and you know resell it on

amazon or ebay for all i care or resell

it on joyce it's totally up to you

honestly

there are still a lot of kinks to work

out in this website so it's still in the

testing stage and i'm not marketing this

site like crazy right now but it would

mean a lot to me if you'd go on there at

least check it out let me know what you

think so i'd like to thank you very much

for watching uh you're all very

beautiful people please subscribe if you

like this video and hit that like button

and i'll see you guys next time