Who are you I'm Jeff Bezos and what is your claim to fame and the founder of www.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 Nicolas 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 with the top fads were beanie babies Tamagotchi's and yes the Internet Alison can you explain what internet is oh I thought you're gonna tell us what this was 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 maybe 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 have 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 calm 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 a relentless.com into your address bar or into Google you'll find that her 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 it 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 dot the equivalent of a dollar and 50 cents price per share and when you look at Amazon stock price today which is a cool $1500 you can do the math and calculate that if you invested $10,000 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 & 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 jumped to nearly 1 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 stock price reach 113 dollars per share in 1999 and indirectly making Jeff Bezos a billionaire an TIME's 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 a 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 or it turns 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 mass a tech bubble or .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 dollars at the time with little to no revenue broadcast.com geo cities the globe com healthy own I'm Tommyb actua vertical net think tools Info seek Global Crossing Commerce 1 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 stock price to fall from a hundred and thirteen dollars at its high to five dollars and 51 cents at its low that's a ninety five percent 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 start-up 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 while 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 dog ER in order for you to build dog ER 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 $4.95 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 dollar a piece 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 start-up 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 percent of all websites today use Amazon Web Services as a platform meanwhile the next three biggest competitors Microsoft Google and IBM owned 11 percent 8 percent and 6 percent 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 two hundred million dollars largely because of the shipping costs this means that they have a loss margin of 0.125 percent which also means that on every single product that is sold through their website Amazon loses on average point one to five percent that doesn't sound like a great business strategy to me step in Amazon Web Services AWS made seventeen point five billion dollars in revenue last year four point three billion of which was profit meaning that AWS has a profit margin of twenty four point five percent so even though AWS makes up only nine point eight percent of Amazon's revenue it makes up nearly 100 percent 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 ecommerce giant it also had some downsides along the way for example Amazon has gotten in trouble for allegedly not paying taxes and for how 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 monopolies 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 Commons and you start up a 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 go on to Joyce 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 gets 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 the age nine 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 reading you're all very beautiful people please subscribe if you liked this article and hit that like button and I'll see you guys next time bye TAKE CARE...
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nice person
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