July 7, 2008
BrainTrust Query: What is Amazon.com?
By Bill Bittner, President, BWH Consulting
A couple weeks ago RetailWire ran a question regarding Amazon’s spread into the office supplies segment. I did a little reading in the "investors section" of Amazon’s website and into the developer and web services areas. I was very impressed with what I saw.
The number of developers signed up for Amazon’s web services has gone from 35,000 in 2007 to 370,000 in 2008. I don’t know how many are working on active projects, but even casual use generates income for Amazon.
Like others, Amazon views the internet as a "cloud of interconnections" offering computing services. But Amazon is providing loosely defined computing services that developers can use to support any type of business. In the Amazon cloud, developers can have access to the Amazon hardware resources with all the redundancy and scalability that offers. This includes both CPUs and disk storage space. Their latest offers include "elastic IP addresses," which allow developers to dynamically switch hardware and a queuing service that supports messaging between various users. Computer messaging can be used to pass transactions between various service providers so that website developers can use the best provider. Finally, Amazon provides their "Flexible Payment Service" which allows payments to be processed through credit cards or an Amazon payment account.
The most intriguing service Amazon is offering is their "Mechanical Turk." Aside from the name, it is an interesting idea for marketing and utilizing personal services. ( http://www.mturk.com/mturk/welcome ) The site offers "Human Intelligence Tasks" that workers can complete in return for a fee. Amazon takes care of all the paperwork and upon completion of the task deposits the earnings into an Amazon payments account. People with tasks describe the tasks, how much they are willing to pay, how many people should work on the task, necessary worker qualifications, etc. People seeking work are able to select tasks to complete and receive payment when the requestor indicates it is done.
Discussion Questions: So is Amazon.com just an online retailer? Will web services become an important source of revenue? How do you feel about Amazon’s "Mechanical Turk"?
[Author’s commentary] The whole idea that the services from one data center can be transmitted across both geographic and political boundaries is significant. Amazon’s computing power and the technical knowledge its workers possess make it able to offer services and platforms that other companies cannot afford. By spreading the cost of these facilities across many users, Amazon becomes a low-cost provider. I really think this is going to be a wave of the future for computing and that although it is not confined to retail businesses, the Amazon Cloud will become a significant source of revenue for Amazon.com.
As far as the Mechanical Turk service, I am really skeptical it can provide the results that people expect. Many of the tasks listed are very simple and involve information workers assigning terms or associating images with descriptions, which are difficult tasks for computers. Others involve data entry tasks requiring workers to pull data from various sources. The requestor has to be very specific when they describe a task and it must be clear what "acceptable results" are. I can see Amazon getting caught in the middle.
So the question becomes "Are they a retailer, distributor, technology company or a service provider?" I guess we’ll see.
BrainTrust
Recent Discussions
Discussion Questions
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Amazon is a learning organization, always probing for alternative ways to be profitable. What started out as a bookstore became a department store and that is morphing into a service bureau for other businesses, especially other retailers. Why not?
Sears started out as a mail order company, added suburban department store locations, an insurance company, and a consumer finance company. No retailer needs to stay within its original channel or its original business.
Amazon’s diversification of its revenue drivers like Amazon Payments to compete with PayPal, and upcoming mid-market ecommerce platform to compete with Yahoo Stores etc. reminds me of Google.
Google has branched out to offer Google Documents to compete with Microsoft Office, web analytics, radio and TV advertising, social networking and even SEO services. Hey, even Wal-Mart got into offering Search Marketing services.
As for its ecommerce division, its lowest-price strategy means slim margins. Services may have more flexibility in pricing and more profitability. With the strength of its brand, it could make big waves in services.
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Amazon is a learning organization, always probing for alternative ways to be profitable. What started out as a bookstore became a department store and that is morphing into a service bureau for other businesses, especially other retailers. Why not?
Sears started out as a mail order company, added suburban department store locations, an insurance company, and a consumer finance company. No retailer needs to stay within its original channel or its original business.
Amazon’s diversification of its revenue drivers like Amazon Payments to compete with PayPal, and upcoming mid-market ecommerce platform to compete with Yahoo Stores etc. reminds me of Google.
Google has branched out to offer Google Documents to compete with Microsoft Office, web analytics, radio and TV advertising, social networking and even SEO services. Hey, even Wal-Mart got into offering Search Marketing services.
As for its ecommerce division, its lowest-price strategy means slim margins. Services may have more flexibility in pricing and more profitability. With the strength of its brand, it could make big waves in services.