He doesn’t strike you as smug type, but smart guy John Ellis must be feeling mighty vindicated right about now.
When he was writing the “convergence” column for the New York Press, Dubya’s cousin approached two of the biggest business stories of 2000 — the merger of America Online and Time Warner and the financial woes of Amazon.com — and rushed against the talking-heads’ consensus with daggers drawn.
Against much of the star-crazy press, Ellis argued that the elephantine AOL/Time Warner merger was deeply flawed. It would lead only to “a universe of management woe” for Steve Case and company and would drag the enterprise down by taking its focus off providing the customer with added convenience and value.
The merger, said Ellis, proved that “AOL’s senior managers are no longer focused on the needs of AOL customers and instead have decided to focus on themselves.” The price of this selfishness would be long and steep. Imagine that: greed being bad for business.
And while the pundits were leaving Jeff Bezos’s company for dead, Ellis mounted what can only be called a rousing defense. Amazon.com would be able to surmount its then-impending debt crisis because it is, quite simply, “one of the greatest companies in the world,” and almost totally focused on delivering to customers what they want.
Now fast-forward two years: AOL is hemorrhaging cash. It has recently launched a legal battle against Microsoft to try to resuscitate the Netscape browser by legal means, when it has become clear that customers naturally favor Explorer. This recent downturn has hit its media properties especially hard, with layoffs at both Time and CNN. Worse, it has inundated customers with damn pop up ads, causing many (soon including this AOL user) to flee to other, cheaper, better providers. It is, in short, a company in drastic decline.
Amazon, on the other hand, has “miraculously” survived and, in fact, recently announced its first razor thin profit of $16 million. This was accomplished with a bit of cost-cutting, to be sure — we do live in the post-dot.com era — but most of the gains came from shamelessly pandering to the customers and working to make the delivery of products and services more efficient.
In the fourth quarter of 2001, Amazon introduced a 30 percent discount on all books over $20 and worked to expand the cornucopia of products it offered. It also drastically cut delivery mistakes. (Last month Amazon added a bridal registry.)
Though Bezos’s company still shoulders over $2 billion in debt, it tends, all things considered, to opt for growth over penny pinching. A recent Business Week story contained the telling statistic that “Amazon’s distribution centers are still operating at less than 40 percent of capacity” but the company doesn’t plan any drastic scaledowns in the near future.
There is a reason for this tolerance that separates Amazon from the rest of the pack. Bezos reckons that they’re going to need that capacity in years to come. He’s looking to position Amazon to dominate the buying habits of future Americans who continue to flock online. And he’s not trying, à la AOL, to force them into something they don’t want but rather, to build something indispensable.
It might succeed. One of the loudest sighs of relief at Amazon’s profit came from authors, book reviewers and book editors. Amazon puts information that was previously often difficult to come by within the reach of our keyboards — from anywhere. The average page on a book has a few editorial reviews, the relevant ordering information, number of pages, customer reviews and (a recent innovation) chapter excerpts.
Nothing on the web, from any other book retailer, can match it. Whenever I’ve pitched a book at editors in the last year, their first response was to look for the book on Amazon.com. Given the recent AOL suit, maybe Publishers Weekly should sue.
Jeremy Lott is a student at Redeemer Pacific College in Langley, British Columbia.
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