WITH the Kindle Fire, Amazon.com chief executive Jeff Bezos is showing the world that he’s much more than an online retailer. The original Kindle, released in 2007, was the first piece of electronic hardware Amazon ever produced, and it revolutionised the electronic book business. Wall Street analysts expect Amazon to sell about 26m Kindle devices next year. Combined with sales from e-books, that’s about $6bn (£3.72bn) in revenues, nearly ten percent of Amazon’s total sales. The new Kindle Fire may be an iPad wannabe, but Amazon may sell 5m units in the fourth quarter of this year alone, demonstrating that Amazon could become one of the world’s major consumer electronics companies.That kind of business diversification is rarely seen in a single company. Sony and Dell have always been consumer electronics companies. Microsoft and Google have always been software companies, although Microsoft added the Xbox after failing to kill off Nintendo with computer games. Apple has always sold both hardware and software (for its own devices) and moved into retailing with iTunes. But Amazon does it all: retailing, computing services, electronics, software – and electronic media in the form of e-books and video downloads, which could get a big boost from the Kindle Fire in the coming years. Bezos may just be the world’s premier entrepreneur.Yet it’s hard to define just what drives him. Steve Jobs saw hobbyists starting to build the first personal computers, fell in love, and sold his car to start Apple. Bill Gates, a software geek, saw the same thing and dropped out of Harvard to start Microsoft. Jeff Bezos didn’t start selling books because he loved books. In the early 1990s, fresh out of Princeton, he knew only that he wanted to be an entrepreneur. In 1994, seeking new business opportunities for his employer, electronic stock trading company D.E. Shaw, he looked into the rising phenomenon known as the internet and discovered that it was suddenly growing like bacteria in a petri dish – twenty-three hundred percent in the previous year. He crunched the numbers for different retailing possibilities and books came out on top. Shaw wasn’t ready for that kind of diversification, so Bezos left and started Amazon.com.Bezos never stops innovating or taking risks. Amazon.com was one of the first profitless dot-com companies to go public, setting what turned out to be a disturbing trend. In the late 1990s, many Wall Street analysts were convinced Amazon.com would be destroyed by larger retailers such as Barnes & Noble. Amazon lost $720m in 1999 and had amassed $2bn in debt. But when the crash came in 2000, Bezos changed strategies and focused on profits while most other dot-com companies collapsed like houses of cards. He’s not afraid to play that game again today. In the third quarter of 2011, Amazon’s profit fell 73 percent as Bezos spent millions of dollars creating new Kindles and adding new shipping centres so he can get products to customers as quickly as possible. After the announcement, the stock dropped 15 percent in two days.Sometimes his ideas on diversification are a little too wild. In 1999, he talked to the press about possibly selling travel, insurance and banking services through Amazon. But some of his ideas are brilliant. In 2002 he had his engineers redesign the interfaces to all Amazon’s software services so that he could lease Amazon’s computers and their capabilities to others through the internet. That turned Amazon into a leader in the field of cloud computing, helping other companies run their own businesses off Amazon’s computers and software so they don’t need to build the capacity themselves. Netflix, for example, streams its 20,000 video titles to people’s homes from Amazon’s computers.Amazon may be diversified, but every business bears the Bezos trademark, the big secret to his success: he’s the entrepreneur for the common man. He sells his products at a deep discount, unapologetically putting other retailers out of business, but maintains an emphasis on customer service that puts most companies to shame. Perhaps his success comes from the fact that his passion isn’t for any particular business, the way it was for Steve Jobs, who always tried to set the gold standard in consumer electronics. Jeff Bezos aims for the mass market, building and selling anything he can think of.There’s one other clue to Bezos’s true ambition, one as grandiose and quirky as Bezos himself. He was always a huge science fiction fan. In his book Get Big Fast, Robert Spector suggests that Bezos wanted to become wealthy so that he could create technology that would allow people to populate other planets. Unlikely? Well, Bezos has already used his wealth to start a company building spaceships for commercial flight. Called Blue Origin, it has had one successful test launch and is vying for Nasa contracts. If he gets his way, perhaps space exploration will be his ultimate legacy. Now that’s thinking big.Richard L. Brandt is the author of One Click: Jeff Bezos and the Rise of Amazon.com, out now from Portfolio Penguin, £14.99.
Sunday 30 October 2011 9:50 pm
Amazon’s Jeff Bezos is much more than a bookseller: He’s the Everyman entrepreneur
City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.