Blog: Amazon is a Beast
Slower growth with higher profits fuels this monster.
Amazon is a beast but it’s international growth is stalling in 2019. Its North American revenue saw 17% increase, compared to last year’s 46% growth, while international growth dropped to just 9%, down from the previous year’s 34% growth rate.
Amazon’s advertising growth also fell to only 34% revenue growth to $2.7 billion, after growing at least 60% in the past five quarters.
However AWS is the inner beast that fuels the Chimera. Amazon Web Services reported revenue growth of 41% on Thursday April 25th, 2019. Amazon is still a Titan because as it gets bigger the new trend is simply less growth but fatter profit margins. That’s to be expected, it’s almost a 1 Trillion dollar company anyway.
Amazon has a kind of store of the future called AmazonGo that makes cashiers obsolete. Amazon employs a system that not only tracks warehouse workers’ productivity but also can automatically fire them for failing to meet expectations. Amazon’s workforce has ballooned with the acquisition of Whole Foods.
Amazon is a beast, in very specific good and bad ways for American capitalism. Just how much revenue did Amazon deliver in Q1 of 2019? $59.7 billion. Think about what that means for the future of this company that is owning the smart home, the AI-voice channel with Alexa and delivering less and less friction in logistics and E-commerce experiences.
Amazon is a Beast because it’s tackling things like healthcare with a more sophisticated leverage of artificial intelligence, the Cloud and machine learning. It’s growing advertising for brands where it has the retail and customer-centric data that matters.
Amazon is becoming more lucrative. Its operating profit of $4.4 billion represented a record 7.4% margin. The company is forecasting guidance where 2019 might be a transition year for it, just as it will be for Apple, Facebook and many others.
Sales at AWS rose to $7.7 billion from $5.44 billion a year earlier, beating the $7.69 billion average analyst estimate. For a company that generates more than $200 billion a year in sales, Amazon’s growth deceleration is to be expected. However it will have nearly a quarter of a trillion dollars in revenue. If anybody is a beast it’s Amazon. Amazon will invest more in original content to compete with Netflix than ever before.
- Amazon’s slowest growth in 4 years
- Amazon’s ad business saw a big slowdown
- Profit margins are very healthy
- The wider margins come from growth in businesses like cloud, advertising and third-party seller services, where profits are bigger but total sales are smaller.
Amazon is a beast that should continue in the 2020s to become one of the dominant firms in America. Amazon’s big bet on its $13.7 billion purchase of Whole Foods Market in 2017 to become a player in the U.S. grocery business has not apparently panned out that well up to this point. The sales it generates from Whole Foods and its other physical stores grew by just 1% to $4.3 billion. That’s terrible.
Amazon is a Beast because it can afford to fail on its big bets and still exceed expectations. Amazon is a Beast because Wall Street adores it nearly whatever it does. Amazon executives discuss international markets, where growth slowed to 15% last quarter from 29% the prior year. New regulations in India really challenged it.
Sen. Elizabeth Warren, D-Mass., has recently proposed breaking up some of the big tech companies, including Amazon, to foster fair competition. Yet Amazon is still building its ecosystem and increasing its value proposition to a consumer that trusts it more than the other guys. What a beast!
With the 2020 Presidential elections there’s going to be a focus on Facebook, Google, Amazon and Apple with regards to their monopoly status. Political pressure (probably yet to peak) has been growing, with a number of lawmakers and regulators around the world expressing concerns about Amazon’s rapid expansion and market control.
Retail is still Amazon’s core business model, but that’s a low-profit margin business. So to continue Amazon needs to win more of its “big bets” namely in how to monetize the smart home. Healthcare, the Vesta robot and advertising do make sense, and AWS can still evolve. Amazon is a beast of the hype factor even if Alphabet is more dominant in AI. That’s an interesting scenario for the future of technology. Amazon is a beast because it’s a giant among Titans even without being an advertising (high-profit margin) easy play leader.
Amazon isn’t a Facebook or Google, it actually has to hustle for its gains in the market.