7 years soared 9 times! From being questioned to the king, how did Amazon turn over? via /r/wallstreetbets #stocks #wallstreetbets #investing


7 years soared 9 times! From being questioned to the king, how did Amazon turn over?

Amazon has increased nearly nine times since 2015, with a market value of $1.5 trillion.

In 2014, Amazon’s annual loss also made Wall Street doubt whether the company would never be profitable. At a time of pessimism on Wall Street, Amazon’s ten-year-old bet began to generate profits in 2015, that is, Amazon cloud. The rapid growth of Amazon cloud shocked Wall Street and doubled Amazon’s share price that year.

Amazon cloud has maintained rapid growth in the past five years. According to the latest news, the net sales of Amazon cloud platform in the fourth quarter of 2021 was US $17.78 billion, a year-on-year increase of 40%, while the net sales of this business in 2021 reached US $62.202 billion, a year-on-year increase of 37%.

Long term investment must be matched with companies with long-term thinking. Such companies may not cater to the tastes of the capital market in the short term, but they will bring thick returns in the long term. Analysts believe that the real top experts like Amazon are playing an “infinite game”, which aims to focus on defeating all competitors and building a unique ecosystem in the long term.

Recently, the annual fee of Amazon gold medal members has increased again, showing its stickiness as a unique ecosystem. The annual fee of Amazon gold medal members in 2005 was $79, which was raised to $99 in 2017 and $119 in 2018. From February 18 this year, Amazon’s annual gold medal membership fee has been further increased to $139 a year.

A ten-year bet — Amazon cloud

Amazon cloud originally used Oracle’s relational database to manage Amazon. Com However, Bezos is frustrated that the increasing traffic makes the software overwhelmed and threatens the stability of the website every once in a while. In 2007, Amazon launched the original database of simpledb. When simpledb proved to be too cumbersome and difficult to use, Amazon cloud engineers began to develop dynamodb, which is faster and more flexible and can cope with the huge traffic unique to the Internet. Naifei is the user of the Amazon cloud.

In 2010, when gulabani, head of Amazon cloud, predicted that Amazon would take ten years to succeed in relational databases, Bezos said: “I bet you need more than ten years, so you’d better start now.” Bezos realized that a strong database would be one of the biggest opportunities for cloud computing, so he greatly increased his budget.

In 2012, Amazon cloud released the data warehouse “redshift”, which allows companies to analyze their data stored in the cloud; In 2015, it released the relational database “laser”. “You know, the importance of names may only account for 3%, but sometimes 3% can decide whether to win or lose,” Bezos said As Amazon enters the database business, a fierce battle between it and Oracle is inevitable.

Before 2015, Amazon did not disclose the financial details of Amazon cloud. In 2015, Amazon finance department proposed that the revenue contributed by Amazon cloud had been close to 10% of Amazon’s total sales, which must be disclosed according to federal law. After the news was disclosed, Amazon’s market value rose by nearly 15% in one day, breaking the $200 billion mark for the first time, ending Amazon’s history of never making money.

The culture of Amazon cloud is the epitome of Amazon’s corporate culture: tenacity, perseverance and focusing on high standards that cannot be achieved. Brad stone, author of Bezos, quoted a former AWS executive as saying: “we are really good at accepting gold medals while complaining that it is not dazzling enough.”

20 years of consistent betting – playing an unlimited game

“For a long time, we are unprofitable. This is our strategy.” Bezos said so in 1997.

The capital market is naturally a short-term place. Most investors and listed companies only focus on the company’s profit maximization and stock price fluctuation, but Amazon is just the opposite, as Natalie Berg, the author of Amazon effect, said.

Bezos’s first letter to shareholders in 1997 still reads like it was just written yesterday. In a letter to shareholders in 1997, Bezos said: first of all, we measure ourselves by the relevant indicators of market leading position. The growth of customers and revenue, the repurchase rate of customers and the recognition of brands. We have been and will be actively committed to expanding and doubling our customer base, brand and permanent infrastructure.

Amazon has been doing the same for the past 20 years. Briton Ladd, a former Amazon executive, believes that companies are either playing limited games or unlimited games. In a limited game, related companies believe they can beat their competitors. The characteristic of limited game is to record game scores with a set of rules agreed by all parties and a well-defined mechanism.

Ladd believes that Amazon is playing an unlimited game with the goal of surpassing its competitors. Amazon is well aware that competitors are destined to emerge one after another, and Amazon itself knows that it can’t be the best in all fields. Amazon therefore made a strategic decision, that is, to focus on defeating all its competitors and survive, it should create an ecosystem to perfectly meet and serve the expanding needs of consumers for products, services and technologies.

Debenham, a British department store retailer, said that retailers generally reinvest 1% ~ 2% of their revenue in system construction, while Amazon reinvests 6%. “This is a 5:1 difference, which makes reinvestment give back better toolkits, better testing and better infrastructure.” He said.

“When you run a business with a low profit margin, you really develop a sustainable moat around it.” Mark mahani, general manager and analyst of capital markets at Royal Bank of Canada, said that he has been involved in Internet stocks since 1998. “Few companies are willing to enter Amazon’s core business and try to compete with it with a profit margin of 1% or 2%.”

Natalie Berg said that this is just a retail business. In fact, many non core businesses of Amazon are first-class large loss makers. Amazon may still lose money in express delivery. Terminal devices such as Amazon’s e-reader Kindle and smart speaker echo are typically sold at cost or loss. Given that echo owners spend 66% more than Amazon’s average shoppers, the retailer is clearly motivated to subsidize the sale of the device.

Long term thinking – continuous innovation on behalf of customers

“If you want to know what makes us different, that’s the answer. We’re really customer-centric, we’re really long-term oriented, and we really love innovation. Most companies don’t.” Bezos said.

Amazon is not the first customer-oriented retailer in the world. However, the reason why Amazon is different is that it is not satisfied with the status quo. It always seeks better ways to serve customers and make customers’ shopping experience more convenient and faster.

In 2016, Bezos wrote to shareholders that there are many advantages of being customer-centric, but the biggest advantage is that customers can always point out your unexpected dissatisfaction. Although they can’t say how to improve, they always expect to get better things, and your desire to please customers can drive you to invent.

Amazon unremittingly innovates on behalf of its customers. In this process, Amazon will not only amaze consumers, but also subvert more industries. Natalie Berg said that Amazon is not a real retailer. It is a technology company whose sole purpose is to innovate on behalf of customers’ needs. However, it sells a lot of things in the process.

Submitted February 07, 2022 at 09:13AM by lilyxu185
via reddit https://ift.tt/wNx65Dk