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Game of Thrones or Game of Drones – Will Amazon Survive the Winter?
July 18, 2016|e-commerceInvesting

Game of Thrones or Game of Drones – Will Amazon Survive the Winter?

Game of Thrones or Game of Drones – Will Amazon Survive the Winter?

Amazon.com has just come through its second annual Prime Day, the day where they as a company reward Amazon prime members with significant discounts.  For all intents and purposes it was a roaring success (even though the stock ended down on the day).

 

Jeff Bezos has become a modern day magician, building a house of cards or turning water into wine, either analogy works.

 

It all comes down to the short term, Q2Q driven environment we live in!  Many of you reading this letter are unaware that Amazon.com in its 17 year history with it’s $300 billion market cap, yes I said $300 billion, has never made a dollar in overall profit.  “What?”  I hear those tech disciples scream “but what about AWS?”  Amazon Web Services, yes this division does make money.

 

Unfortunately, every other department does not and as such Amazon Web services is supplementing the rest of the company until Amazon.com becomes part of an oligopoly manufactured by Mr. Bezos himself.  For every next day delivery, for every drone delivery within the next hour, they are losing millions of investors’ dollars.  To what end you might ask? Well, to be honest it’s an age-old story, kill or be killed, Amazon.com is basically gambling that they can dominate the market share so much that they can influence pricing to the point where every department can make money.

 

The reality is that every mom and pop store in this country does not stand a chance unless we change the way we think about capitalism.

 

The American corporate culture has become centered around a 90-day horizon where people literally live or die by making their revenue number.  Innovation and long-term planning have seemingly been put to the wayside by this level of short-term thinking.  Every C-suite in the country is guilty of thinking this way, why?  This is because their compensation is based on short-term success.  Why plan for the next 10 years, when a chief executive can make $50 million in the next three years simply by him hitting their numbers quarter after quarter?

 

As a professional trader, it seems bizarre to me that Amazon.com appears to be bucking the trend.  The question remains when, rather than whether time and the lack of profit will catch up on Mr. Bezos.

 

We are in a dreadful downward spiral – from 1955 – 2014 a staggering 88% of the Fortune 500 companies no longer exist.  Let me be the first to say that innovation by its very nature is destructive but to this extent really does this look like a long-term plan for the American economy.  It doesn’t to me.  A striking example of this is the company LinkedIn who had a staggering 44% fall in their market cap this summer.  Why?  Because their membership numbers had stalled in the previous quarter, thus putting them in a weak position and now they are owned by our friends Microsoft.  Wow!  Is the American economy building companies or just playing cards?

The good news is I think I have an answer. Platform companies such as Facebook and Google have revolutionized the way revenue structure works allowing these two goliaths to plan for the future.

 

I am Kieran Prior and I’m about to embark upon a journey of change, one that will change e-commerce environment forever, without prescribing how things should be done.  Instead simply providing the tools for culture to meet commerce.  Allowing job creation and human innovation to sculpt and etch the way to an open commerce ecosystem.

 

I will write more in my next letter about what I call the PriArc Hub.

 

Kieran Prior

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Kieran Prior

My blog “Trading Places” is all about perspective. People who read it may not and often will not be in agreement. And that does not matter, as everybody is entitled to their own perspective. What does matter, however, is that the right questions are asked.
Hi I'm Kieran
I'm a proud husband, football fan and Dog Dad to @finchy_the_frenchie