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Team Nebraska: Amazon

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Jason Dunn

on 13 February 2014

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Transcript of Team Nebraska: Amazon

Insight #1: Amazon has an unorthodox business model
In October 2013, Amazon reported a second straight quarterly loss. Strangely enough, stock investment in the company rose dramatically and stock prices rose as high as $400 a share. This wasn't because Amazon was proving unprofitable...
Team Nebraska

Insight #2: Amazon Prime Bigger then Predicted
AW$ Revenue
Analysts at Macquarie Securities estimated in a 2013 report that total Amazon Web Services Revenue will almost double this year to $3.8B and reach $8.8B by 2015.
Web services will kick in close to 5% of sales this year, up from 3.5% last year, and will rise to almost 8% by 2015, Macquarie projected
Amazon Web Services’ annual revenues could reach $20 billion by 2020 from $1.8 billion last year, Carlos Kirjner, an analyst at Sanford C. Bernstein & Co., estimated in a 2013 research report
The total cloud market is forecast to rise to $237.2 billion in 2017 from $108.9 billion last year, according to Gartner.

Business Insider reports that, "Amazon is losing money because it's investing like crazy in fulfillment centers, and other expensive things to stay 100 steps ahead of the competition. Amazon has found that cheap, fast shipping leads to a big jump in sales, so it's investing in making that possible."

"A report from Morningstar and Consumer Intelligence Research Partners (CIRP) estimated that there are now 10 million subscribers to Amazon Prime. "

- 4 MILLION IN 2011
- 7 MILLION IN 2012
-10 MILLION IN 2013

Predicted to reach 25 Million by 2017.

Insights into Online Retail's
Unquestionable Overlord

Amazon uses its online presence to get the most out of its fixed costs.

(according to former
employee Eugene Wei)
The platform starts turning a high number
of sales with a large amount of available products.
The total sales from all
of those products add up to exceed the fixed costs of operation.
Amazon Prime Members
Insight #3:
Amazon Web Services (AWS)

Game Changer
The shift to cloud technologies is an existential threat to tech giants such as IBM, Microsoft and Oracle--In Fact, Amazon recently won a 4-year $600M CIA contract beating out IBM.
Its technology powers upstarts, such as Netflix and Airbnb, and corporate giants, such as General Electric and Pfizer.
Amazon Prime is a fee-based membership service that includes free 2 -Day Shipping and streaming of thousands of movies and TV shows. Membership in Amazon prime has doubled in less then two years and analyst predict it will easily double again by 2017.
Fee to join $79 ($39 students)

Average Prime Users use $55 in shipping and $35 in digital content annually = $90
Prime members bought things they probably wouldn't normally in the past and most shoppers ceased to shop anywhere else.
Members spend 150% more after joining Prime. An average of $1,224 in Amazon Purchases compared to $505 for Non-members. After factoring in costs incurred for shipping and streaming, the average Prime member yields Amazon $78 more in profits than other customers.
Since early 2006, Amazon Web Services (AWS) has provided companies of all sizes with a complete set of infrastructure and application services that enable them to run virtually everything in the cloud: from enterprise applications and big data projects to social games and mobile apps. In other words: they "rent" computing power.
The main appeal of AWS is it offers cheaper or more flexible options than traditional corporate technology that lives entirely in computing centers inside a company’s walls.
AWS has reaped the rewards of being an early-mover advantage
Full transcript