You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, let's get to James Thompson, partner at buy Box Experts, former business head of Amazon Web Services, your Amazon Services. Excuse me, joining us on the phone from Seattle. Hey, James, UM, let's go through these numbers here, because even though Charlie talked about them just now, they are certainly worth repeating.
For Amazon, first quarter net sales beat estimates one eight point five billion dollars, first quarter operative income beat estimates one eight point nine billion dollars, Online stores net sales fifty two point nine billion dollars, handily beating estimates there. And then here's here's the big one. This is the guidance sees second quarter net sales one billion to one hundred sixteen billion. The estimate was one eight point three
five billions. So how's Amazon doing well? You give me, you give me two minutes to look over the earnings numbers. Welcome to my life. There you go. So a couple of things thinking about for Q two. UM, Amazon is likely going to do Prime Day at the end of June. So that's going to count in the in the Q two numbers. This is a holiday that Amazon invented, that inspired by for inventing holidays, if it creates capitalism, invent the holiday. So uh, yeah, that that's an Amazon holiday.
We're now in years five or six. Amazon's got most of the kinks worked out in the system. Um, it's interesting to see that they're moving it, but most likely and again they haven't announced the exact date, but all indications suggest that it's going to be before the end of June. It's interesting that they're moving in a little bit earlier. UM. And I think there's a few interesting things that are that tell us that there may be
issues on the horizon. The fact that they're doing Prime Day in June at the same time that we're seeing Amazon placing big, big bets with brands. Uh. You know, we're we're seeing Amazon placing six to nine months worth of inventory orders all at once that they want to make sure that those products get on the ships, get into the United States, and get into their warehouses before Q four. We haven't seen Amazon do this kind of
thing before. Uh. It's an interesting move. It means their warehouses are going to be fuller than usual by the time we get to the beginning of Q four. As much as Amazon has been able to continue to build out its facilities different fulfillment facilities, the reality is demand for prime space from both vendors as well as through
party sellers. Everybody wants to be prime eligible that that's that's the goal, and it's hard to keep up with the demand and Amazon struggling I believe, to to keep up, and that's going to create a situation where it come Q four, a lot of these successful third party sellers that have become completely reliant on FBA, on the Fulfillment by Amazon program, they're going to find that they can't
get an inventory space. And I think we're going to see a situation where between their continued recovery of the ECONO of me as covid gets under control, and Amazon struggling with inventory space. I think by the time we get to queue four, that that's when we're going to see that Amazon has actually um not been able to keep up with the demand for its its marketplace. So
then what happens to Amazon's business. Do we get to the time around the holidays this year and Amazon says, hey, in order to actually get these products to you by the time that you expect you need to order them by this date, or is it is it something that's that's more severe than that, that that you're actually not able to find what you're looking for on Amazon and
it's not able to get to you. Well, let me be clear, Amazon always puts the customer first, So I don't think we're going to see customers being told that you can't have this, or you you can have it, but you're gonna wait much longer than usual. I think instead, what we're going to see is companies that sell products that aren't necessarily the absolute top selling items, they're going to find it very difficult to get their products into
the Amazon warehouses. So consumers are likely going to be moving to a model where you can have the best selling product, but you can't have the fifth best selling product or that that's best selling product. And you know Amazon's all about choice. I want to be able to go there to find everything I want. If I can't find the purple pokadad version I need, where do I go? Well, I don't know where to go after after looking at Amazon.
So that's that's one major trend I'm looking at and I'm anticipating based on some of the stuff we're already seeing with our first party and third party clients. Uh, there are issues on the horizon at a time when there's so much uncertainty and we're not necessarily hearing guidance
from every company out there that's reporting earnings. This quarter, the company is saying that it's going to see net sales from a hundred ten billion dollars to a hundred and sixteen billion dollars, handily beating estimates that we're at a hundred and eight point three five billion. This gets to that central question of what life looks like on the other side of the pandemic. It's something that Pinterest
talked about earlier this week. It's something that Twitter made reference to in its own earnings that just came out to what extent people continue to use the products they used during the pandemic. Is Amazon to you in a different position than other companies because it's p kind of have been known to keep their habits when they when they start to use Amazon products and services. I start again with the customer, and I asked myself this question.
If I'm a customer and during the pandemic. All those retailers I went to before the COVID started, I wasn't interacting with those retailers. And by the way, a lot of brands who are exclusively reliant on retailers to tell their story to consumers, a lot of those brands were hurt because the retailers weren't open or the retailers didn't have well established e commerce in place for COVID. So I then look at the alternative. I go to Amazon.
Guess what, I can find what I want on Amazon and Amazon can market specifically to me and my needs as a consumer. If I know that I can go somewhere and Amazon is going to be looking out for me and suggesting products that actually are relevant to me, I can engage with the brand the brands that I want on Amazon. That's pretty enticing when every other retailer has struggled to be able to con tinue that discussion
with consumers during COVID. So the longer the short is, I expect Amazon is going to continue to do very well post COVID because consumers who either did or didn't have Amazon experienced pre COVID, They're going to say, you know what this experience is a whole lot more robust than anything I can get with my local retailer. Yeah. I like to go in and try stuff out, but the reality is they always have my color, my size, and they certainly aren't as good at making recommendations to
me as Amazon is. I'm wondering about other highlights from the earnings report. Um, and I know you didn't necessarily work on this when you were at Amazon, but Amazon Web Services has certainly turned into an incredibly important part of the company's business. I mean, essentially, starting out as an experiment at the company, they invented a category there. Um. Amazon Web Services revenue for the first quarter beat estimates. It was thirteen point five billion dollars. Estimates were at
thirteen point nine billion dollars. Um. What is that telling you about how Amazon is still able to eat those estimates even though we're seeing increased competition from Microsoft and earlier this week hearing from Google as well. Well. I'm definitely not an a AWS expert by any means. One of the key things to keep in mind here is that as more and more companies realize that they need to have an e commerce presence, even if they're not
selling on Amazon. They need to have the backbones, they need to have the systems in place that allow them to become e commerce relevant. And AWS helps brands to become more efficient, helps them to host different types of capabilities for consumers or customers. So Amazon is going to continue to grow the whole process of how do they communicate expectations and how do they manage that? You know,
that's an art that every company needs to figure out. Um, we will continue to see more and more demand for AWS. Now I think back to my time at Amazon. One of the most impressive things about AWS was that they are aggressively going out of their way to lower prices as often as possible. That's an amazing model to have to be in a position where you're trying to lower the cost every consumer in this case business customer. Uh And that's a model that not necessarily every other cloud
service company has been able to keep up with. You've got this huge competitor called Amazon. They're aggressively lowering prices regularly, and you're trying to grow to beat them, and you're faced with a lower cost competitor every month. It's an
interesting model. So at the end of the day, AWS will continue to grow and it continue to be a big cash cow that helps to fund other parts of the business um and even if they start to slow down at some point, they are learning so much from different types of customers about how to offer better services
to the next customer that needs an AWS capabilities. Amazon's Amazon is going to be a major player for decades to come in this space, James, I want to go back to something that you talked about earlier and the challenges that you potentially see Amazon having was specifically with
the Fulfilled by Amazon program later this year. It splain what exactly it is and and because I don't think consumers necessarily know that when they're ordering something on Amazon, even though it does say, and some consumers do look where it's coming from, it's not necessarily coming from Amazon. Many many, many three or third party sellers. Rather than fulfilling the orders themselves, they will ship products in bulk into Amazon's warehouses, and Amazon will actually do the order
fulfillment when the customer places the order. So when you buy that product from a third party seller on Amazon and you magically get an Amazon branded box, that's because the box actually came from an Amazon facility Amazon basically serves as the warehouse and storage and order fulfillment service for that third party seller. Well, there's only so much
facility space to put third party seller inventory. While Amazon can scale up the number of orders they fulfilled, especially in Q four, um, there is a physical limit to how much inventory can be in a warehouse at any given point. During my time at Amazon, we were regularly had to deal with situations where in Q four whatever
warehouses were available were cloaks to capacity. Fast forward a decade and now there's that many more facilities, but there's that many more consumers that want products that are magically delivered to them within one day or two days. That requires Amazon to have this huge network of fulfillment centers, but also Amazon to have what they now do, They own the last mile delivery for somewhere north of of all orders that are prime eligible here in the US. UM.
That's just a massive investment of capital. It's not a it's not an exciting investment, but the reality is it creates a huge moat an advantage for Amazon relative to every other retailer and brand out there. So um, good good good times. As a consumer, won't want you to get stuff deliver to you fast, but it's hard for Amazon to to make make that promise happen without continuing to scale its business. Good times for shareholders as well.
James tom In, thanks so much for joining us. James Thompson's a partner at buy Box Experts, our former business head of Amazon Services, joins us on the phone from Seattle. Well, we are making our way through Twitter earnings. The company reported earnings per share and revenue just topping estimates, but shares are sinking after lackluster sales and user outlooks. Joining us now with more is Kurt Wagner, technology reporter who covers Twitter for Bloomberg News, joining us on the phone
from San Francisco. Kurt uh, It's sort of seems like there is a kind of like tale of two social media and advertising supported companies here, right, there are the facebooks and and and alphabets, right, and then there are the Twitters and Pinterests. What's going on with Twitter? Well, I think the biggest issue here is that Twitter has always been what's called a brand advertiser. You know, they
get the big brands. You're familiar with, the same people who are spending money on television, who like to be involved with, you know, big events like the scurs of the Olympics, but they're not very strong when it comes to what has become the bulk of online advertising, which is this direct response advertiser, right the small retailer who's trying to target you very specifically to get you to,
you know, buy something. And so what we've seen over the last year is that that direct response has really blown up. We've seen Google and Facebook really capitalized as all these businesses have gone online. And Twitter meanwhile, is still kind of doing the same old brand stuff that it's been doing historically, and I just don't think that it's really reaping the same benefits that some of those bigger companies are. Well. Shares down down more than nine
point six in the after hours. Is this all about guidance? I think of guidance is a big part of it. Um. You know, we saw that the numbers came in almost exactly where everyone expected they would. Um, But for next quarter they've said that, uh, they gave a revenue range and the estimates are on the high end of that range. In other words, that means Twitter has to basically hit the very high end of of what it's giving people
in order to meet the expectations. So I do think there's a little bit of disappointment there and that you know what we saw again, Facebook and Google really come out and say, hey, not only was cute one strong, but we're expecting a good Q two as well. There's a really good chance that Twitter might under deliver here, Kart, I want to go back to what you said about
direct responsive. I'm me thinking about what I see in my own Twitter timeline when it comes to ads and and look full disclosure here, I spent way too much time on Twitter, more time on Twitter than pretty much any other app. One thing I noticed this week is like, even until yesterday, I was still getting ads on the mobile app for the Oscars, something that ended on Sunday. And I'm thinking to myself, even before these earnings, I'm thinking to myself, why is how is Twitter to the
point in not not smart enough? And I mean when I say Twitter, I mean the app, Like, how is the app not smart enough to show me something that's more relevant? Well, it's really funny that you say that,
because I had that experienced a few weeks ago. I started seeing ads promoting a baseball game that was over h and had been over for a couple of days, and I was, you know, similarly disappointed, right, like, who's paying to promote a live event to me that is no longer live, not only not live now, but has happened days ago. And I don't have a good answer for why that's the case, other than that, you know, advertisers should be maybe paying closer attention to the timelines
of their campaigns. But you would think Twitter as well would not want to show that kind of an ad right, It's not very relevant, it's not helpful, certainly to you or me. And so I think that that's, you know, an example of the kind of thing that they could
certainly do a better job of. What about when it comes to Twitter's product, because you and I've talked a lot about this over the last few months, that Twitter Investor Day and the way that the company h really changed the way that investors were thinking up until then, at least year to date, about the company's ambitions and
the company's ideas for the product. That Twitter is a unique product and that it hasn't changed significantly apart from the number of characters that you can really type out on a tweet since the company was started more than a decade ago. Um, what do we learned in the earning about the company's thoughts on product Well, that could also be I would think um construed as a disappointing thing about this earnings report is that there's really not
much new in here at all. Um. You know, we talked about subscriptions as being something that Twitter is looking into. There's no updates on subscriptions and their shareholder letter obviously Twitter spaces their audio chat room. This is the clubhouse competitor right now. Yeah, it's a clubhouse competitor. It's it's UM.
I think it's actually better position just because there's so many people on Twitter will already have a following, UM that you know, for someone like me, it works better than clubhouse because I don't have to start from scratch. But again, no update in the shareholder letter about spaces either, And so I just think, like the kinds of things that might get someone excited about the future of Twitter,
we're not really mentioned in this letter. And then you couple that with the fact that you know they're they're kind of announcing some lackluster projections for next quarter. I think that's maybe a combination of what we're seeing here. In fifteen seconds, what are you gonna be listening for on the earnings call? I am going to be listening for some of those product updates. I want to know, you know, how spaces is going. Are they getting interested in more M and A? And then you know, are
they getting ready for a newsletter? Subscription? Businesses are all new lines of revenue that they could have, and I think that would be interesting given their their situation with ads right now. Kurt, I know you are swamped. Thank you so much for taking the time stepping away from crunching those numbers. I really appreciate it. Thanks for joining us at Kurt Wagner, technology reporter at Bloomberg News, joining us on the phone from San Francisco,