The Story of Amazon.com: Part 2

this ridiculous. Yes. So previously on tech Stuff we talked about the history of Amazon dot Com leading up to and including the dot Com crash, which was in the year two thousand and so today we wanted to start up where we left off and bring you up to date on what Amazon has been up to. And it turns out it's a whole heck of a lot a bunch of stuff. But let's let's look back on two thousand one. Now, two thousand's when the actual dot com crash was. But the crash wasn't. Don't think of it

like a crash where suddenly all companies lost value. It was actually more gradual than that. Companies like Amazon saw their stock prices hit a steady decline, and that decline would hit its lowest point as far as I was able to determine any way, in UH in mid two thousand one, when it hit just below six dollars per share, And keep in mind that in in they were looking at three hundred dollars per share before stock split, and it even opened. At the end of the opening day,

it was at three dollars right. Yeah, so yeah, opening day before the company had ever done really anything beyond you know, it had been it had been an operation for two years as a private company, had not turned a profit, raised fifty four million dollars at twenty three bucks a share two thousand one. It weathers the storm of the dot com crash if I can mix all sorts of metaphors, uh, and ends up at six dollars per share. So this is a tough time and some

companies wouldn't have survived. In fact, a lot of companies did not survive this this tumultuous time, and it did not stop Amazon. In fact, they they did. They did cut costs, they like laid off employees, closed or distribution facility. Um. Yeah. They ended up seeking out and forming alliances with what would have traditionally been considered competitors on Target and also Borders Group. Yeah, that's a two big competitors right there.

They also introduced the concept of the for Amazon anyway, for in store pick up where you would order an item on Amazon dot Com and then go and pick it up at what whichever store actually sold that thing. So they had other alliances, not just with Target and Borders they had they had previous alliances with companies like Toys r Us and also Circuit City, which you know had its own sad story, which I guess we could

do someday and talk about. Maybe maybe instead of just Circuit City, we could talk about all box stores that have suffered, because now we're seeing the same sort of thing happened with Best Buy, which which survived the Circuit City debacle but is now struggling on its own. That's neither here nor there at this point. Target makes these alliances in part to kind of wide Amazon. I mean, I'm sure that it was. You know, Target was in

it for the same reasons. Yes, Target, Target was, but Target as a as a as a traditional retail establishment was not affected as badly with the dot com crash as web based companies. So thank you for correcting me, because that was a definite correction that needed to happen. But but yeah, Target, for its part, they were having trouble.

You know, one of the things that that made investors kind of wary about Amazon was that its competitors could in theory, create their own websites and start to sell things in these vast numbers that Amazon was enjoying hypothetically right directly to their consumers as opposed to partnering with Amazon.

But it was take a while for that to work, partly because you had these traditional retail establishments that they the web space was foreign to them, that was not where their expertise lay, and so to get into that meant that they made a lot of mistakes. They had to work with a lot of companies they weren't familiar with,

and it took it was it's a slow process. Whereas Amazon was coming from the opposite direction they were looking at they already had all these systems in place to to categorize and and organize data about objects exactly, and

to handle all the customer information as well. So so yeah, it was one of those things where, uh, it made a made sense on both parties because Target could take advantage of Amazon's interface, Amazon could take advantage of the fact that Target had a lot of stuff that people wanted and and both companies to Yeah, so they both benefited. So yeah, by by the end of the year, they had made UM three point two billion in sales um, which you know, considering after right after the dot com crash,

that is not bad. And they also reported their first net profit during the fourth fourth quarter of that year. And this is this is major, This is huge because I mean, you know, not only had they survived this terrible crash of two thousand, but also for the very first time in their entire history, actually turned to profit. Yeah. So this is this is kind of confusing in a way because you're talking about a year in which they see the lowest stock price for a for a share

of Amazon stock. The same year they have their first net profit of one quarter. Again it's just one one quarter, but but yeah, their annual loss was at a hundred and forty nine million dollars for that year. So so they're still losing money, but they're losing a slower rate than they were before a trickle. Yeah, so you're talking about a billion dollar industry but no profit. So uh, but still Bezos is in it for the long haul. He's able to hold it together despite all of this.

And they move on into two thousand two and uh and Amazon continues to diversify and try new things. They opened some new stores in apparel and accessories and office products, which go hand in hand. I know when I'm shopping for slacks, I also often need a stapler of course. You know. Also Staples make great air rings. No, no, don't do that. No listeners at home never never listened to me, right, So um. They also launched Amazon Canada. Yeah, so the Canadians finally got to shop. It is Canadians.

I feel your pain as you sit there and think. Wait, in that last episode you talked about them launching in France and Japan and Germany in the UK. Yeah, they got out the Canada, especially since they were in Seattle. I mean you could technically like spitt and hit him from where you. I think what Canada would do is they would just hop across the border and order things and then hop back across. That's probably not true, Canadians. I know you're all too nice to yell at me.

So um. Also, by the way, if you, if you really want to feel superior, Atlanta lost its hockey teams. So really, I'm just envious of Canada because I happen to love hockey and I no longer have a team to cheer for, and that's sad. Anyway, moving back to Amazon, they also created their well, they had already created a free Super Saver shipping program right back in back in two THO actually missed that point. Yeah, that was when if you ordered a hundred dollars or more you could

you could qualify for free shipping. They had reduced that amount to twenty five dollars. Yeah, so this is an effort of them trying to continue to to increase sales. Obviously, they did not want for that momentum to slow down because the momentum, frankly, was really all that was keeping that company going at that point. Um. They also launched Amazon Web Services. This is a one of the things

that really helped Amazon as well. Uh, this is a back end thing that a lot of you know, retail customers would never understand, but corporate customers, it's very important. Amazon Web Services here's a direct quote from the site. It offers a complete set of infrastructure and application services that enable you to run virtually everything in the cloud, from enterprise applications and big data projects to social games

and mobile apps. So basically what it means is that Amazon took all of these amazing bits of technology and software and infrastructure that they were using to make their own business awesome, and they sold them piecemeal to anyone who was interested in using. This is almost like leasing really leash. Yeah, not not selling, but um but right yeah,

so so leasing the space, leasing the databases, leasing the programming. Yeah, and this is this This is a part of a conversation that will probably have and yet another episode further down the line when we talk about Amazon and its impact in the industry. Because while we're talking about the history of the company right now and we're talking about some big idea is it's hard to stress what sort

of impact this made. Keep in mind, this is cloud computing and cloud storage before people were even using that term, and Amazon. You know, we often think, at least I often think of Google as being huge with the cloud, the cloud storage and cloud services. But really when you look at it, it's Amazon that was a real pioneer in that space. When you're talking about big big names. Yeah, not not not for personal use yet they would get

into that later, but for corporate use. We're talking like major companies using Amazon because again, just like I was talking about with the retail companies where the web space was unfamiliar territory. You had these other big companies that had the need to support at some sort of networked infrastructure or online capability. But it's such a huge investment

to do that as a company. And to have that, like, you have to have the space to to store the servers, you have to have the people trained to maintain the servers. You have to have the right kind of space because if it gets too warm, the servers shutdown. Kind of funny thing about computers. So Amazon was essentially saying, hey, we know it's tough. We do this for a living, so why don't we do it for you? And uh and yeah, that ended up opening up a huge business opportunity.

Um and also uh, they ended up moving on to uh to the next year. We're talking about their first profitable year in two thousand three. So uh, two thousand three, they have their first profitable year. They earn thirty five million dollars overall, thirty five Okay, so they're sales, by the way, so they make thirty five million. Here's how much they sold one point nine five billion dollars worth of stuff, so almost two billion dollars in sales, thirty five million profit, so not a not a not a

not great margins. And it turns out, um, you know, it had a crazy holiday season that year. They processed one million shipments and had twenty million inventory updates in a single day. That's that's big. They also opened up more stores. I probably won't be talking too much about all the different stores they've got at this point. It's

just more stuff. I will say. That's when gourmet food hit so yeah, important the stomach demands that I mentioned that Also, this was the year two interesting things as far as I'm concerned with with Bezos here. Um. One was that he decided to pursue his love of space exploration by funding a startup company called Blue Origin, which is a Seattle based aerospace company working on private space flight. He also had a near death experience that year. He

was on a helicopter, right, Yeah, he was in a helicopter. Uh, and they were essentially scouting locations for Blue Origin. And uh they were that they were about to take off in this helicopter in a field I think it was. And um, while they were starting to take off, the helicopter drifted, the tail hit a tree, the helicopter began to tilt and then it ended up flipping upside down

and landing in a creek. Bezos. Obviously he survived, but apparently he said that he was asked like, did your life flash before your eyes or did you suddenly have like things that you wish you had done? He says, Actually, what I thought was this would be a dumb way to die, which is pretty awesome. Um, yeah, so you know that's that was That was a pretty incredible experience. He also said in an interview. This is unconnected with the helicopter issue. They said an interview with Business Week.

When we can improve our personalization algorithms so that we show something to somebody that they wouldn't have discovered in any other way, and then that serves them very well, that's something that's incredibly valuable. And that goes back to

something I said earlier. I think it was actually in part one of Amazon, this idea of creating algorithms that can predict customer wants and needs and behavior so that you give you give the customer a really great shopping experience and also in the process you make more sales, so it benefits everyone. So when I go online and I think, I really really want to buy that copy of of of Halo four. Uh. It also says, hey, I see that you really like being bad at video games.

Maybe you would also like to be bad at Assassin's Creed three. And I say, yes, I would, and I add that to the list, and that happened. Um, although I should, I should point out right now Assassin's Creed three is still in the shrink wrap. I have not finished playing Halo four or Border Lens too. As it turns out in February. First kids, both Jonathan and I are lame at video games, but we we have played online at the same time on the same team. We did we did, and uh, Matt from from Stuff they

don't want you to know, John joined in as well. Yes, we actually had Team House Stuff Works for a while. We've had one person suggests that we have a tournament of Team House Stuff Works versus Team Twit over this week in tech. I don't know if anyone at twit plays Halo or any other Xbox three sixty game, but if they do, uh, it is on like Donkey Kong. Yes, call us guys any any time, I as let me know.

You know, he's my he's my buddy over there, but at any rate, Yeah, So getting back over to Amazon, they also launched a service called A nine. Now. A nine had development efforts in five areas product search, cloud search, visual search, advertising technology, and community question answering, but when it originally launched, it didn't actually go live until two thousand four, but it was developed in two thousand three, so this kind of less you have something specific about

two thousand segways into okay. Uh So. Originally the forward facing part of A nine was a search portal, So this is kind of competing with Google and Yahoo and other search engines, but it allowed you to use different filters or search groups like it had over four hundred different groups you could search from, and you could choose

which groups to include or not include. So it was very versatile in that sense, although I guess if you're really getting bogged down into it, it it could probably take you ages to do a search. But it was discontinued that that part of A nine was discontinued in two thousand eight because it just wasn't getting a lot of traction. But a lot of the technology they developed in A nine still powers the search within Amazon itself. So when you go to Amazon, you do a product search. That's

what's powering that search. It also is being used in other e commerce sites, so it's not just Amazon that uses that technology. Also in two thousand four, they launched Amazon Theater. Uh, they launched more stores. Um. The tsunami, the major tsunami that happened in two thousand four. Right, Yeah, they donated a fifteen point seven million dollars yep, and they they offered the ability for users to contribute directly to the American Red Cross. Uh Amazon payments, so yeah,

you could. You could end up doing that. So that was a good, uh show of community and support. They also had that year bought jo dot Com, which became Amazon China. Right. Dot Com was a kind of a It became the largest book retailer in China at the time. It was a strong contender, but was not yet the number one, but did after Amazon bought them. Uh, they Amazon Theater. In case you're wondering, it was a short

film series and they took uh the production company. They used the production company that was formed by the Scots that's a Ridley and Tony um and they produced five short films that started Hollywood Actors. These were short shorts that were released over several months, and they allowed users to watch the films and then buy items that they saw inside the film. So direct product placement. That's actually

really interesting. It's one of those things you've been hearing about forever, right, Like one of the big promises of web tv was that eventually you would be able to watch a show and say, gosh, you know the Winchester brothers on Supernatural, sure to wear nifty clothing. I really want that shirt. I want to look I want to look like Dean Winchester. So how do I get that jacket? I've been watching so much of that show, Guys, I really have I can't. I cannot help you. There. I

went through a Phineas and Ferb stage. It just happens, people. I mean, you just be thankful you didn't get to listen to my breaking bad phase. Um. But anyway, Yes, So that was kind of the idea. It was sort of a pilot program in a way. Uh didn't really go that far, but it's still interesting that they were starting to work with that sort of creative element. Yeah, and and that comes into play again. So Amazon is not finished with the creative element by any stretch of

the imagination. But this was this was sort of an early like feeling the water kind of thing, and it was just a little chilly as all. Two thousand five, they introduced Amazon Prime, and I was so happy. I don't think I got involved in Prime until recently, like maybe actually I think that was closer to when I

did too, but it's still it's uh yeah, yeah. So Amazon Prime, for those of you who do not know, it's a program that for a yearly fee, you have the option to get to day free shipping on lots and lots of products, not everything, because a lot of the stuff that's on Amazon is not actually offered directly through Amazon. It's offered through a partner. Now, the companies that partner with Amazon can choose to participate within the primeration,

but it's not necessity. So if they do participate, you get two day free shipping on stuff, which is pretty cool. You would also later on get access to things like the Amazon Instant Video database for for certain Prime movies and TV shows, and also the capacity to loan out Kindle books. Yep. That's that's something else that comes to Prime. And we'll talk about more of those things when we get to them. But yeah, and then that holiday season

they announced they sold one and eight million items. Yeah, that's a lot of a lot of stuff. Yeah. They also entered if a film agreement with drug Store dot Com that year. UH and UH, I had had another interesting note in here somewhere, but I can't read. That's too bad because the clock is ticking. I'm about to go into two thousand six. As of that year, they've possessed the world's three largest Linux databases with uh capacities

of terabytes and tarabytes and tarabtes. Yeah. So again, you know, you would sit there and think of like data storage, you might think Google, but Amazon was the big name. UH. In two thousand and six, they launched Amazon Simple Storage Service or S three UH, and they this is another back end thing, but it's and it's something that eventually customers would see in another form that's kind of a split off of that. But they made a lot more

partnerships with merchants, retailers, and manufacturers. UH. They also launched Amazon Connect, which was away for authors to reach readers through sort of a blog like interface, but that would eventually get replaced by what they call author pages. But the idea was that by giving authors a direct route to communicate with readers, it could enrich the experience because we didn't really talk about it. In fact, this is

a very important point. But one of the other things that really helped Amazon get through the dot com crash is that they had, you know, user reviews, and user reviews created this rich user experience that made Amazon more of what what used to be called web two point oh. The concept that a community is important online right crazy that there has to the web two point oh has a lot of different definitions to it, but part of it is interactivity, uh, and the fact that users are contributors,

not just consumers. And also that you have dynamic content, meaning that it does change over time. It's not just a landing page you go to and it has you know,

a stock amount of information about the company. So and and this was really revolutionary because being able to jump on a website, look at a product that you're thinking about buying and see that someone says, you know, I really liked the shirt, but I got it and it seems ripped in a day and a half and and or or on the other hand, like this is a terrific thing. I've bought five of them. I've had it

forever and it's wonderful, right, you know. I bought them for friends and family for for gifts and everyone loves them. That kind of thing and everything in between. And actually, you know, Bezos has said repeatedly that that negative reviews are just as important as positive ones because it shows that Amazon is dedicated to to the to the consumer side. I think he came under a little bit of fire at some point from some companies that were saying, why

are you letting people post these negative reviews? And it was like, well, because they're true, because your stuff isn't good, make better stuff. Uh. You know, he points out that to build customer trust, you have to have that. It's also one of the reasons why Amazon is very very keen to uh to get rid of any reviews that are gaming the system, because that does happen. You have occasionally you'll have a company and it might not be

the company directly. It might be say an outside PR firm that comes in and and without the company's permission, goes in and makes a whole bunch of fake reviews for for a product on something like Amazon. To drive up the rating to either to either positive reviews on their own products or negative reviews on a competitor's product. Right, So again, this isn't that something that necessarily a company is is, uh, you know, colluding with a PR firm.

Some PR firms take it upon themselves, some companies do this kind of stuff on their own. But Amazon's approach is to try and head that off as much as possible. Uh. Also in two thousand and six, they launched the Amazon Unboxed which is interesting. This is kind of a predecessor to the instant video stuff Unboxed. What it would have let you do is download a DVD quality film or TV show and now you would download it to your

PC and you could watch it on your PC. You could not watch it on anything else, and you could not It was not compatible with max, it was not compatible with Linux machines, only PCs running Windows, and you could not poured it over to our devices. Yeah, so you had to actually use the Amazon Unboxed video player to watch it. So it's a um, you know, proprietary

video player. And you might think, well, that's kind of lame Amazon, Uh, this is kind of a In two thousand six well, it's also a restriction that the industry is putting on Amazon right because they don't want they definitely do not want you to be able to download video and either distribute it as much as you like or watch it on whatever you want. They want to control that as much as possible because because of licensing issues,

because they make more money down the money. Yeah, so so it's not entirely Amazon's fault, although you know, people argue about how much responsibility they have the same thing is true in the publishing industry when we get there, of course. Yeah. And in two thousand six, just for perspective, Amazon accounted four or five point one percent of the online retail market. Uh, five point one percent out of

all retail, all retail online. That's that's huge, which is yeah, I mean sounds like a really low number until you think about that. The internet was sort of a thing by two thousand six, and so that was definitely it was definitely big. Housetu works was going strong by two thou six, and uh, the next year's when Amazon really comes up with something huge. But before we get there, I think it's in weren't we take just a quick break to thank our sponsored and now back to the show.

So it's two thousand seven. Amazon decides to rock the world, at least the world of publishing, and it releases the Kindle e reader. It launched at a three. Reviews were pretty mixed about it. Actually, people weren't sure that this entire electronic book thing was going to be a thing. Yeah,

and there were a lot of people who were. I mean, I was skeptical when it launched because I thought, hey, I really like the feel and the smell of experience of a book, absolutely, and then I eventually got to hey, I like being able to carry a library without breaking my spine. Yeah. But yeah, early days, it was kind of a question about whether or not they can make

it go. And and we should point out, I mean, we know this, so you guys who are furiously typing on your on your laptops, take a moment, or your

smartphones or tablets, whatever, take a moment. We know that the Kindle was not the first e reader, wasn't even the first e ink e reader, but it was one that had an enormous company behind it, a company known for distributing books, so it also had a huge library of e books already available so so they had a distinct advantage over other companies that sold you the hardware but didn't have access to the actual content. This is selling you the hardware and the content all in one

big company. So it also opened up huge opportunities for e publishing, where where authors could potentially publish a book themselves in electronic format and skip the entire publishing industry experience altogether. Now that doesn't necessarily mean that the book will be a success, but it does mean It does mean that a book that might not otherwise be published because it is too risky or too outside the norm.

The rest of the Internet has given a huge voice to people who might not otherwise have have ever gotten a soapbox for good or for ill and commoners I'm looking at you. But but yeah, if they really started shaking things up, yeah, definitely, and um and it would continue to do so over the next few years. I mean we well, we'll probably do another episode about again

about Amazon's effects. Yeah, because there's there's a whole lot to be said about the impact of electronic publishing on the publishing industry as a whole, especially when you get into the battles about pricing those those got ugly and they're still They're still going on. It's not like it's over, but it's for a while there it was. It was hurting everybody, especially authors and fans of certain authors, my wife being one of them. It's a whole Jim Butcher story.

I'll have to tell when we get to that. But uh. They also that year two thousand seven, launched a partnership with TiVo, and TiVo of course the DVR for those who are who forgot, because Tvo TiVo was like the name and DVRs for the longest time. It's kind of lost a lot of it's ster mainly because there's so many other devices out there that incorporate DVR technology that

TiVo is kind of. And there's also a lot of people are getting them straight from their cable provider these days, and so they don't necessarily have a separate branded Yeah, and and and to be fair, also, ti Vo has a reputation for not updating its operating system as frequently as people would like. Uh so, um uh all of those things. But back in two thousand seven, Tevo was the name. Uh it made entered a partnership with Amazon, and Amazon essentially allowed people who subscribed to ti vo

access to the unboxed videos. So it meant that that, you know, if you were an unboxed customer, you could get access to thousands of movies and television shows. Um, the first quarters sales in two thousand seven past three billion. That's billion with a B dollars. That's in the first quarter. Yeah, the entire year that year was fourteen point eight billion in revenue. That's a lot of money. So um oh and oh this is huge, it's huge. Two huge things.

First of all, September two seven, they launch a public beta program of their Amazon MP three program. So this is this is Amazon saying okay, Apple, see iTunes, Let's see what you're doing there. Let's let's go for it. And uh yeah. So then you had the MP three battles between Amazon and Apple, which are still going on today. Uh and uh yeah. I can tell you that I do a lot of comparison shopping. But then they also they they purchased the publication rights for a special edition

version of a particular author's special book. That book is The Tales of Beatle the Bard. That author is j. K. Rowling. YEA heard her? Yeah, she wrote those Harry Potter books, you know, the ones where Frodo has to destroy the Ring. Um. Yeah, so you shall not pass thoks I love in the movie. Patrick Stewart is still good. He is so good. Yeah, as as professor x of of of Dumbledore University. Uh no, we actually do know our stuff. We're big Harry Potter fans.

We're just we're just also enormous dorks. Um. But yeah, so J. K. Rowling's Tales of the Beatle of Beatle the Bard, which was a special special book that she had written that was, you know, connected to the Harry Potter universe, but not actually part of their not part of the actual story that shows up in the story. Yes, kind of meta, Yeah, a little meta. Uh that Now, that would not actually go on sale until two thousand eight.

Amazon purchased the rights in two thousand seven, but two thousand eight they get the rights to actually sell the collector's edition version of of the Tales of Beatle the Bard. And that was the most important thing that happened in two They also hit like a four point one billion dollars in sales in their first quarter. They also acquired

a company called Audible. So we've talked about audible on this podcast before they acquired a company called fabric dot com customers out there, they if you were following along with our web services. A conversation earlier, they they reached three hundred thousand developers using their web services. They also launched apps on Facebook. So this this is again Amazon looking at what is out there, what's working, what what are people really getting into, and making sure that they

have a presence there. They've done this with multiple platforms, Facebook being a very important one, but they've also done things with Xbox Live and other companies as well. So, uh, you know, it's it's one of those things that that marks a company that's really on the lookout for what is it that customers want, because if they're able to

continue to meet that, then they're going to be a success. Um. Moving into two thousand nine, Uh, this was also an important part important time for Amazon because in two thousand nine we started to see a dramatic decline in demand for retail space. This is where retail companies are starting to have serious problems. Companies like Circuit City and best Buy and uh and even you know, companies like Kmart and uh, you know, you're looking at more and more

people shifting their shopping experiences to online online right. Bezos has said that nothing is ever going to replace the experience of going out and shopping at a physical location, and that it may just be that that becomes more of an event thing. So there might be for just specific types of products and services that you would go out to a brick and border store. That's actually absolutely

true for me. I mean, you know, if I'm looking for something local or artistic, then I want to go out and kind of look at it and poke at it. But if I'm just buying a DVD, I don't want to go to Best Buy. Yeah, I'm sort of the same way in that. Like the other day, for example, Uh, at my house, I have no fewer than four different types of lightbulbs because of fixtures in my house. Uh, eventually I to have only need for one type of

light bulb, but right now that's not the case. So I whole other episode, I had reached a point where I had enough burnt out bulbs that something needed to change or else I was going to really injure myself while navigating through my house at night. So I went on to you know, I could have gone to the store and gone down the light bulb aisle. This would have had to have been a hardware store because these

are Halligen halogen bulbs. Yeah. Because I had to buy one of those fancy modern houses, um, which I love. The house is the fixtures that are driving me crazy. So I went on Amazon way easier with a couple of clicks, I bought a whole bunch of light bulbs so I won't have to go shopping again for a long time. It will be bright at my house for ages to come. Ever. But in two thousand nine, also the kindle was the top selling item of the holiday season. Yep.

And this is also when a trend called show rooming began. Showrooming is when customers go into a store and they have a smart phone and they used the smartphone to take a picture of the stores product. Yeah, yeah, that was There were a few there were a few uh

controversies that year. That was also the year that they that Amazon ended up deleting George Orwell from a whole bunch of kindles because they realized that the that the copy that they had in their store was actually in a legal copy that was only only approved for sale in Australia, I believe, Yeah, and there was definitely the problem was that they could sell Georgia or orwell four but the version they sold this is kind of weird because it's the same words. But then this is this

is a publishing industry thing. I mean, and you know, every publishing company is very proprietary about these sort of things, and with good reason, because that's how they make their dollars. But but yeah, when you consider the content of nineteen eighty four and the fact that that was the book that gets I liked that a whole lot, and it was it was something that happened that you know this this actually required a response from Amazon to customers because uh,

it happened so suddenly and without warning. Really, people just wake up one day and one of their titles is deleted. It raised the question of hey, don't don't I own it because I bought I bought a copy. Yeah, and the thing is that you you you technically do not own that book. That you own that that that you have on your kindle. You own the rights to read it right now. It's more like renting a book honestly,

the way that it's worded. Yeah, And and when you think about it, that's that's worrisome because you think, well, could that rental agreement end some day and suddenly I don't have that book anymore. I mean in the series, yes, So you know, that's one of the big differences between an electronic book and a real book, because it would be a much different story if Amazon employees kicked open your door and walked to your bookshelf and took a physical copy of George Orwell's and said, sea, here's a

receipt for your receipt and walked out. That was That was a reference to the documentary Brazil. Um. Anyway, moving on, so yeah, show rooming the whole idea about comparison shopping. While you're actually in a physical space, you end up taking the picture of the the you know, the code on the box or whatever, and get a quick look to see, okay, well, here's this one product in this store. What is it on Amazon? And do I want to

just order it online? Uh? That that has driven stores nuts, and in fact, some stores, for example, I'm pretty sure Target for has a policy where it will match Amazon's price for products. So it's it's become kind of a battle between Amazon and traditional retail stores. Moving into two thousand nine, uh, they announced the fourth quarter sales for two thousand eight. This happens in early two thousand nine obviously,

or like each year, at the beginning of the year. UH. Once you get into the year, the companies announced the results of their last quarter because obviously they can't do it during the actual year that happened, because it has happened. But the fourth quarter sales for two thousand eight were announced at the beginning of two thousand nine, and they were six point seven billion dollars, so still making huge sales.

And of course part of this is because Amazon selling more and more stuff, just different kinds of stuff, not just books and music and movies. Um. They also introduced the Kindle too, which and they introduced shopping apps for

Android and the Kindle app for iOS devices. And they acquired a company called Zappos, which made a lot of my friends unhappy because they loved Zappos and they loved its independent spirit, and they were worried that that would go away once it was acquired by a giant like Amazon, or that it would just be incorporated into Amazon, and Zappos as a thing wouldn't always um. Also we something

else that's interesting at this point. One of the reasons why the kindle was so important to Amazon is we were talking about profit margins earlier, about how expensive it is to run a business like Amazon. You're talking about huge, huge infrastructure, lots of warehouses, lots of employees, equipment, shipping, lots of lots of stuff. You have to worry about. Kindle. It's an electronic file, so you pay for the equipment that it's stored on and the infrastructure that supports that equipment.

But you don't have to worry about shipping. You don't have to worry about all those other problems. It's it's much cheaper to get electronic uh uh book it is to get a physical book. And you know, for example, George R. Martin stands with the Dragon's ways approximately what I do. So you have to shift at somebody. Yeah. Often I confuse Lauren with the book I'm currently reading, and uh, I now realize that when I hear put

me down, I've accidentally picked up Lauren's awkward. Yeah, it's HR has talked to me, so um, yeah, it's It's true. Also with other forms of digital files, obviously MP three's and uh, and instance, streaming movies that kind of thing. So Amazon's really helping it. You know, the company is doing well in part because people are buying more and more of the electronic versions of stuff as opposed to the physical thing, although they're still buying the physical thing too.

That's that hasn't changed. Um In they announced their fourth quarter sales for for two thousand nine, which was nine point five billion dollars. The other thing to keep in mind is the fourth quarter tends to be Amazon's best quarter, of course, because Christmas happens, holiday holiday shopping, and it's

always any retailer's biggest quarter. Yeah, and and keep in mind also Amazon, while it's making these amazing sales, sometimes those profit margins aren't so great simply because Amazon is also cutting prices, so they they're actually really big on cutting prices there. You know. It's it's one of the things, one of the reasons that a lot of other physical big box stores have been driven out of business in

contribution via Amazon. Right. Yeah, so you've got that's something that some critics are upset about with Amazon because they feel one that you know, it's it's slowly making Amazon and monopoly in many in many industries. And two it is uh, it hurts shareholders in the sense that they Amazon could be making more money if they charged more for stuff. Right. Then the counter argument to that as well, if you charge more for stuff, fewer people buy it.

So what's the right balance? Yea. And interestingly, they've also applied the same concept to their to their web services UM, which is a huge part of their business. That again is the infrastructure that they rent out to other companies for use, and and prices of those services were dropping pretty dramatically as they streamlined that around the sort of time period. UM. Also that year, the sale of e

books surpassed hardcover sales in July. Yeah, yeah, which that that would become, you know, pretty much part for the course from that point out, they would sell more kindle copies of books than physical copies of books. Now, that's not necessarily true across all businesses, right, And that's not to say that there are now more digital copies of books being sold then hard copies everywhere. It's simply for Amazon and particularly y Yeah. So now granted Amazon's big books,

so it's it's a big story. They also launched Amazon Studios in two and this is a This is Amazon's attempt to get into content creation. It's an idea where they partner with content creators, writers who are writing movie scripts or television scripts that normally would not get turned into actual movies or TV shows because Hollywood is insular and there's it's really hard to break into it, right.

I mean, you hear like the amazing stories that happened where someone gets discovered, like a writer, a writer, something gets discovered in Hollywood. But for every one story you hear, there's a thousand heartbreak stories of people who have the best idea but no one will listen to it. Yeah, So this is kind of Amazon's approach to letting content creators get a chance at seeing their stuff come to life.

So in order to be part of it, you have to actually create an account and submit stuff, and they have very specific um uh parameters that you have to fit within in order to be part of it. So it's not like you just sent in a script and you're you're good to go. It's there's more to it. It's a little bit more complicated than they're kindle self publishing model or not Kindle, but self publishing model. Right. And then Amazon also invested a hundred and seventy five

million dollars in a company called Living Social. So this is Amazon's attempt to get in on a game that looked like it was threatening companies like Amazon. So companies like group Me and Living Social which have these special deals, usually their regional deals that apply to you if you happen to live within a certain area and you get a you know, merchants or service providers or whatever will enter into it an agreement where you get for reduced price,

essentially a voucher for something. Um And and there was a there was a time where people were genuinely concerned that these companies would topple retail establishments or at least really hurt the bottom line. But it turned out that it's really hard to make money with that business model. So, um, this might be one of those sort of missteps where where Amazon makes was perhaps not yeah yeah, maybe it wasn't the best idea. They reached seventeen billion dollars in sales. Um,

that's a lot of money. They also released the Kindle Fire tablet, which it was it was a strong competitor because it was seen as a tablet device that could compete with the iPad, not you know, spec for spec, but because it was just in color, it was a touch screen, and it was way cheaper. Yeah, way cheaper

thing that I've had. I mean, I think at the time that I had was still it's like bucks or something like that, right, and then and the fire debut, I think at about two hundred I want to say that that is I may king that up, but I I feel like it was. It was. It was a couple It was a couple of hundred dollars less than the guy I Pad was, and it was seen as such a low cost cost alternative that a lot of people who wanted a tablet but didn't want to invest that much money in an iPad decided to give it

a try. And also, I mean it was a smart idea for Amazon because again, the tablet essentially acts as a portal for all of Amazon's content. So everything Amazon sells works really well on the Amazon Kindle Fire. So uh, you know, really, when you think about it, the tablet, they were selling those essentially either at cost or even at a loss, in order to sell you more e

books and more video and music down exactly. Yeah, They're like, well, we'll make it up in content, which you know again because it's digital content has a much lower cost of distribution than physical stuff. This way, this way, we are bringing about the digital revolution and we will make so much money. Yeah, yes, yes, and and for for perspective, Borders that was two thousand eleven was the year that

Borders announced their complete liquidation, so total, said Trombone. That was also the year they introduced Prime Instant Videos, so you could stream certain videos if you were a Prime member. You could also rent or buy videos through Prime Instant Prime as well, so you could watch those for for a fee. But there were there are lots of them that were available free for Prime users to watch. So again Prime is a subscription service, so you had to pay into it first, but you could watch all these

other things for free once you were a member. They also introduced Amazon Cloud Drive and and cloud players, so this was the customer facing. This is when when you and I could end up taking advantage of Amazon storage space online. Uh. And also you could buy digital albums they would get stored in your cloud drive. You could upload stuff to the cloud drive, but there was a certain limit, a certain number of gigabytes of stuff you could upload butt in there. Yeah, you're good to go.

You could listen to it from from anywhere, any any device that could connect to it. But also if you bought it directly from Amazon, it did not count against your limit. So if you bought and if you but I think it was if you bought a full album from Amazon, you would get upgraded to the next level of the cloud service. So it gave you an incentive again to shop through Amazon. So it wasn't like, you know, they were just being altruistic. They had a good reason

to do this. They also announced my Habit dot com, which those personalized shots. Yeah, I vaguely, I vaguely remember. I ocusually get emails from them that I look at and I think I am not nearly attractive enough to wear that clothing. They then began to uh. They launched Amazon Local, which again very regionalized kind of a service, and they also well, they had the Amazon Silk web browser which was part of Amazon Fire. UH. That was shown as being really fast, but some people had some

issues with it. UH. And they introduced the Kindle Owners Lending Library, where you could borrow books on your Kindle and not have to buy them if you want to just read it, which was kind of cool. Again, that was one of those things that you had to be a prime that was a prime perk moving into that's when they released the Kindle fire HD. Uh. They acquired Kiva Systems Incorporated. Yeah, yeah, that's the that's the nonprofit. No, no, that's the other other word. Opposite of nonprofit. Kiva was

Kiva was. I know where you're going, but it's a different company. I'm going to I'm going to put you out of your misery. Actually, Tiva is a company that makes robots like those. Yeah. They these are the ones that made the automated material Handling system. Oh okay, excellent. Yeah. So yeah, when you when an order comes in, the robot goes and picks up the appropriate shelf. That like, they picks up the entire shelf. The shelves are designed

so that they are the same dimensions. Yeah, they're the same dimensions as the robot. So the robot, because everything belongs on its own shelf, and every shelf belongs in a specific spot within the warehouse, the robot goes to the right spot. I'm gonna keep saying it that way. No, I'm gonna get lots of emails I'm gonna stop. So the robot goes to that spot and then uses a

screw drive to lift the top of the robot. So from the perspective of the shelf, the top of the robot is not moving at all the but the the robot ends up using the screw driver to lift the top of the of it. This platform that goes from the robot up until it hits the bottom of the shelf lifts the shelf up, so now the robot is physically lifting the shelf off the floor, and then the robot wheels the entire shelf over to the packing area, where a human being grabs the product off the shelf

and takes it to pack it up. Meanwhile, the robot return the shelf to the appropriate place in the warehouse. This is there are hundreds of robots in these warehouses, and they're all working independently and interdependently with each other

so that they don't collide. They know the system knows where every robot is, and every robot knows where every robot is, so they move in this incredibly efficient manner and make it way easier for fewer people to pack more stuff in a warehouse and fulfill those Amazon dot Com orders. So it's kind of, um, it's kind of awesome to see. And then at the same time you

think robots are going to take all our jobs. Well, at the same time, I mean, I've read there's been a couple of really good essays that have been published. I think the one it was called I was a Warehouse wage Slave. It was excellent published on mother Jones and uh, and yeah, just just detail this one journalists, uh inside experience of working for that kind of giant amalgamated shipping website thing, and and you know, the sort of the sort of man tory over time, twelve hour days,

five days a week, fifteen minute breaks. You have to imagine that during the holidays, it's going to be particularly hillish. It's not good. Yeah, and you know, getting fired for things like taking a day off, Yeah, that's tough. Robots, as it turned out, do not need very many coffee breaks, and they rarely take days off unless they're no longer running. They complain less about having to run fifteen miles a day across a warehouse floor, but they will eventually override

us and enslave us. Um they that year last last last year, last year, recording this podcast. Um. They also had Amazon Studios announced that it was going to develop series exclusively for Amazon Instant Video, which kind of puts it on par with Netflix, which is also developing content exclusively for Netflix. So with Netflix, you've got like the big title has me excited? Is arrested development, arrested developments

coming back new season on Netflix. Well, Amazon is looking into creating the content that it was soliciting with Amazon Studios into these various series and movies, offering them on Amazon Instant Video. And the idea is that this will give you the option to see stuff that you otherwise never would get a chance, and hopefully some of it will be amazing. I'm sure. I'm sure quite a few titles will end up being really interesting and exciting to watch.

And I say that knowing that the majority of the stuff I come across on Netflix is not. And what's interesting about this competition actually is that Netflix uses Amazon's web services to run I think that they're one of their larger, larger clients. Yeah, yeah, so, I mean, you know, it's it's an interesting experience to see the competitor using your own service. Um, and then moving up to to

our current year. Uh. The only note I wrote down is that the current stock price as of the recording of this podcasts and just before we came in here was around two sixty four dollars a share. So if you remember when we started this podcast, it was down to just under six dollars per share. It's back up

to two four dollars per share. It has not split since the dot com crash, but there was a there was a long time where the stock price was in the the ten to twenty dollar per share range, and then over the last few years, especially as the publishing stuff started taking off, the value of the company has gone up quite a bit. So it's it's it's an interesting story. I mean, they were way on top before the dot com crash. They went, you know, as far as the market value of the company went. They they

sunk pretty low and then they rose back up. And uh, you know, it's interestingly a lot of during the fourth quarter of pcent of the units sold on Amazon were by third party sellers, so they're kind of starting to move away from selling things themselves become like a like a most you know, a middleman, yeah, a platform for selling things, which makes sense. Amazon has a huge reach.

So it makes sense from a merchant standpoint, because you're going to reach way more potential customers than you would with your own site, because you know that requires people actually know about you before they start shopping. This way they can find out about your stuff on Amazon and fewer and fewer people. Uh, this is anecdotal. I shouldn't

say this is not scientific. Anecdotally, I know that from my group of friends, a few people are really they don't really care where the product they buy comes from when they buy it on Amazon, and they're not looking at the name of the vendor. They're looking at, Oh, here's the thing, Here's how much it costs. Here's if it's a prime eligible thing. One click, give me that thing that I want. Um, I've got a little bit.

Here's another kind of interesting fact. So during the time that Steve Jobs came back to Apple, you know he was were stout of the company, came back in the mid nineties, brought Apple back from the brink of bankruptcy to great success. UH investors achieved a return of sixty six point eight times their money that they invested. During Jeff Bezos's tenure at Amazon, shareholders achieved a return of one D twenty four point three times their money. Yeah,

so nearly twice as much. Yeah, it's it's which is one of those reasons why a lot of like like Forbes has called Bezos the best performing CEO ever at least of this current era and that Uh, and that's the reason why is because of stuff like that and bezos his philosophy. It's very interesting if you were to ask Bezos about the competitors to Amazon. Uh, he he doesn't talk about them at all. He does not acknowledge them,

like no matter which industry you're talking about. And his philosophy is this is quote from him, whatever your set of competitors competitors is today is transitory. You'd have to change your strategy all the time. So his his view is that you just gotta do what you do as well as you possibly can and don't pay any mind to the competitors because that's just a distraction. So yeah, it's it's an incredible story, it's and it's a pretty amazing company. H in that you know, you look at

the the rise and fall and rise again. Um, it's I'm curious to see what goes on in the future, because, like you said, they could potentially get out of the whole why do we have this warehouse thing and just be be like a middleman, right right, Yeah, they're they're already doing that for so many corporations. But their infrastructure that it's their their web services are a multibillion dollar business at this point. Yeah, So, I mean that's where a lot of the value of the company is coming from.

That in the digital products are really shaping the world as we know it. So we'll probably do an episode that kind of talks more in detail about Amazon's impact. Uh, maybe we'll We'll we'll split it up a little bit and give you some other episodes first, so that you're not amazon out all of what's or amazone as I like to say, Amazon as I just invented. You just did that thing, that was the thing that just happened. Okay,

so let's wrap this up. Guys. If you have any suggestions for future episodes of tech Stuff, I highly recommend you let us know in an email. Our address is tech Stuff at Discovery dot com, or drop us a line on Facebook or Twitter or handle at both those locations is text Stuff hs W and Lauren and I will talk to you again really soon for more on this and thousands of other topics. Is it how staff works dot com