by The Economist
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| Amazon accounts for more than half of every dollar spent online in America and is the world’s leading provider of cloud computing. But can the company avoid the attention of the regulators?
Click here to subscribe to The Economist on YouTube: http://econ.trib.al/rWl91R7 This week we put Amazon on the cover. Amazon is a remarkable company but what’s extraordinary about it is the scale of its ambitions. Its shareholders expect it to grow faster for longer than any big company in modern business history and we asked whether it can do so. More than half of every new online dollar that’s spent in America goes to Amazon. It’s already the world’s biggest cloud computing firm; it’s set to spend more on TV investments than HBO, a big cable channel, next year. Amazon’s success is built on two things in particular. One is its willingness to think about the long term – in an era when chief executives complain about the pressure to deliver results on a quarterly basis, Jeff Bezos, Amazon’s founder and chief executive, thinks in terms of years and decades. It’s expressly been part of its business model to take the cash that it earns and to invest it in order to take advantage of what it calls network effect, the idea is that more users you attract to its e-commerce site the more attractive it is to other retailers and therefore the more users come on to the site. Its bet is that if you invest hard for the long term the rewards will be enormous. The other thing that distinguishes Amazon is the span of its activities. It’s no longer right to think about Amazon as a retailer. In its filings it lists as competitors everyone from media companies to food manufacturers, social networks to logistics firms. It is a conglomerate that spreads across all commerce. The amazing thing about Amazon is that it could well achieve investors expectations for it, but if it does then it could run into a problem, and that problem is the regulators. At the moment antitrust enforcers don’t particularly worry about Amazon. It’s not even the biggest retailer in America, it’s most mature market. But if it gets as big as shareholders expect it to then they may start to look at it and not just because of antitrust rules but also because it will become a kind of utility for commerce. Lots of competitors will rely on it for services. Renting warehouses, for example, paying for goods, and that dependence on Amazon could be a reason for the government to look at it more closely and with that it’s business maybe threatened. Daily Watch: mind-stretching short films every day of the working week. |
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