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Wednesday, April 25, 2012

Amazon Is Going To Eat The World

9:27 PM Posted by Deepak Nayal No comments
If you ask people to name the most powerful company in technology, I can bet most of them will name Apple, Google or Facebook. These are some of the most successful and sexy technology companies and also favorites of the press and bloggers. But if you dig deeper, beyond the sexiness, you will find that these companies (and their other technology counterparts) are mostly strong in an area or two. For Google that is search (Android is just another gateway for Google to generate more search-based revenue, at least currently), Facebook social networking, Zynga games and so on and so forth. Apple is only company amongst these favorites that is [extremely] strong in more than one area - mobile devices and online stores. There is, however, one company which is not only strong in multiple areas but has also positioned itself well in gaining mind and market share of the consumers and the enterprises. Yes, you guessed it - that's Amazon. 

This is the information age where content and information are king. The value chain for digital content/information starts with the creation of content and ends with its consumption (thanks to social networks, there is now a post-consumption stage of sharing as well). While most of the successful technology companies have created strong holds in one or few aspects of this value chain, Amazon is probably the only company that has strong hold pretty much throughout the value chain (except for the sharing aspect). The company that started as an online bookstore and then moved into general e-commerce, is now also serving content, managing cloud and even providing devices to consume that content. Even Apple is not that well positioned throughout! The company founded by late Steve Jobs is extremely strong in a few areas and average or weak in others. If you overlay Amazon's business activities on top of the information value chain, you will realize the extend of power and influence that Amazon has on this world and its future potential. 

Amazon Value Chain

  • Creation - This is probably the area that Amazon is least strong at. It has been strengthening its position in this area by acquisitions (such as, IMDB and LoveFilm) and initiatives such as Amazon Publishing. By allowing independent/individual authors to publish their own books and bypassing the dependency of publishing houses, Amazon has been able to successfully connect authors directly with the readers, in effect revolutionizing the publishing industry. 
  • Delivery - Well this is Amazon's bread and butter - the area where they have been active from day one. Not only does it have, the world leading e-commerce site, but a plethora of other e-commerce sites such as Zappos, Joyo and Junglee. Using its wide and successful delivery network, Amazon has the potential to reach hundreds of millions of users. The company has strengthened its position in this area further by adding delivery networks (Kindle Store and App Store) for its consumer devices (Kindle and Kindle Fire) as well. It is now taking this a step further and adding delivery network for its cloud services - AWS Marketplace (app store of sorts for cloud software). 
  • Platform - Amazon's ability to envision cloud computing and to deliver that vision is probably the most impressive of all its feats. Not only has Amazon successfully turned its infrastructure (a cost in most companies) into a huge revenue source, it has been able to scale it and add more features at incredible speed. Amazon Cloud has now become the de-facto choice for setting up internet based ventures, for not only startups and SMEs but large enterprises as well. With thousands of companies running their technology infrastructure on Amazon's cloud, the company has become one of the most important entities in enterprise computing. And now with its cloud app store, it is adding more clout to its already dominant position. By enabling and empowering startups and entrepreneurs, Amazon Web Service is also helping the world at a social level (i.e. more companies leading to more jobs). 
  • Consumption - This is the most recent area for Amazon to enter - with which it has pretty much covered the entire content/information value chain. With its Kindle e-reader, Amazon has been able to position itself as one of the leading mobile devices company. The verdict has yet to be out on Kindle Fire; though, early reports seem to reflect positive reviews, considering which, I won't be surprised if it turns out to be the most successful Android tablet as well. 

Being strongly positioned throughout the information value chain is not the only strength of Amazon. The company also has the ability, and loads of practice, of thriving in very low margins - a strategy it has used extremely well for Kindle's dominance of e-reader market - and provide great products. This combination of serving throughout the value chain, providing great products, crucially positioned in both, consumer and enterprise, technology markets, vision and brilliant execution ability makes Amazon arguably the most dangerous player in the technology sector. And while the rest of the players in technology industry are busy suing each other, Amazon is [relatively] quietly working on its expanding its dominance further.


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