Amazon not too long ago introduced their earnings for the final quarter of 2021 and it despatched their inventory value up over 13% the following day. A couple of of the issues that caught my consideration included:
- Internet gross sales elevated 9% to $137.4 billion within the fourth quarter, in contrast with $125.6 billion in fourth quarter 2020
- Internet earnings elevated to $14.3 billion within the fourth quarter, in contrast with $7.2 billion in fourth quarter 2020
- Amazon Internet Companies (AWS) quarterly income is up 40% 12 months over 12 months simply shy of $18 billion
These have been just some of the eye-catching numbers that had the inventory blasting off after the report was printed. However two different issues grabbed my consideration probably the most. For the primary time that I can keep in mind, Amazon reported making $31 billion final 12 months from their promoting platform, which is a reasonably large quantity for an organization that hasn’t actually been recognized for being in that enterprise in comparison with Fb and Google. However with numbers like that, it is probably not lengthy earlier than promoting surpasses AWS as the largest driver of operational revenue.
The very last thing that caught nearly everyone’s consideration was the opposite piece of reports that got here out of the earnings announcement – the value enhance for Amazon Prime membership going from $119 to $139 a 12 months. So with all this information popping out, my Watching Amazon present co-host John Lawson and I gave our tackle what all of this added as much as, and the way we thought it could be obtained by customers and sellers on the platform. And if there may be something on the horizon that might disrupt Amazon’s dominance in digital commerce.
Under is an edited transcript of a portion of our dialog. Click on on the embedded SoundCloud participant to listen to the complete dialog.
Brent Leary: I don’t know in the event you caught it in that video, how they talked about how Fb’s inventory value acquired hit. One of many issues that hit Fb was Apple’s privateness changes, tweaks and modifications. It’s killing Fb’s income stream. However, guess whose income stream from adverts shouldn’t be being killed from that transfer? Amazon.
Amazon is definitely not less than holding their very own, if not… truly, they’re nonetheless rising. They’re nonetheless on the incline. Even with the privateness stuff, no matter you need to name it, from Apple, the tweaks, the modifications. It’s killing Fb. It’s not doing an excessive amount of of something to what’s occurring with Amazon and their advert income, which is basically fascinating.
John Lawson: Why is that fascinating?
Brent Leary: As a result of Amazon shouldn’t be as affected by all of the issues that’s hit Fb and Google in relation to this privateness stuff.
John Lawson: No, Google didn’t get hit that a lot.
Brent Leary: Google acquired hit.
John Lawson: However not close to as a lot as Fb.
Brent Leary: Effectively, no, as a result of they’ve acquired far more different issues that they’ll pull from.
John Lawson: Proper.
Brent Leary: However what I’m saying is what’s hurting, or in sure situations killing a few of these different of men shouldn’t be doing a factor to Amazon, which is basically unbelievable.
John Lawson: Not likely. I imply, it’s a complete totally different fowl, bro.
Brent Leary: It’s. That’s what I’m saying. As a result of they’re totally different. The issues which can be affecting,
John Lawson: So, there was no dialogue of Apple truly affecting Amazon.
Brent Leary: They’re affecting how folks generate income by way of adverts.
John Lawson: You simply assume adverts are adverts are adverts are adverts. That’s not the identical.
Brent Leary: I’m digital adverts. I’m that complete business.
John Lawson: Okay. Nevertheless it’s not the identical factor. It’s not the identical factor. It’s not like if I’ve acquired some product that’s off of Amazon, that I can go to Amazon and promote it there and achieve success. All of promoting, I’d say 80 plus p.c of the promoting price range that’s spent on Amazon is spent by Amazon sellers. That’s a special ecosystem.
Brent Leary: Regardless of the case could be-
John Lawson: I’m simply telling you, bro.
Brent Leary: … Apple made a swap, a tweak or no matter you name it-
John Lawson: Sure, however no one cared.
Brent Leary: … and it rippled all through the entire business apart from one of many huge gamers. That’s what I’m saying.
John Lawson: I don’t assume eBay was harm by it. Was Etsy harm by it? I imply, you’re variety of-
Brent Leary: They’re not huge gamers. They’re not like a Fb. What are the 2 biggies?
John Lawson: I’m simply saying, you’re speaking a few market. You’re speaking a few market that could be a commerce base market, versus a social platform.
Brent Leary: What are the 2 greatest advert platforms? Fb and Google.
John Lawson: Fb is a social platform.
Brent Leary: Fb and Google.
John Lawson: Amazon is a market. They aren’t the identical. Simply because they acquired … You recognize what, guess what?
Brent Leary: You recognize, what?
John Lawson: Guess what? ABC didn’t get harm.
Brent Leary: Possibly we’re saying the identical factor. Amazon shouldn’t be instantly the identical as Fb. That means they’re not as depending on advert income generally.
John Lawson: Proper.
Brent Leary: And particular sorts of advert income significantly that’s the stuff that’s hurting everyone else that’s affected and completely impacted by this. Amazon is over right here chilling.
John Lawson: They don’t care.
Brent Leary: Not fearful.
John Lawson: Not fearful.
Brent Leary: Not threatened. How lots of the earnings transcripts has talked about Apple’s change or Apple’s privateness tweak in reasoning why their income took a success?
John Lawson: Solely social platforms.
Brent Leary: I didn’t see that in Amazon’s quarterly report. We’re harm due to Apple.
John Lawson: No, as a result of they’re not a social platform. You’re attempting to place everyone that has an advert community into one basket.
Brent Leary: What I’m saying is, I suppose, once I seemed on the quarterly experiences for many of these firms, there’s one line that appears to be constant in all of them. Because of Apple’s privateness change, our income took a bigger than anticipated hit. Whereas that was not talked about in Amazon’s quarterly report.
John Lawson: Nor ought to it’s.
Brent Leary: And we simply acquired Amazon’s first variety of what it’s that they’re doing in adverts. And it was an enormous quantity and it’s going up. That’s all I’m saying.
John Lawson: Okay. After all.
Prime membership goes up
Brent Leary: Okay. It feels to me, not less than the sentiment I’ve seen, are folks… And perhaps that is form of the mixture due to inflation and due to the value will increase on fuel and on meals and on just about all the pieces else, this was not welcome data that there’s a value enhance.
John Lawson: It by no means is.
Brent Leary: And I’ll say it. I don’t assume they’re gouging. I believe the best way they’ve normally operated is that they reinvest their cash, their income into the client expertise. And it’s occurred time and again and again and again. And you’ll see it. You’ll be able to see supply occasions being sped up. Getting stuff hours after you order it, as an alternative of seven days, prefer it was within the early days. So, you’ll be able to see it.
You’ll be able to see them spending cash on content material. Even when a few of that could be a miss greater than it’s a hit. However you’ll be able to see them doing it. It’s not like what I believe I used to be beginning to understand, folks pondering, oh, they’re simply gouging us, getting our cash, and not likely giving us something, any extra worth. That’s not the case. You’ll be able to see the worth.
John Lawson: Yeah. However I imply… Effectively, I imply, hey, the value enhance is now. Are you saying I’ve seen the worth? I’m paying for will increase from you years earlier than, months earlier than?
Brent Leary: You’re paying for them to maintain keep it up the best way they’ve carried out, which suggests at all times plowing it again into the client expertise.
John Lawson: All proper. Effectively, we’ll see.
Brent Leary: It’s labored for them prior to now, so why would they cease that now? That wouldn’t make any sense to me.
John Lawson: We’ll see. I imply, one of many issues that I believe individuals are feeling is that costs are rising all throughout the board, many alternative locations.
Brent Leary: That’s it.
John Lawson: They usually’re simply leaping in on the bandwagon.
Brent Leary: It’s arduous to take. I imply, Netflix, they went up what? Two or $3 a month?
John Lawson: Yeah.
Brent Leary: That’s fairly important.
John Lawson: That was very important.
Brent Leary: Yeah. They’re speaking 20%. And it looks like Netflix will increase their charges yearly, the place that is Primes first enhance since 2018.
What if Walmart purchased Shopify?
Brent Leary: Might the mixture of Walmart shopping for Shopify do something when it comes to knocking Amazon in any respect?
John Lawson: You recognize, I believe… I don’t keep in mind who I used to be speaking to the opposite day. We have been speaking about Walmart, and principally one of many issues that… Walmart solely wants a small bump of their eCommerce to be greater than secure. I imply, they’re secure anyway, however to make a giant distinction at their high and backside line, proper? They don’t must do what Amazon’s doing. They simply must do higher than they’re at present doing with their eComm.
As a result of they’ve acquired purchase on-line pickup in retailer(BOPIS). They’ve acquired the supply enterprise. I simply assume there’s just a little little bit of lag on their eComm aspect. In the event that they get that collectively, I can see them doing just a little bit extra, however they don’t must do much more. And their numbers don’t must be like Amazon’s for them to be a beast.
We need to make them look like they’re in competitors for, however I don’t assume they’re even enjoying in the identical area. Amazon has far more floor to make as much as be a competitor to Walmart than Walmart must be a competitor to Amazon.
Brent Leary: Are the Shopifys of this world actually a hazard for Amazon?
John Lawson: No.
Brent Leary: It looks like the one actual hazard to Amazon is regulation and unexpected pure happenings.
TikTok a rising challenger to Amazon?
John Lawson: You recognize what? I don’t know. I’ve at all times stated this, that there’s at all times one thing lurking within the midst in retail that may change all the pieces. So, if I used to be to name one thing, how about TikTok? TikTok is a hazard to Amazon.
Brent Leary: No.
John Lawson: All proper. I referred to as it right here. How about that? Dwell promoting is a hazard to Amazon. It’s a complete new channel. I believe direct to shopper (D2C) promoting might be an element. I don’t assume simply having a Shopify retailer or Shopify themselves are literally cohesive sufficient to compete in opposition to Amazon. No.
That is a part of the One-on-One Interview collection with thought leaders. The transcript has been edited for publication. If it is an audio or video interview, click on on the embedded participant above, or subscribe by way of iTunes or by way of Stitcher.
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