Monday, December 2, 2013

Why Amazon Has Been So Successful

I just finished reading The Everything Store: Jeff Bezos and the Age of Amazon.

Written by Bloomberg technology reporter Brad Stone, the book is a terrific read.

While some have disputed some of Stone's facts (most notably, Jeff Bezos's Mackenzie has written a very negative review which is posted on Amazon), the overall story is an incredible one. Little wonder that the Financial Times named it "Business Book of the Year for 2013".

The focus of the book is on Jeff Bezos and his relentless drive to have his company succeed in becoming the largest internet retailer in the world.  While Bezos is portrayed as a demanding boss, he is also given well-deserved credit for being a true visionary in seeing the opportunities in internet retailing.

Bezos is compared to a chess player who plays a number of different games at the same time.  He is constantly thinking of the next step necessary to keep ahead of the competition and add more sales to his multi-billion dollar company.

I was reminded of this last night, when the CBS news program 60 Minutes carried a feature story on Amazon which featured an interview with Bezos.

The major news story from the piece was the announcement that Amazon is considering using small drones to deliver packages to customers.  In the interview Bezos argues that the day when a small package arrives at your door could happen as soon as 2015.

Cyberspace instantly went crazy.  The idea of small aircraft whirring around the neighborhood with five pound packages to be delivered seems too implausible to be believed.  Moreover, as Bezos himself acknowledges in the interview, the FAA has to date not been all that keen on allowing unmonitored aircraft into the air.

However, it could also be that Bezos knows this all too well. Perhaps he was using the 60 Minutes appearance to promote Amazon for free at the beginning of the holiday shopping season.  In addition, by highlighting such a futuristic vision, he could very well have been trying to change the image of Amazon from a huge on-line retailer to a cool technology company.

The blog Business Insider (partly, by the way, by one Jeff Bezos) seems to agree with my assessment that perhaps Bezos - in typical fashion - was thinking far ahead of delivery drones:

The fact is, there is a very good chance that, last night, Amazon "announced" a service that will never exist in reality.

Why did Amazon do that?

The answer is free advertising. Even better: free advertising the night before the biggest e-commerce shopping day of the year, Cyber Monday.

How much was that free advertising worth?

"60 Minutes" gave more than 15 minutes to its Amazon story. A 30-second spot during the 7 p.m. show usually costs just over $100,000.

If you figure Amazon got 30 30-second commercials' worth of time, you can estimate that it got about $3 million worth of "earned" media. 

But $3 million is probably a very low estimate. That's just the cost Amazon would have had to pay to reach "60 Minutes'" 13 million viewers. Thanks to all the coverage Amazon Prime Air has gotten in other outlets, many more millions of people are talking about the company today.

In short, you don't get to be Jeff Bezos without being pretty smart.