All Techs Flow Into Amazon
Very few companies have been as transformative to the modern economy as Amazon. While it did not invent e-commerce, it certainly made it the driving force of online retail as we know it today, from ultra-fast deliveries to most of the design rules for websites and payment systems.
Progressively, Amazon added more services to its offerings, such as Prime, its subscription and streaming service.
As such, it has also been the inspiration and template to imitate for many other regional e-commerce giants like Alibaba (BABA +0.04%), SEA (SE -2.43%), or Mercado Libre (MELI -1.03%) (follow the links for the corresponding investment report).
However, the Amazon should not be reduced to an e-commerce company. Over the years, it has evolved into a tech giant on par with Apple (AAPL -1.79%) or Google (GOOGL -1.29%).
Amazon is currently the largest cloud computing company on Earth. It is a master of logistics, dabbling in groceries and movie production, and might soon expand into drones, AI, space-based Internet, and more.
Amazon.com, Inc. (AMZN -0.57%)
Amazon’s Evolution: Small But Never Modest Origins
When Amazon started, it was not an “e-commerce” website, but an online bookstore. It started in 1994 in a small office with a spray paint sign, which has since become legendary.
Source: Snopes
Jeff Bezos’s key insight was that the experience of shopping for books was far from optimal. It could be hard to find what you wanted, and it was often expensive. So, the core offer would focus on a large selection of books at the cheapest possible price.
“At Amazon, I know what the big ideas are: low prices, fast delivery, and vast, huge selection”
Jeff Bezos
Another key insight was the so-called long tail. These were products with a limited but very motivated customer base, like rare books that would sell only a few thousand copies. Such low sales volume would make them almost impossible to find in a physical bookshop, as it would not be worth the effort to stock it. But for a centralized warehouse, it was not a problem and would get book lovers used to buying on Amazon.
“There are more items in the book category than there are items in any other category, by far,” said Bezos. “Music is No. 2 — there are about 200,000 active music CDs at any given time. But in the book space, there are over 3 million different books worldwide active in print at any given time across all languages, [and] more than 1.5 million in English alone.”
Jeff Bezos – CNBC
Far from neglecting this original business, Amazon is today the leader of online bookselling, having added a few important components to its strategy, cementing its absolute domination of the world of edition and bookselling:
- Audible, the absolute leader of audiobooks, is an increasingly popular format over written forms.
- Kindle, one of the first big e-reader successes.
- Goodreads, the largest author and reader social media and book review website in the English language.
Becoming The Everything Shop
Books were always an attractive initial market, but Jeff Bezos’ goals expanded much, much further, already back then in 1997 when the company did its IPO.
“We’re moving forward in so many different areas. “This is Day 1. This is the very beginning. This is the Kittyhawk stage of electronic commerce.”
Jeff Bezos – CNBC
The first extension included CDs, videos, and software, which were all sold on physical media at the time. It quickly moved into other product categories, slowly becoming a hyper-sized mall where you could find every item you might ever want to buy, to reach today’s extremely wide range of goods.
Physical Stores
If almost everything can be sold online by Amazon, some goods are still selling better in brick-and-mortar shops, like, for example, groceries. Amazon acknowledged this by acquiring Whole Foods for $13.7B in 2017, a major organic food retailer in the US.
It also launched Amazon Go and Amazon Fresh stores, as well as Amazon Books, AmazonFresh Pickup, and Amazon Pop-Up, paradoxically closing the loop back on retail channels after having been the “destroyer” of physical shops for 2 decades.
Physical shops provide extra advantages to Amazon Prime subscribers, creating an “omnichannel” shopping experience. They are exploring innovative ways to improve the customer experience and/or reduce costs, notably:
- Computer vision and machine learning so customers can shop and leave without going through a traditional checkout process.
- Mostly cashless purchases, directly billed to the user’s Amazon account.
- Smart shopping carts (Dash Carts) to register the product purchased while still in the shop.
Source: Amazon
Amazon is looking to also resale these technologies to other physical retailers, reducing the R&D costs of this technology and turning it into a new profit center.
AWS
From its beginnings, Amazon had made a habit of handling its technology in-house, from web development to internal search engines to server hosting. As the company’s e-commerce activity quickly exploded in size, so did the quality and scale of its hardware and software capacities. Over the years, the company has deconstructed and standardized the IT infrastructure to make it as efficient as possible.
Amazon realized that its expertise and tech stack could be monetized independently from its e-commerce business as early as 2002. To do so, it launched Amazon Web Services (AWS).
Source: Zoho
The idea was that all the issues Amazon had faced scaling up its IT infrastructure were shared by many other online businesses. So instead of having to reinvent the wheel, they could just buy the solution key-in-hand directly from Amazon.
Quickly increasing bandwidth and Internet speed also allowed for the emergence of what is now known as cloud computing.
An extra benefit was that scaling up the company’s IT infrastructure would have 2 side benefits:
- “Unloading” the R&D costs of IT technology onto AWS, making this segment’s clients pay for it instead of the e-commerce segment.
- Creating economies of scale, reducing IT costs and allowing the e-commerce segment to become even cheaper, reinforcing its main competitive advantage: low prices.
Today, AWS is the largest profit center for the company, commanding high margins and an activity that even more hardware and software-focused companies like Microsoft or Google did not manage to fully compete with, as Amazon owns almost as much market share as the both combined.
Source: Statista
In Q3 2024, AWS was responsible for “only 17%” of Amazon sales ($27.5B out of $158.9B), but 59% of operating income ($1.4B out of 17.4B).
To this day, Amazon is investing massively in AWS, notably with a $10B investment in Ohio.
The company is also signing deals with nuclear Small Modular Reactor (SMR) startups for future low-carbon energy production powering its AWS servers and AI data centers, a global trend among the largest tech companies initiated by Microsoft.
Prime, Streaming & Filmmaking
Amazon Prime was launched in 2005 to encourage people to keep all of their online shopping on Amazon for a $79 annual fee. Its main appeal was free two-day shipping on more than one million items.
It quickly changed how people expect e-commerce to handle delivery and created a core of very dedicated buyers locked in the Amazon ecosystem to pay back their subscriptions.
Amazon Prime would add an extensive library of movies, music, and TV shows, putting Amazon among the major streaming services. It recently added Apple TV+ to Prime Video’s collection of over 100 add-on subscription channels in the U.S.
The streaming branch would add in-house production with series like The Expanse or the recent Lord of the Ring series (more on that below). Amazon also acquired a massive catalog of movie IP with the acquisition of MGM in 2021 (Rocky, James Bond, Stargate, etc.).
In parallel to the Prime subscription, Amazon also acquired Twitch, one of the largest video game streaming and e-sport websites. In 2025, Twitch has over 240 million monthly active users and 30 million users use Twitch daily.
Streaming Difficulties
While widely popular among Prime subscribers, the company’s series and movie streaming segment has experienced some difficulties.
A major one is that the billion-dollar worth of production for the Lord of the Rings series has failed to convince the fans, with only 37% of people who started the show actually ending up finishing it.
It also received scolding reviews from major outlets like Forbes:
The Rings Of Power failed on all fronts, and the majority of viewers appear to feel the same way. I have little faith that Season 2 will be anything but more of the same.
Amazon should cut its losses and start over with a new project helmed by people who know not only how to make a decent TV show, but how to respect Tolkien’s lore while doing it.
Erik Kain – Forbes’ Senior Contributor
The series also ended up at the center of the anti-woke cultural war (together with the Netflix Witcher series), while many others simply criticized a very poor writing and some surprising weaknesses considering the massive budget, like bad-looking costumes.
Combined with not many new productions from the massive IP catalog from MGM, 4 years later, it seems that Amazon’s excellence in distributing content has so far failed to materialize in entertainment production. But of course, this could change over time and provide a new growth engine for the company.
The company is also reported to be exploring the creation of a news program.
Ads & Services
As a prime location on the Internet where people are looking to buy products and entertainment, Amazon has built a massive $50B ad business.
This ad business is now expanding even to other online stores, somewhat mimicking the move of expanding AWS offers to other websites.
Overall, this has been a very profitable segment for the company, as it sells ad space on Amazon e-commerce and other platforms that would otherwise be used anyway by organic search results.
The ad business recently expanded, somewhat controversially, to Amazon Prime unless you pay an extra $2.99 a month. It was not liked by many Prime subscribers, seeing it as a return to cable TV and overall decreasing the user experience.
Prime Video is totally fine with inserting ads in the most chaotic way possible. I’m talking ads in the middle of dialogue, or at the height of a dramatic moment.
Rather than take the same strategy as the majority of its streaming rivals, including Netflix and Disney Plus, and launching a cheaper ad-supported tier, Prime Video is instead punishing its pre-existing subscribers with a stealth price hike dressed up as an optional charge.
Tom’s Guide
Logistics & Robots
Where Amazon is leading is in logistics. The early focus of the company on a large catalog and fast delivery, reinforced by Prime, has given it one of the world’s most extensive logistical networks of warehouses, trucks, planes, and delivery vans. And the company is now looking to improve it further with new technologies.
Amazon is actively looking to replace some of its warehouse workers with robots, especially for the most difficult or health-damaging tasks like lifting heavy goods.
This started in 2012 with the acquisition of robotic company Kiva Systems. Since then, Amazon has deployed 750,000 robots across its operations network, with 8 different types of robotic systems, from automatic sorting systems to palette movers, packing automation, and even humanoid robots.
Drones
Amazon drone deliveries, or “Prime Air” is exiting its testing stage, after approval by the FAA (Federal Aviation Administration) in May 2024. Prime Air received additional permissions that allow us to operate our drones beyond visual line of sight, a must for actual drone deliveries.
“To obtain this permission, we developed strategy including an onboard detect-and-avoid technology. We’ve spent years developing, testing, and refining our onboard detect-and-avoid system to ensure our drones can detect and avoid obstacles in the air.
We flew in the presence of real planes, helicopters, and a hot air balloon to demonstrate how the drone safely navigated away from each of them.”
Amazon
This would bring delivery to yet another speed level, notably for goods like medicine.
Ultra-fast drone deliveries are also expanding in the UK and Italy, as well as a growing number of locations in the US (3 states so far). Especially thanks to a new drone design specifically created for deliveries.
The MK30 is quieter and will be able to fly in more diverse weather conditions—meaning customers can get super speedy deliveries even in situations like light rain, and hotter and colder temperatures.
Our drones have a unique package delivery system, where packages are held inside drones during transit to protect their contents.
Amazon
IoT
Amazon robots might not stay confined to warehouses for long. The company has also been working intensely on multiple connected devices, contributing greatly to the realization of the IoT (Internet of Things) vision.
In consumer goods, this manifested first with Alexa, the voice-controlled smart home assistant. It works very well in synergy with the rest of Amazon’s services and online subscriptions, from online music or radio (Spotify and others) to FireTV, an AI and voice-driven smart TV system and smart speakers & display Echo.
Source: Alexa
This is now combined with Amazon Astro, a robot for home monitoring, which interacts with Ring as well.
Source: Amazon
Ring is a company doing smart doorbells, alarms, and security cameras. It was acquired by Amazon in 2018 for $1B. Ring systems can connect to smart cars as well. Meanwhile, Ring Sidewalk Bridge Pro is a shared network helping users to stay connected including in parks or campuses.
Source: Ring
Among other IoT systems, Amazon also owns smart security systems Blink similar to Ring’s offer, since 2017, WiFi systems Eero, and cloud gaming service Luna.
Internet Constellation
For now, something mostly discussed by space enthusiasts, this is the latest project of Amazon, to connect to Jeff Bezos’s personal project of Blue Origin, a competitor to Elon Musk’s SpaceX.
Amazon Project Kuiper will be a constellation of more than 3,000 satellites in low Earth orbit, delivering broadband Internet everywhere on Earth.
Project Kuiper has secured 80 launches from Arianespace, Blue Origin, SpaceX, and United Launch Alliance, and has options for additional launches with Blue Origin.
As Blue Origin is looking to soon launch New Glenn, its first heavy reusable rocket, this could be a new segment for Amazon, with entry into the telecom markets.
AI
AI has been a part of Amazon’s business for more than a decade, including smarter search algorithms, Alexa voice recognition, etc.
Of course, the recent progress made by AI technology has changed how Amazon is using it. In the company’s latest investor letter, Amazon mentions a series of AI-related news and releases:
- Rufus, a generative AI expert shopping assistant, becoming available in Canada, France, Germany, India, Italy, Spain, and the UK.
- AI Shopping Guides, which simplifies product research by using generative AI to pair information about a product category with Amazon’s product selection.
- Project Amelia, an AI assistant for sellers that offers tailored business insights to boost productivity and drive seller growth.
- Video generation and live image capabilities for advertisers to easily create short, animated campaign images.
- Bedrock: Amazon’s generative AI service leveraging many AI services, including:
- AI21 Labs’ Jamba 1.5 family
- Anthropic’s upgraded Claude 3.5 Sonnet
- Meta’s Llama 3.2
- Mistral Large 2
- multiple Stability AI models.
- SageMaker: Amazon’s fully managed machine learning (ML) service integrated into AWS systems.
- AWS’s latest generation Graviton4 processor delivers 75% more memory bandwidth and 30% better computing performance than the previous generation Graviton chips.
These new AIs come in addition to other AI-based offers from Amazon and AWS, like advanced analytics, marketing tools, coding tools, text-to-speech tools, etc.
Source: Veritis
Self-Driving Taxis: Zoox
This is the autonomous vehicle project from Amazon, declared as “ready-to-launch” in the summer of 2024, after being capable of smoothly traversing a 5-mile stretch just off the Vegas strip.
The robotaxi has no steering wheel, no pedals, and four inward-facing seats.
Source: Zoox
Overall, Zoox seems to lag a little behind in term of autonomy and regulatory approval compare to Google’s Waymo. But it is likely that its marketing firepower and combination with Prime subscriptions could give Amazon an edge in catching up with the other big tech companies in this field.
Conclusion
It is a little jarring to try to grasp the entire scope of Amazon, as it is increasingly less an e-commerce company, or even “just” a tech company, and more of a massive conglomerate integrating logistics, cloud computing, drones, robotics, ads, AI, streaming, movie production, telecom, security service, IoT, etc.
Overall, the company seems for now to still be extremely efficient despite its size, and lean, with new innovations and new markets entered every year.
A likely factor in this success is that each department is relatively autonomous and expected to stand on its own, even if its has many synergies with the other segments of Amazon’s activities.
New Businesses
This extreme level of activity can be hard to assess for investors. Some of Amazon’s ventures are likely to be more important than others in the future. Among the potentially most impactful segments can be highlighted:
Zoox: as robotaxis are clearly getting ready for prime time, from Google’s Waymo quick expansion to Tesla’s art deco robotaxis and robovans.
Source: Yahoo Finance
AI: By providing many AI services in one place and integrating them with AWS-native data, Amazon could benefit from AI deployment without directly having to compete in the hotly contested field of generative AI.
Project Kuiper: Far from being just a pet project of Jeff Bezos, the success of SpaceX’s Starlink has proven that space-based Internet services could be very much in demand and lucrative. Project Kuiper could combine with Amazon Prime streaming, Twitch, AWS, and Ring Sidewalk Bridge Pro to provide excellent Internet coverage, everywhere, at all times.
Robotics: Modeled around the AWS method, Amazon’s internal deployment of soon 1 million of its own robots could form the base for a “robot-as-a-service” offer (or maybe key-in-hand robotic warehouses) where it would have unmatched scale and expertise in deploying at-scale robots for logistics and industrial purposes.
Lastly, it should be acknowledged that a conglomerate that massive will likely not always win. Poor reception of ads on Prime streaming, or the Ring of Power series are examples. However, they are hardly a sign of poor management, and more of a company doing a lot at once, and ready to try a lot, even at the risk of temporary failures.
