Amazon's Profitability (Score 1)

Ok, it may not be wanted, but I can't help but want to clear up some of the mystery of Amazon's inability to be profitable.

The reality is that Amazon is unprofitable mainly because they don't want to be profitable. For starters, their book business was profitable in the fourth quarter of last year. And it may also have been for the first couple quarters of this year, though I don't know for sure. So it is quite possible to be profitable just from selling books and Amazon has done that. It was their other sections (the new-at-that-time music and video sections) that caused them to lose money.

Second of all, Amazon has publicly stated that they have no intention of being profitable at this point. That, in fact, they consider it a mistake. May sound ridiculous, but Amazon's ultimate goal is to rule ecommerce. Every section of it. As it has been stated numerous times, they want to be the Wal Mart of the web--a multi-billion dollar ecommerce hub.

Which means expansion. Book to music to videos to electronics and toys. Then on to software (which will probably be next), then maybe flowers or jewelry or travel or cars or whatever the hell they think will sell on the site. Expansion takes money. Advertising--building brand awareness--takes money. And they plan to spend more money than they take in for at least another year or two.

Amazon loses money because they want to. Because that is the plan. Not because they are incapable of being profitable. And Amazon has said that to their investors many times.

When Bezos started Amazon, he was not thinking of selling books. He was simply think of selling--on the internet. He researched 20 product groups and settled on books because of the huge selection and other factors. It was a good product to sell on the web, as he has since proven. But he never intended to sell only books. Why do you think he called the company Amazon instead of something with "book" in the title, or relating to books? He wanted to dominate from the very beginning.

When Bezos decides Amazon should start being profitable, he will make it profitable. In the mean time, his plan is to dominate the world of ecommerce. And he will carry out that plan by eventually selling anything and everything.

Joel Caris