Putting the Chronicles on Hiatus

Yeah, this sucks

After long deliberation, I’ve decided to put this newsletter on a temporary hiatus until I can recover from my shoulder surgery. It sucks! There’s a ton to write about and I really want to write it. But physically, I can’t get it done, and setting myself up to fail again and again was putting me in a downward spiral that wasn’t going anywhere good.

How this works

If you’re a free subscriber, very little will change. You just won’t get the Amazon Chronicles in your Inbox weekly-ish for a little while. If you’re a paid subscriber, then payments will stop for two months until the site resumes in early July, at which point they’ll pick up again. Annual subscribers should have their subscriptions extended by two months. Then after two months, everything will come back. We pressed pause, and we’ll press unpause again.

With luck, I will come back with a replaced shoulder and renewed verve to write about all things Amazon. Thanks, friends, for your kindness and patience. I’ll see you again soon.



How Much Can Amazon Make Free?

The answer is: a lot, and still make money

Welcome back to the Amazon Chronicles, and thanks for your patience in getting this issue to you. A couple of things have happen since I wrote to you last: I went on what was supposed to be a working vacation, and I managed to dislocate my shoulder again. It turns out I am going to need shoulder replacement surgery, so I am typing what I can while I can. (Dictation will probably be the name of the game afterwards.) A lot’s been happening with Amazon while I’ve been out, so let’s get to it.

Amazon Might Add A Free, Ad-Supported Tier to Amazon Music

This is potentially a really powerful idea. The reporting comes from Billboard, which says the following:

Amazon has entered into discussions to launch a free, ad-supported music service, sources familiar with the plan tell Billboard -- intensifying its competitive threat to global streaming leader Spotify.

The world’s biggest e-retailer would market the free music service through its voice-activated Echo speakers, sources say, and would offer a limited catalog. It could become available as early as next week.

That actually tells us very little! It doesn’t tell us whether it’s radio or station-based, like Pandora, or album-and-artist based like Spotify. It’s not clear whether the free music tier would be Echo- or Alexa-only, or available via other devices or the web. All of these things affect the nature of the service, how robust it will be, what its actual competition is, and how successful it might become.

But: whatever! Let’s go back to general principles here, and the ultimate general principle is that a free, ad-supported media offering by Amazon could be supremely disruptive. Audio is probably the most natural market to give this a try, because, get this: Amazon already has a pretty successful music service, and some of the most successful audio-based hardware devices on the market. It’s also got a huge marketplace for ads and could use more portals for discovery. A free music tier feels like a no-brainer.

And if that works well, could you also expect to see ad-supported television from Amazon too? Why not? Keep those subscription costs low, and those sales margins and user numbers high. Makes sense to me!

Amazon Might Be Making Earbuds With Alexa In Them

This reporting comes from Bloomberg’s Mark Gurman, who writes:

The Seattle-based e-commerce giant is readying earbuds with built-in Alexa access for as early as the second half of this year, according to people with knowledge of the plans. The headphones will look and act similar to AirPods, but people working on the product inside Amazon are striving for better audio quality, the people said. Like the AirPods, the Amazon earbuds are designed to sit inside users’ ears without clips around the ear…

The headphones will let people use their voice to order goods, access music, weather and other information on the go. The Amazon digital assistant will be summoned by saying "Alexa." There will be physical gesture controls, such as tapping to pick up and end calls and switch between songs, the people said. Amazon declined to comment.

Oooooh is this going to be execution-dependent. I mean, we’re talking really tricky stuff. Half the success of Echo devices so far has been because you don’t have to wear or control anything to make them work. Earbuds might be the most complex wearable around. You’ve got comfort issues, audio quality, durability and resilience, etc., etc. There are reasons Apple hasn’t been able to make these things as popular as the other stuff they sell, even after buying Beats. It’s a tricky piece of hardware.

But if it can work, there’s a huge upside. You take Alexa outside the home, and it becomes an information layer for your life. At a minimum, you’ve got a killer product to sell music, audiobooks, podcasts, and whatever else you’ve got that you can squeeze in a speaker. You’ve got the foundation for multimodal interfaces you can build on later, with screens or projectors as well as audio. But Amazon has to come correct with this; it probably can’t launch with what it has and fix it later. It’s got to create a compelling product out of the gate.

SPACE INTERNET, via Project Kuiper

The ultimate limit on Amazon’s product line from e-retail to smart earbuds, is the penetration of the global internet. So it makes sense that Amazon is one of several companies pursuing a satellite-based solution.

Amazon’s effort is called Project Kuiper. The reporting here comes from Alan Boyle at GeekWire, who says Amazon is intent on putting 3,236 satellites in low earth orbit, all to provide internet access everywhere that doesn’t have it.

“Project Kuiper is a new initiative to launch a constellation of low Earth orbit satellites that will provide low-latency, high-speed broadband connectivity to unserved and underserved communities around the world,” an Amazon spokesperson said in an emailed statement. “This is a long-term project that envisions serving tens of millions of people who lack basic access to broadband internet. We look forward to partnering on this initiative with companies that share this common vision.”

Amazon said the satellites would provide data coverage for spots on Earth ranging in latitude from 56 degrees north to 56 degrees south. About 95 percent of the world’s population lives within that wide swath of the planet.

This is one of the rare cases where Amazon’s mundane terrestrial ambitions and Jeff Bezos’s fascination with building and owning the basic infrastructure of space (and building things to last generations, not just years or decades) come together. Amazon needs future customers and doesn’t want to have to rely on any state’s infrastructure to get them. This is years-out thinking, but it’s very shrewd, and frankly, quite realistic.

Amazon’s Future Also Needs A Healthy Planet, Maybe It Should Work On That

Amazon workers are pushing the company to get serious about taking action to stop climate change. More than 3500 employees signed a letter urging Jeff Bezos to create a comprehensive climate change plan for their company, transitioning away from fossil fuels rather than relying on carbon offsets, and making climate impact a priority when making business decisions.

Jason Del Rey at ReCode says it’s unusual for Amazon employees to go public with their names and faces when it comes to matters of internal dissent at the company. But Amazon had already been accused of backsliding on its publicly-stated environmental goals, and had publicly touted its partnership with fossil fuel companies, and generally had left itself open to this kind of criticism.

Humans Listen to Alexa Recordings

At its basic level, this is not especially controversial. Amazon’s Alexa group has a voice review team that “listens to voice recordings captured in Echo owners’ homes and offices. The recordings are transcribed, annotated and then fed back into the software as part of an effort to eliminate gaps in Alexa’s understanding of human speech and help it better respond to commands,” according to Bloomberg.

It gets tricky in the details. For example:

Sometimes they hear recordings they find upsetting, or possibly criminal. Two of the workers said they picked up what they believe was a sexual assault. When something like that happens, they may share the experience in the internal chat room as a way of relieving stress. Amazon says it has procedures in place for workers to follow when they hear something distressing, but two Romania-based employees said that, after requesting guidance for such cases, they were told it wasn’t Amazon’s job to interfere.

Amazon should probably also review their anonymization procedures, because this isn’t cutting it:

A screenshot reviewed by Bloomberg shows that the recordings sent to the Alexa reviewers don’t provide a user’s full name and address but are associated with an account number, as well as the user’s first name and the device’s serial number.

It needn’t be sinister on Amazon’s part; imagine a government requesting recordings of a user’s device. If Amazon’s going to be collecting this data and making it available to anyone, it needs to be properly anonymized.

Your Must-Read: Jeff Bezos’s 2018 Letter to Shareholders

This whole letter could use an annotation (and I still might do one), but let’s focus on this section for now:

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.

Development of the Fire phone and Echo was started around the same time. While the Fire phone was a failure, we were able to take our learnings (as well as the developers) and accelerate our efforts building Echo and Alexa. The vision for Echo and Alexa was inspired by the Star Trek computer. The idea also had origins in two other arenas where we’d been building and wandering for years: machine learning and the cloud. From Amazon’s early days, machine learning was an essential part of our product recommendations, and AWS gave us a front row seat to the capabilities of the cloud. After many years of development, Echo debuted in 2014, powered by Alexa, who lives in the AWS cloud.

No customer was asking for Echo. This was definitely us wandering. Market research doesn’t help. If you had gone to a customer in 2013 and said “Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?” I guarantee you they’d have looked at you strangely and said “No, thank you.”

It’s unclear what’s being subtweeted (sublettered?) in this letter. Amazon-does-Pandora doesn’t seem to cut it. Project Kuiper probably counts. But there are a couple of lessons one can draw from it:

  1. Ideas for future Amazon products can come from anywhere;

  2. The me-too products aren’t always the most successful;

  3. That doesn’t mean Amazon’s going to stop doing them.

Like, okay, Amazon made an unsuccessful phone; Jeff Bezos’s lesson from this is MAKE MORE PHONES. Even if we don’t win in phones, we might win doing something else. That is an intriguing idea! It’s the kind of idea a company might come up with if they were going to launch some earbuds.

Bezos Watch

Jeff and MacKenzie Bezos announced their divorce settlement last week. Jeff Bezos retains 75 percent of the couple’s Amazon stock, voting rights over their full joint share, and full ownership of The Washington Post and Blue Origin, his spaceflight company. MacKenzie Bezos will now own about 4 percent of Amazon, a share worth about $36 billion, making her one of the wealthiest women in the world.

Keeping Myself From Embarrassing Myself

There’s plenty more to say about Amazon, but I promised I would not go all Moby Dick on this newsletter, and instead keep it relatively simple. All I can promise you is more next week.

Until then,

Tim Carmody


The Best of the Best

Revisiting the past two months' "Must-Reads"

Hello Amazon Chroniclers! There are two things happening here. I am traveling along America’s eastern coast, which tempted me to shut down the newsletter for a week, since I am busy busy busy. Also, this week was a pretty quiet one for Amazon, dominated by press releases and a big Apple event that sucked a lot of oxygen out of the tech journalism room. Are there smart things to be said about Amazon’s new partnership with Volkwagen? Probably! But there is no great urgency to say them.

So what I thought what could be best for this week is a quick revisiting of the articles I’ve marked so far as “must-reads” for Amazon watchers. We can see whether the added months or weeks of context have added any layers, or catch an out-of-cycle story that might still be all-too relevant. And it gives new readers a chance to catch up on what the newsletter is all about, the kinds of stories I like to highlight, and the overall perspective on Amazon those stories create.

In other words, read these recommended stories, and you’ll have a very good idea of where I’m coming from and where things are headed with The Amazon Chronicles.

Okay? Okay!

So let’s start with the very first must-read, from the first proper issue, “Interpreting Amazon’s Earnings.” This was:

John Herrman, “The Secret Life of Amazon’s Vine Reviewers

Herrman’s slice-of-life, “here’s how weird it is to live in late capitalism” approach is potentially deceptive; it is that, but it also offers rich insights into the fiddly ways in which Amazon works. I read this now very much in the light of Zack Kanter’s “What Is Amazon?” (see below). Faced with a difficulty (Amazon’s overwhelming catalog makes it difficult to make its best products visible), Amazon creates a platform. In fact, Amazon creates multiple platforms, some working at cross purposes: the advertising side of the company is selling companies a solution (advertise with us, make your product more visible), while product review teams are working to get their own visibility-boosting metrics up by somewhat artificially creating more reviews. It’s a hodgepodge set of solutions to problems Amazon’s created itself, by making itself the Everything Store. But Amazon, the phenomenon, is equally both those problems and those solutions.

The second must-read, from Amazon’s Game of Monopoly, is one I’ve already returned to at some length, in “There Are Only Two Amazon Stories That Matter”:

Lina M. Khan, “Amazon’s Antitrust Paradox

Senator Elizabeth Warren’s Presidential campaign has helped moved the needle on public discussion of the big “A” word (yes, antitrust) when it comes to the biggest tech companies, but Khan’s Yale Law Review article already had the momentum going. What’s more, Khan puts Amazon square in the center of her genealogy of legal reasoning around antitrust. She shows how Amazon created itself to be the perfect non-monopoly monopoly, counting on its relentless focus on lower prices and consumer benefits to wash out anything potentially anticompetitive in its approaches. So the article doubles as a way of thinking about the changing legal reasoning around antitrust and a way of thinking about Amazon, the quintessential company formed in those changes’ wake. It’s only getting more relevant, so the time to read it is now.

Issue number three, “The Union Forever,” had three must-reads.

Whet Moser, “The Cloud

Sometimes readers tell me I should do a basics/ABCs issue, explaining nuts-and-bolts stuff like how Amazon Web Services works, which a lot of people don’t fully understand. (I’m not sure everyone working in AWS fully understands it, but let’s leave that there.) Moser’s “The Cloud” is as good a basic introduction to the idea of AWS and cloud computing as you can ask for. Part of Quartz’s “Obsession” series, it gives you a capsule history, some mind-boggling numbers, and a few future ideas to chew on.

Alexis Madrigal, “How Big Is Amazon?

Madrigal thinks about Amazon’s overall infrastructure in a slightly different way, in terms of overall square footage. “Amazon now has 288 million square feet of warehouses, offices, retail stores, and data centers,” writes Madrigal, and it’s only getting bigger. What’s more, the growth in square footage isn’t being driven by Amazon’s sudden acquisition of lots of retail space, or the explosion of cloud computing; it’s still Amazon’s nuts-and-bolts logistics business, moving retail goods around the world, that accounts for most of its space.

Rachel Siegel, “Flesh and blood robots for Amazon

This is a story about retail arbitrage, people who buy up goods by the case at low prices from retail stores and sell them on Amazon’s marketplace at a markup, especially where the goods plug a gap in the marketplace. Now I wonder, though, whether and how these freelance workers (since that’s really what they are) fit into Amazon’s new scheme of promoting verified non-counterfeit goods above all else? In some cases, it doubtlessly won’t matter; people searching for a particular product on Amazon will find it if they’re looking hard enough. But Amazon has ways to make things very difficult on third-party sellers if they don’t like what you’re up to. So long as the arbitrage works for everyone, things are good; the second it seems like more trouble than it’s worth, off goes the spigot.

The Bridge Is Over” had no must-reads, as it was a special report. But “Don’t Cry For Me, Long Island City,” on the other hand, after synthesizing a whirlwind of takes on Amazon pulling out of HQ2 in Long Island City, Queens, settled on the decidedly boring story of Amazon’s tax returns:

Matthew Yglesias, “Amazon’s $0 corporate income tax bill last year, explained

What can I say? I whiffed on this one. Yglesias’s article is perfectly serviceable, but it’s not a must-read. It doesn’t answer any burning questions about Amazon or point the way towards its future, other than to say Amazon likes to reinvest its profits, it enjoys the privilege of stock-based compensation, and the company has good accountants. I picked a solid article that allowed me to condense a bunch of takes from that week into a single link, and called it a must-read. It was a mistake. I’m looking for something a little bit deeper, a little longer-lasting. I’ll try to do better in the future.

From “A Star Is (Not) Born” (one of my better newsletters, by the way, especially if you’re interested in Amazon Video):

Margaret Burin, “What it’s like to work in an Amazon Australia warehouse

I wrote this at the time:

The Australian Broadcasting Corporation’s “What it’s like to work in an Amazon Australia warehouse” is not breaking all-new ground, at least not for those of us who’ve read Mac McClelland’s “I Was A Warehouse Wage Slave,” or Hamilton Nolan’s series of “True Stories of Life As An Amazon Worker,” or Dave Jamieson’s “The Life and Death of an Amazon Warehouse Temp.” At this point, if you don’t know that warehouse work at Amazon and its peer companies is extraordinarily difficult, dangerous, often humiliating, and thoroughly casualized in its reliance on temporary workers without guarantees or benefits, you’re choosing not to know.

What I think is striking about what the ABC has done, which other stories have touched on but not delved into, is the psychological reality of working as a picker. It’s not just tough blue-collar work. There’s an ideology involved that you as a worker are required to buy into… This ideology is reinforced through constant surveillance and measurement… The ABC story reflects this inside-outside, Imaginary Amazon vs. Real Amazon divide very well through its juxtaposition of official Amazon footage and photographs with its uncensored stories from current and former workers.

Still holds up today, even as the stories of the reality of work inside Amazon’s warehouses have multiplied and metastasized.

From “Amazon Is A Marketplace For Information”:

Shahid Buttar and Mitch Stoltz, “Antitrust Enforcement Needs to Evolve for the 21st Century

This report comes from the EFF, and it pushes a very simple idea: antitrust rulings need to lean harder on the “essential facilities doctrine.” This comes out of railway law, but roughly states that a monopolist with control of a bottleneck that’s essential to other competitors needs to provide reasonable use of that bottleneck, in the absence of a regulatory agency that can provide bright-line rules for use of the essential facility.

This is a pretty lightweight way to get around some monopolistic problems regarding access to platforms. I think my mistake with this one was that while it touched on things I’m interested in and that are relevant to the potential regulation of Amazon, it’s not really about Amazon, which is already pretty open in terms of access to its platforms. I mean, Amazon is even putting Apple TV+ on Kindle Fires from the jump, which, considering the years of handwringing it took to get Prime Video on Apple TVs, is a small miracle.

Broadly speaking, the way I can justify it is this: there are a lot of people thinking about monopolies, antitrust, and monopolistic behavior on tech platforms. There are a lot of approaches being put forward to help us rethink how these things have been arranged in the past. It’s worth being broadly aware of this range of discourse when you’re talking about Big Tech and antitrust.

Elizabeth Warren, “Here’s How We Can Break Up Big Tech

My long reading of this post is at “There Are Only Two Amazon Stories That Matter,” and I still feel like this is the Amazon story that matters most right now. Warren’s Iowa poll numbers right now are decent but not overwhelming, but she’s by far leading the way in terms of proposing policies that are pushing other Democratic candidates for President to make a stand.

Basically I propose that Warren’s “spin off Whole Foods, spin off Zappos, spin off Amazon Basics,” top line when it comes to Amazon is slightly disingenuous. The real meat of the proposal comes in the possibility of designating Amazon’s marketplace and Amazon Web Services as platform utilities under the law, and regulating them accordingly. It’s less about inexpensive USB cords, and more about what Amazon is doing with all of the data it’s pushing around for its competitors and the tech ecosystem as a whole.

From “Amazon Keeps Making Its Basics Better”:

Zack Kanter, “What Is Amazon?

This essay is just great. As I wrote last week:

What’s so elegant about this argument is how Kanter both shows how product advertising has the possibility of eroding everything that Amazon has built, while also showing that advertising is a necessary conclusion to everything that Amazon has built. Like Oedipus being the very murderer he’s looking for, it’s both tragic and tidy.

What’s also fascinating to me is to watch Amazon convert itself from being “the retailer with the lowest prices on everything” to “the trusted retailer with low prices on all of the best products,” and how that both works with and against the grain when it comes to ads. Because on the one hand, advertising offers brands a chance to distinguish themselves from the pack. But on the other, advertising necessarily extends this chance to the company that pays the most, which is not necessarily the best product. It’s a conundrum, and one Amazon is going to resolve in some of the most counterintuitive of ways, like pulling ads from nonprofitable products, and hiding products that get waves of negative reviews. It’s going to layer all these customer and seller platforms on top of each other, and hope the result is coherent. And if you’re a customer? You’re counting on Amazon to pull it off. Because they always somehow have before.

Thanks for reading this self-indulgent self-roundup. I hope you’ve found at least one thing you may have missed the first time around, or (like me) can re-encounter the same text in a new context now.

See you next week with more Amazon news,

Tim Carmody


March 28th: An Amazon Chronicles Event

In Philadelphia, hosted by Pilcrow House

Greetings friends,

This will be a quick update. I’m writing a long overdue note to tell you about an upcoming event, in Philadelphia, on Thursday, March 28th. It’s going to be a dinner party, basically, but with me as the guest of honor, talking about all things Amazon. Here are the details:

Thursday, March 28 2019

6:00 PM — 9:00 PM

Pilcrow House welcomes Tim Carmody, publisher of the Amazon Chronicles newsletter and former writer for WIRED and The Verge.

Join us for an intimate three-course dinner on the most important company of our lifetimes: Amazon. This event is an intimate private dinner featuring structured and unstructured conversation with one of the internet’s best thinkers on Amazon + technology and culture.

You WILL enjoy this event if any of these apply to you:

  • You want to better understand the complicated strategy of Amazon

  • You are concerned about how Amazon is reshaping our cities

  • You breathlessly followed the HQ2 sweepstakes

  • You want to spend a fun evening and lively conversation discussing an important issue

Tickets for the event cost $89; that includes dinner and drinks at The Twisted Tail, one of Philly’s best restaurants and bars, and that’s where most of the money’s going.

Those of you who know me know how special the city of Philadelphia is to me; it’s where I lived for nine years, and where both of my sons were born, and it’s an honor to be asked back to give a talk about the thing I’m thinking about these days as much as I’ve ever thought about anything. I can promise that for my part, everyone who can come will get their money’s worth.

It also sets up an exciting precedent of, maybe not this elaborate, but me coming to various cities around the country (around the world?) and doing talks on Amazon and meeting Amazon Chronicles readers. I think that’s very cool!

So please, if you’re in Philadelphia or adjacent to it, consider checking out this event. We’re going to have a great meal and a fun time. Sean Blanda from Pilcrow House is putting together a really exciting series of speakers and he’s trying all sorts of different formats to find the one that clicks best with audiences. This is the first full meal format, and I hope it’s a success.

See you next week with more Amazon news,

Tim Carmody


Amazon Keeps Making Its Basics Better

And that's a problem for anyone who wants to partner with them

Kind of a chill week for Amazon. No lawsuits from top executives, no stunning legislative revolts in Arlington, no breakthrough product announcements. But that doesn’t mean Amazon wasn’t up to anything. Let’s start with the three press releases that all hit yesterday, March 20th, because they’re seemingly basic, but actually really interesting.

  1. MLB.TV now available on Prime Video channels

Sports TV gets you closer to “real TV.” It’s live, it’s exciting, it’s something that people are used to accessing on either network or cable television; it’s irreplaceable. Look at last week’s deal with the Yankees to buy the YES Network to stream regional baseball games in New York. I doubt Amazon is going to try to pull this in every market, but its interest in sports programming is obvious.

What’s more, Amazon’s proven that by surrounding a core digital video experience (Amazon Prime Video) with premium add-ons (like Major League Baseball and NBA League Pass, HBO and Showtime, and kids’ programming), you can create a meaningful alternative to the cable package with a straightforward business model (skim the subscription prices of the add-ons). It’s pretty much exactly what Apple is going to be introducing at their event on Monday, if Peter Kafka is to be believed (and I usually believe Peter because he’s so often right).

  1. All-new Kindle now with an adjustable front light for just $89.99

Amazon doesn’t really have any meaningful competition left in in e-readers or e-bookstores any more, much to the detriment of the overall market, but at least they’re still working on trying to make their flagship hardware product better. A front light adds a lot to an e-reader, enough that I would call it an essential feature of the product, and Amazon clearly agrees. This also solves a problem in that, provided the battery holds out, Kindles last essentially forever, so you need something to make people upgrade or update their devices. There are not as many new-to-e-reader buyers out there as there once were; almost everyone who is going to own a Kindle already owns a Kindle.

But note also that while the entry-level Kindle is cheap, it’s not that cheap. There was a future in which the price of the Kindle dwindled down to virtually nothing, as the device became a loss leader to sell e-books and other ancillary services. The Fire TV Stick is almost like this; it retails at $40, but over the holidays you can get them for almost nothing. The Kindle never became that, and it’s kind of a shame. The screens and devices are cheap; the money is in the books. But I think it may be worth more to Amazon to treat the e-reader and its contents as an object worth protecting and investing in. At any rate, that’s the path they’ve chosen, and they show no signs of deviating from it.

  1. Amazon kicks off spring with the launch of Belei, its first dedicated skincare line

This was one of those announcements you could feel coming, like rain on a March day. Coresight Research had delivered a report on March 11 on Amazon’s beauty line offerings, noting that Amazon was America’s second-most shopped retailer for beauty products (Walmart is first), that makeup and skincare were the largest categories by number of products, and generally that the market was primed to boom if more products hit the shelves. Meanwhile, Amazon had already put forward a skincare company from its brand accelerator program called Fast Beauty Company, and announced an Indie Beauty Shop for independent beauty brands. If third-party sellers aren’t going to rise to meet the demand, then Amazon surely will.

Belei, while branded to compete with bigger sellers, is definitely in the Amazon Basics mold; it’s inexpensive, with all products $40 and under, and (from what I understand, I confess this is not my most expert field) it’s hitting a broad range of sweet spots in everyday skin care.

“Our goal is to help customers spend less time and money searching for the right skincare solutions,” said Kara Trousdale, Head of Beauty for Private Brands on Amazon.com. “We took a simple, no-nonsense approach when creating Belei, developing products with ingredients that are both proven to deliver results and also offer customers great value for the quality.”

This is, however, the kind of move that sometimes gets Amazon in trouble; on the one hand, encouraging name brands to come and sell direct to customers in its third-party marketplace, while also selling and promoting its own products as a first-party seller. There’s a new study that suggests that third-party products actually do pretty well compared to Amazon-branded ones. Will skincare companies raise a stink if they feel Amazon is undercutting them? Is the whole thing actually an attempt to elevate the entire space? [Puts chin in hands] Let’s find out.

Your Must-Read

This is a fun one. Zack Kanter takes on a question I often ask here at Amazon Chronicles: What is Amazon? (It also doubles your money by answering the related question, “What is Walmart?)

Whereas a traditional retailer had to weigh tradeoffs within finite shelf space, an online retailer could display page after page of items with near-zero marginal cost for more items. Instead of choosing which items to stock, Amazon could let its customers do so – it would add all sorts of items to its catalog, measure web traffic for each item, and bring the items into stock that seemed most likely to sell.

Bezos, in other words, wanted to build an unbounded Walmart. By removing the constraint of geography – and therefore the local economy – and by adding search functionality, the new formula became simpler: the more SKUs it added, the more items would be discovered by customers; the more items that customers discovered, the more items they would buy. In this world of infinite shelf space, it wasn’t the quality of the selection that mattered – it was pure quantity. And with this insight, Amazon did not need to be nearly as good – let alone better – than Walmart at Walmart’s masterful game of vendor and SKU selection. Amazon just needed to be faster at aggregating SKUs – and therefore faster at onboarding vendors.

This innovation comes at a price though:

Platforms became Amazon’s answer to every growth obstacle it encountered. Platforms became part of the algorithm. Sellers are limited by access to capital? Launch Amazon Lending. Customers can only buy things when they are in front of their computer or phone? Build Echo. UPS and FedEx can only deliver within 24 hours? Launch Amazon Flex and Amazon Logistics.

Amazon assembled a massive machine to deploy its algorithm over and over, and the momentum was unstoppable. Every barrier in its path was solved with a platform – until one of these platforms led Amazon to a catastrophic mistake….

Instead of solving the root cause of the discovery problem, Amazon layered a solution on top: ads. This would normally be a reversible decision, but the extraordinary amount of ad revenue it is generating will likely prove impossibly addictive for a company with Amazon’s appetite for capital. One way of thinking about this is that the $8 billion generated by Amazon Advertising fuels roughly ⅓ of Amazon’s entire R&D budget.

This may seem like a minor footnote in the grand picture of Amazon, but it is an absolutely devastating misstep for Amazon’s retail business. This isn’t “just” search results; search results are the entire driver of Amazon’s retail engine. Remember that in the world of infinite shelf space, the ranking algorithm is practically the entire merchandising strategy. Organic, customer-centric product rankings – the strategy that brought Amazon to $250 billion in retail revenue – has been permanently distorted. And everyone is praising them for it.

Ads become the platform solution to the problem of an unbounded virtual store. But the problem is that advertising has its own logic, and that logic is not, strictly speaking, one of customer satisfaction. “The problem with Sponsored Products is that sponsored listings are not actually good for customers – they are good for sellers; more specifically, they are good for sellers who are good at advertising, and bad for everyone else,” Kanter writes.

Amazon’s other solution to the problem of an unbounded virtual store, with products of varying quality, is to offer its own product lines, using the only mechanism it has to promote them over products that aren’t running a profit: ads!

Meanwhile, Amazon has not so quietly turned into the third-largest advertiser on the web, and the fastest growing, even as its share of the online retail market has grown.

What’s so elegant about this argument is how Kanter both shows how product advertising has the possibility of eroding everything that Amazon has built, while also showing that advertising is a necessary conclusion to everything that Amazon has built. Like Oedipus being the very murderer he’s looking for, it’s both tragic and tidy.

The Future of the Cloud

AWS CEO Andy Jassy Drills Down On Cloud Adoption And Amazon’s Culture.

“Most applications in five to 10 years will be infused in some way with machine learning and artificial intelligence,” Jassy said. “Companies will work at different layers of a stack. You’ll have expert machine-learning practitioners that will build models for you on the frameworks. You’ll have everyday developers and data scientists that use this abstraction which we have that’s called SageMaker, which is really a managed service to build, train, tune and deploy machine-learning models. We have a lot of customers who will be able to do what they typically think of as AI services that closely mimic human cognition—so text to speech, speech to text, translation across a lot of languages, natural language processing—so you don’t have to read and figure out what’s in every piece of corpus text. You can kind of get meaning from something in a machine-learning fashion—the ability to recognize video and what’s in it, images and what’s in it.

“A second technology that we’re pretty excited about is what people call IoT, the Internet of Things or edge computing,” Jassy said. “When we think about 10 years from now and when we think about hybrid, we don’t think the on-premises part is going to be in data centers. We think the on-premises part will be billions of these devices that sit at the edge—in our houses, in our offices, in factories and oil fields and agricultural fields and planes and ships, and automobiles—everywhere. These devices have relatively little CPU and relatively little disc, and so the cloud becomes disproportionately important in implementing all of those devices.”

(A lot of other companies in the cloud are making a play that they’re going to be better than Amazon at one or both of these things, either AI or the edge. So Jassy’s ability to both reassure customers that yes, security is their number one priority, that they’ll be able to do the current things they do more efficiently in the cloud, as well as having a vision for where all this cloud and hybrid cloud computing is heading, is very necessary and powerful.)

Amazon Is Not A Great Place to Work

Here is a triptych in the never-ending series about how difficult it is to work at Amazon, and how few remedies Amazon workers have when something goes wrong.

KUOW also has an interview with GeekWire’s Taylor Soper about what it’s like to work as one of the casualized last-mile drivers for Amazon Fulfillment.

You don't know what you'll be delivering when you sign up for a shift. You don’t know until you get to Amazon’s facility. You just know where you’re going and the general area. Amazon tries to put all the deliveries into one area, so you’re not driving all over the place…

When you pour 41 packages in your car, you don’t know which one’s first and which one’s last, and then when you get to a house, you’re just kind of digging through and looking at the labels. I didn’t know what I was doing.

When you refresh the Flex app, Amazon is also changing the price of what the job is worth. It seems that Amazon's algorithm is calculating every few minutes what demand they need and how many drivers they'll need out delivering packages.

Very few companies continually remind us it is no longer the 20th century as much as Amazon does. We are dealing with a very different business in a very different world.

Don’t Miss These

I Didn’t Know That

This is one of those news items that you know is important, but you have a hard time explaining why? AWS is adopting chips from NVIDIA. Why does this matter? See Andy Jassy above, talking about AI in the cloud and at the edge. Then read this:

The NVIDIA Jetson platform offers AI at the edge with high-performance and power-efficient computing. Applications include autonomous machines and smart cameras for industries such as retail, manufacturing, agriculture and more.

AWS IoT Greengrass seamlessly extends AWS to edge devices, including machine learning inference, so they can act locally on the data they generate while still using the cloud for management, analytics and durable storage. Jetson-powered devices perform inference at the edge to take near real-time action using AWS IoT Greengrass. Data is then sent back to machine learning services such as Amazon SageMaker to improve model accuracy.

TL: DR — this is how all of that is going to work.

Bezos Watch

This week, Jeff Bezos again hosted the private (read: no press) MARS conference devoted to Machine learning, Automation, Robotics, and Space in Palm Springs, California. The only way we know what went down are from the tweets trickling out from attendees.

Pretty cool hobbies that wealthy, wealthy man has. When it comes to this one thing, I can’t say I’d be doing anything differently if I were in his place.

That’s it for this week at The Amazon Chronicles. If you liked it, please pass it on to a friend. If you loved it, please consider becoming a supporting member. Thanks for reading.

Tim Carmody


Loading more posts…