Amazon Will Become Alphabet-like In Structure
If Amazon breaks up, it will be on its own terms. Similar to PayPal and eBay, the Board will, at some point, wisely choose to make some major moves. And this will be a great thing for all involved. I predict an Alphabet-like structure with Jeff still at the top.
So, yeah, more of the same!
Most estimates I see have Amazon's retail business valued at 2-3x and its marketplace, ad, and cloud-based businesses at 5-6x. Logistics will be below the retail business valuation.
Its top growers are asset-light.
Third-Party Marketplaces, particularly internationally, are growing fast. Many people blend the entire retail business together, using traditional retail valuations. But the action is all in third-party. More profitable and growing faster.
AWS is still insanely profitable, despite Azure growing faster and more prominent than before.
Advertising is a newcomer in the last few years. Over $2B and growing 30-40% based on recent estimates. You can’t get any more asset-light than advertising. Ironically, the growth of ads does, in some ways, threaten the consumer experience of its own retail business, as most ads are on its own properties.
Matthew Holman posed the following question: “What are the odds of future anti trust action? The marketplace is operating at a loss and affecting other players - fueled by AWS. Any chance government entities get involved at some point?” My take: Chance? Yes. Likelihood? Low. The world has bigger problems right now than antitrust.
Peter Schwartz shared some really interesting insights, which I’d like to highlight here:
I would submit that the classic and predictable breakup of Amazon regardless of how it might be implemented would be to separate AWS and the rest of Amazon. While that would move a big problematic ‘boulder’ from the competitive watchdog hit list, IMO the more salient issue sits in their conflict of interest as both a provider of goods and services (batteries) and a retailer. This would be a “coopetition” model employed by the likes of Jack Ma. The western monopolies have not embraced this model and is where the true conflicts arise. Is Amazon a wolf in sheep’s clothing vs the Shopify and other collaborative models that are emerging? Collaborative models take years to imagine, build and deploy - and complex IP that does not fit the model for a one pager. It also requires deep trust between partners, and relies on different data than the typical ad-supported models. This will become problematic for today’s black box monopolies as this plays out. Amazon like many other models in the western world are tempting and intoxicating especially for small producers - a dangerous but instant fix. How many regulators have this understanding?
Hilton Barbour chimed in to add: “The monster called Amazon is ripe for anti-trust and regulation. Does the FTC have the temerity to do that? I adore Scott Galloway’s POV that we should be seeing "anti-trust" as a badge of honor to congratulate organizations for creating such value. The future can't be a model where consolidation occurs...that is severely limiting. Collaboration creates a larger and richer impact for ALL parties. Its an attitudinal shift but the crushing impact of consolidation needs to addressed.”
The “badge of honor” bit sort of tickles me. I still don’t foresee an antitrust suit in the near future, but I smirk at the idea that it’s a feather in someone’s (Bezos) cap.
