Amazon took cash for positive reviews
Thursday 11 February 1999
The embarrassing setbacks come as the stock market rethinks its love affair with the Internet and other electronic traders also hit problems. E-commerce is coming of age in the US, and it is proving painful.
Amazon.com lists thousands of books on its website, with comments and recommendations, as well as a best-seller list. Customers can buy these electronically and have them delivered. For the past year it has been the subject of endless fascination in the world media as the prototype of a new company, one that exists only electronically. It has succeeded in generating a sense of community with intelligent reviews and a well- composed site.
But some of the magic has been dissipated by news of how the reviews end up on Amazon.com's pages. The company has been soliciting payments of up to $10,000 for prominent placement of books in what it calls "co- operative" arrangements. Companies representing books such as John Grisham's The Testament paid for prominent coverage, including e-mail alerts to customers. The company responded swiftly, offering refunds to everyone who had bought one of the recommended books. From next month, it will list which features on its pages are paid for.
It emphasised that it could refuse to feature books if it did not consider them suitable. "We have the largest staff of book editors online or off, and for a book that doesn't meet our standards, there is no amount of money that would cause us to feature it," said Jeff Bezos, the founder.
But the financial side of Amazon.com has also raisedquestions. It is a huge business, with 4.7 million books sold, 6.2 million customers and $1bn in business last year. The company's stock went from 9 to 199 as investors went crazy over the prospects for e-commerce, giving it a value of over $25bn.
Yet its losses actually increased last year, and it is unlikely to make a profit until 2001. Since the beginning of this year, the stock has halved in value. Some investment firms have limited the amount of cash which investors could borrow to gamble on e-stocks.
It is not the only company facing problems. E-Trade, the online brokerage, is being sued after its trading system crashed four times. And Buy.com, an online retailer, lost more than $60,000 after putting the wrong price on a computer monitor.
Partly, these are problems of success. The online services have grown so rapidly that they are having trouble keeping up. But it is also a problem of age. The United States is ceasing to see online commerce as a fascinating toy, and starting to treat it seriously, not always to the companies' benefit.
Praise for Andrew Morton's Monica`s Story on Amazon's website raised eyebrows mainly because the book had not been published.
"I though I knew it all, but Monica's Story blew me away," wrote Peter Feld, who later admitted he had invented the review. It was subsequently removed from the site. But yesterday, another review had appeared, under the name of Boygeorge@yahoo.com from Oval Office, DC. He gave it one star out of five, saying: "It blows. No cigar. No blue dress. Just yap, yap yap, yap about some cheesecake she ate last night." That, too, was removed within hours.
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