Is Jeff Bezos spreading Amazon too thin? As its new smartphone, the “Fire”, makes its debut, it is sometimes hard to keep track of what business – or businesses – the company is in.
Online retail, online video, TV streaming, hardware, cloud computing and bookselling would appear to be just a few of Amazon’s services and products. The company is pinning much of its hope on its “Amazon Prime” service, which includes fast shipping, streaming of movies and TV shows, and music.
However, Amazon’s shares plunged more than 10 per cent in after-hours trading on Thursday when it reported a $126m quarterly loss despite a 23 per cent jump in revenue to $19.3bn.
What’s more, Amazon said it expects an even bigger quarterly loss next time around.
The reason? The company continues to invest heavily in its new businesses, funding all sorts of new ventures and enterprises to compete with the likes of Google, Apple and Netflix. It insists it is investing in new ventures instead of focusing on short-term profits.
This can be viewed as admirable, but with so much revenue being generated every quarter, some shareholders are bound to agitate for profits so they can get their share of the wonga. It is shareholders’ money, after all.
But it’s not just about profits.
In business schools, a seminal work read by students is the 1960 Harvard Business Review paper “Marketing Myopia”, by Theodore Levitt, which laid down the challenge to corporate executives to answer one basic question: what business are you really in?
Professor Levitt cited railroad executives who thought they were in the railroad business – when in fact they were in the broader transport business. They were “myopic” and defined their business too narrowly. Mr Bezos could never be accused of myopia or of defining his business too narrowly – quite the opposite – but some Amazon investors would really like to hear someone articulate with clarity what business their company is in.