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What Business Is Amazon.com Really In?

With more than $550 million in losses over the past five years, how can Amazon.com seriously expect to become a viable retail business? Inc. offers five theories as to what the leading E-tailer is really up to.
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Unsolved Mystery

By drawing attention to its appetite for expansion and red ink, America's leading E-tailer has cleverly concealed its grand plan from public view. Until now

By now, surely everyone knows that Amazon.com isn't actually in the book business. Nor is it in the business of peddling videos or pet supplies. Software? Please. Auctions? Get real. Sure, the giant E-tailer provides those offerings, having serviced cybershoppers to the tune of an estimated $1.4 billion last year. But with losses that would bury multiple businesses (more than $550 million, accumulated over the past five years), it's abundantly clear that Amazon isn't even aiming to become a viable retail business. The challenge, then, is to define what it is.

It's unprofitable, of course, but that's just the superficial answer. The tsunami of red ink, founder and CEO Jeff Bezos has long maintained, is part of the plan. On to the deeper question, then: What on earth is the plan?

Theories abound. Internet analyst Evan I. Schwartz -- whose 1997 book, Webonomics: Nine Essential Principles for Growing Your Business on the World Wide Web, ranked as a number one business best-seller on Amazon.com -- insists that Bezos's enterprise, with its investments in fledglings like Drugstore.com and Pets.com, is "becoming a venture-capital company, and this is how they're going to become profitable." For his part, James McQuivey, the astute research director at Forrester Research, in Cambridge, Mass., believes that Amazon.com's broad positioning is its way of preparing for a surge of new on-line-shopping households, 11 million this year alone. "Until 2001," he says, "I'm buying the argument that it has to lose money to make money."

But such pedestrian interpretations fail to match the measure of Bezos's vision. He is, we're convinced, after something grander. All the talk -- of profitability or its absence, of endlessly expanding product lines or investment in new business areas -- amounts to an elaborate distraction, one that Bezos has created to keep his grand plan concealed. And his smoke screen has worked beautifully. Until now.

Come with us beyond the pithy sound bites. Join us as we slip behind the numbers. Examine the evidence we've gathered. Those brave enough to connect the dots will find themselves staring at possibilities so plainly convincing, they seem eerily familiar. To wit, five solid theories as to what Amazon.com is really up to.

1. Today the World, Tomorrow the Country
What do Steve Forbes, H. Ross Perot, and even "The Donald" Trump have in common with Amazon's Bezos?

Like them, Bezos has at times seemed bent on world domination. And just as they have all toyed with turning high-profile business success into political power, Bezos will soon reveal his so-called business to be a platform for a slightly more focused ambition. He's out to run the country.

Sure, none of them has actually won an election, but it's easy to see why. They're all out of touch, relics of a bygone era when CEOs believed companies needed profits. Bezos brings a refreshingly modern vision with a platform that holds that prosperity is an attitude, a way you choose to operate regardless of the bottom line. Casting himself as a latter-day Perot, he plans to crank up the espresso machine, throw the flip charts into the Volvo, and ride a populist wave into the White House.

"We're going to be unprofitable for a long time. And that's our strategy," Bezos told Inc. in 1997. What debt-strapped citizen could resist clambering aboard that bandwagon? He's got a brazen cockiness that's quintessentially American -- and an inscrutability that's quintessentially electable.

All that remains is a choice of running mate. He's got options: go the traditional route to balance the ticket, tap Bill Gates, and vie for the predictable profitability vote; or follow the model of Jesse "The Governor" Ventura, defy the system, and capitalize on sheer popularity. To that end we understand Bezos has been pursuing someone even more skilled at wizardry than he is. Would someone please tell him that Harry Potter is fictional?

2. It's for Prophet, Not for Profit
One day soon, America will sprout a host of billboards featuring a stark white background with a lonely line of bold text stretching across it that asks: "Depressed about the lack of security in E-commerce? For books about consumer insecurity, click here." In the bottom left corner will be a logo, bright blue with a swirl of soothing yellow-gold -- Amazonetics.

It's simple. It's beautiful. Amazon isn't unprofitable -- it's evolving into a nonprofit. Any day now, it'll be notifying the IRS to reclassify it as a not-for-profit, thereby exempting it from paying taxes.

Last updated: Feb 1, 2000




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