Amazon Service Marketing Case Study

1998 S.
Vandermerwe, Imperial College Management School, London, UK
ECCH Collection
EU
RO
PEAN CA
case centre
Distributed by The Case Centre

www.thecasecentre.org
All rights reserved
North America
t +1 781 239 5884
f +1 781 239 5885
e info.usa@thecasecentre.org
Rest of the world

t +44 (0)1234 750903
f +44 (0)1234 751125
e info@thecasecentre.org
Amazon.com:
Marketing a New Electronic Go-Between Service
Provider
This case was written by Professor Sandra Vandermerwe, and Dr. Marika Taishoff,
Imperial College Management School, London. It is intended to be used as the basis
for class discussion rather than to illustrate either effective or ineffective handling of
a management situation.
The case was compiled from published sources.
1998 S. Vandermerwe, Imperial College Management School, London, UK
SE
RING HOU
This case was written by Professor Sandra Vandermerwe, and Dr. Marika Taishoff,
Imperial College Management School, London. It is intended to be used as the basis
for class discussion rather than to illustrate either effective or ineffective handling of
a management situation.
The case was compiled from published sources.
EA
Educational material supplied by The Case Centre

Copyright encoded A76HM-JUJ9K-PJMN9I
Order reference F250215
Marketing a New Electronic Go-Between Service

Provider
SE
Amazon.com:
598-069-1
Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

You are permitted to view the material on-line and print a copy for your personal use until 14-May-2016.
Please note that you are not permitted to reproduce or redistribute it for any other purpose.
598-069-1
CL
Distributed by The European Case Clearing House, England and USA.

North America, phone: +1 781 239 5884, fax: +1 781 239 5885, e-mail: ECCHBabson@aol.com.
Rest of the World, phone: +44 (0)1234 750903, fax: +44 (0)1234 751125, e-mail: ECCH@cranfield.ac.uk.
All rights reserved. Printed in UK and USA. Web Site: http://www.ecch.cranfield.ac.uk.
598-069-1
Case No.
598-069-1
MS9808
Case No.
MS9808

This case was prepared by

Professor Sandra
Vandermerwe & Dr.
Marika Taishoff, as a
basis for class discussion
rather than to illustrate
either effective or
ineffective handling of a
business situation.
The debate in the executive classroom had raged on for over an

hour, despite the end-of-term Christmas party in full swing just
down the corridor. All the other classrooms in the London-based
business school had emptied out long ago, as the participants rushed
to the party, or to do their last minute Christmas shopping. But not
the class debating the strategy Jeff Bezos, founder and CEO of
Amazon.com, one of the flag bearers and icons of the e-commerce
era, had used to achieve success so fast since he had created the
company in 1995.
Did the secret to Bezos success (he was worth after all, now at the
end of 1998, a neat $2 billion) lie in his having spotted a golden
technological opportunity, and riding its wave as some executives
argued? Or, as others believed, had he come up with the new
electronic service business model, which others would have to learn
from and in some cases copy in their own businesses areas? Was
his strategy fundamentally price based as some participants
insisted? Or was there a completely new set of market and
economic dynamics at work, which is what another group of
delegates believed?
Certainly Bezos had effectively created a new way of buying and
selling books, and so forever transformed and reshaped the industry.
But what would Bezos have to do to sustain its success? The
competition had belatedly, yet aggressively, entered the field-especially the two biggest players, Barnes & Noble and
Bertelsmann, jointly trying to topple Amazon from its lead position
in the on-line book battle. Could the small upstart, which had yet to
show a profit despite rapid sales growth, be able to survive the
combined competitive onslaught of these leaders from the global
publishing and retail worlds?
The Early Wake-Up Call
Jeff Bezos probably hadnt figured on sore knees and an aching

back when he had decided, in late 1994, to leave his high-powered
job on Wall Street and begin an entirely new career and business.
Just thirty, he had until then followed the classic path of the Wall
Street whizzkid: a summa cum laude Princeton University graduate
in computer science and electrical engineering; the youngest ever
Copyright 1998 Sandra Vandermerwe, Imperial College Management School, London, UK. Not to be
1
used or reproduced without permission.
AMAZON.COM: MARKETING A NEW

ELECTRONIC GO-BETWEEN SERVICE
PROVIDER

AMAZON.COM: MARKETING A NEW

ELECTRONIC GO-BETWEEN SERVICE
PROVIDER
This case was prepared by

Professor Sandra
Vandermerwe & Dr.
Marika Taishoff, as a
basis for class discussion
rather than to illustrate
either effective or
ineffective handling of a
business situation.
The debate in the executive classroom had raged on for over an

hour, despite the end-of-term Christmas party in full swing just
down the corridor. All the other classrooms in the London-based
business school had emptied out long ago, as the participants rushed
to the party, or to do their last minute Christmas shopping. But not
the class debating the strategy Jeff Bezos, founder and CEO of
Amazon.com, one of the flag bearers and icons of the e-commerce
era, had used to achieve success so fast since he had created the
company in 1995.
Did the secret to Bezos success (he was worth after all, now at the
end of 1998, a neat $2 billion) lie in his having spotted a golden
technological opportunity, and riding its wave as some executives
argued? Or, as others believed, had he come up with the new
electronic service business model, which others would have to learn
from and in some cases copy in their own businesses areas? Was
his strategy fundamentally price based as some participants
insisted? Or was there a completely new set of market and
economic dynamics at work, which is what another group of
delegates believed?
Certainly Bezos had effectively created a new way of buying and
selling books, and so forever transformed and reshaped the industry.
But what would Bezos have to do to sustain its success? The
competition had belatedly, yet aggressively, entered the field-especially the two biggest players, Barnes & Noble and
Bertelsmann, jointly trying to topple Amazon from its lead position
in the on-line book battle. Could the small upstart, which had yet to
show a profit despite rapid sales growth, be able to survive the
combined competitive onslaught of these leaders from the global
publishing and retail worlds?
The Early Wake-Up Call
Jeff Bezos probably hadnt figured on sore knees and an aching

back when he had decided, in late 1994, to leave his high-powered
job on Wall Street and begin an entirely new career and business.
Just thirty, he had until then followed the classic path of the Wall
Street whizzkid: a summa cum laude Princeton University graduate
in computer science and electrical engineering; the youngest ever
1
598-069-1
senior vice president in a Wall Street investment bank; and fast becoming one of the citys
leading money and hedge fund managers, he was seemingly destined for the corporate fast
track. And yet in 1994, everything changed. During a casual read, Jeff Bezos came across a
statistic. A statistic which not only led him to radically change careers, but also convinced
him that he had to make the big move from the East Coast all the way to Seattle on the West
Coast.
senior vice president in a Wall Street investment bank; and fast becoming one of the citys
leading money and hedge fund managers, he was seemingly destined for the corporate fast
track. And yet in 1994, everything changed. During a casual read, Jeff Bezos came across a
statistic. A statistic which not only led him to radically change careers, but also convinced
him that he had to make the big move from the East Coast all the way to Seattle on the West
Coast.
The Growth of the Internet

The statistic had to do with the Internet: usage of the new medium, according to the statistic,
was growing at 2300% per annum. Bezos reaction was quick and decisive: Anything that is
growing that fast is going to be ubiquitous very quickly. It was my wake-up call.i
The Growth of the Internet

The statistic had to do with the Internet: usage of the new medium, according to the statistic,
was growing at 2300% per annum. Bezos reaction was quick and decisive: Anything that is
growing that fast is going to be ubiquitous very quickly. It was my wake-up call.i
Thanks to the bonuses he had made in his brief yet successful Wall Street career, Jeff Bezos
decided to quit his job in order to dedicate himself fully to what he perceived to be a major
new market opportunity. The next few months he spent studying the key factors necessary for
success on the Net, and investigating the kinds of products which fulfilled those criteria. He
soon narrowed his list down from about 20 potential offerings --including videos, computer
hardware, and computer software--to just two: music and books.ii Both, he thought, had a
competitive advantage for virtual, Internet-based selling as opposed to physical, retail
sales. Possibly because he himself loved reading, possibly because his wife was an aspiring
novelist, and definitely given the innumerable hassles involved in the book buying process
encountered in any traditional retail outlet by customers, Bezos ultimately decided to start his
Internet-based business with books.iii
Thanks to the bonuses he had made in his brief yet successful Wall Street career, Jeff Bezos
decided to quit his job in order to dedicate himself fully to what he perceived to be a major
new market opportunity. The next few months he spent studying the key factors necessary for
success on the Net, and investigating the kinds of products which fulfilled those criteria. He
soon narrowed his list down from about 20 potential offerings --including videos, computer
hardware, and computer software--to just two: music and books.ii Both, he thought, had a
competitive advantage for virtual, Internet-based selling as opposed to physical, retail
sales. Possibly because he himself loved reading, possibly because his wife was an aspiring
novelist, and definitely given the innumerable hassles involved in the book buying process
encountered in any traditional retail outlet by customers, Bezos ultimately decided to start his
Internet-based business with books.iii
Bezos Moves to Seattle

In July 1995 Bezos settled in Seattle. It wasnt that he had wanted to leave New York; he felt
he had to. Not only was Seattle home to Microsoft and its numerous suppliers, thriving with
software talent, but also the site of one of the worlds biggest book warehouses. And its
location on the West Coast gave him proximity to the computer industry gurus and venture
capitalists of Silicon Valley, whose combined expertise and funding, he felt, could prove
essential to his fledgling business.
At about the same time, on the other side of the Atlantic, Darryl Mattocks, a British computer
games specialist, also had the idea of creating an on-line bookstore. Because UK venture
capitalists at that time saw little potential in the Internet, and so refused to back him, Mattocks
financed his business with his credit card and an $80,000 loan from the Blackwell family,
founders of the booksellers of the same name.iv
From his home in Oxford, the thirty year old set up the Internet Bookshop. He had lived most
of his life in the small university town, and didnt want to leave. However, Oxford was miles
away from the nearest book warehouse or distribution centre. Internet Bookshop prices were
initially about the same as those of the traditional high street bookstores and, similar to these
physical retailers, the Internet Bookshop didnt sell titles until their British publication dates,
in many cases months after the US publishing dates. Still, open 24 hours a day, seven days a
week, the Internet Bookshop felt it served a need for time-pressed readers, many of whom
were European, not just British, who couldnt or didnt want to go to bookstores. Rather than
use advertising, the Internet Bookshop relied on word of mouth and Net browsing to create
awareness and interest in the site.


598-069-1
Bezos Moves to Seattle

In July 1995 Bezos settled in Seattle. It wasnt that he had wanted to leave New York; he felt
he had to. Not only was Seattle home to Microsoft and its numerous suppliers, thriving with
software talent, but also the site of one of the worlds biggest book warehouses. And its
location on the West Coast gave him proximity to the computer industry gurus and venture
capitalists of Silicon Valley, whose combined expertise and funding, he felt, could prove
essential to his fledgling business.
At about the same time, on the other side of the Atlantic, Darryl Mattocks, a British computer
games specialist, also had the idea of creating an on-line bookstore. Because UK venture
capitalists at that time saw little potential in the Internet, and so refused to back him, Mattocks
financed his business with his credit card and an $80,000 loan from the Blackwell family,
founders of the booksellers of the same name.iv
From his home in Oxford, the thirty year old set up the Internet Bookshop. He had lived most
of his life in the small university town, and didnt want to leave. However, Oxford was miles
away from the nearest book warehouse or distribution centre. Internet Bookshop prices were
initially about the same as those of the traditional high street bookstores and, similar to these
physical retailers, the Internet Bookshop didnt sell titles until their British publication dates,
in many cases months after the US publishing dates. Still, open 24 hours a day, seven days a
week, the Internet Bookshop felt it served a need for time-pressed readers, many of whom
were European, not just British, who couldnt or didnt want to go to bookstores. Rather than
use advertising, the Internet Bookshop relied on word of mouth and Net browsing to create
awareness and interest in the site.
598-069-1
New Name, New Game

Back in Seattle, Bezos decided on Amazon as the name of his new business, after the name
of the worlds longest river, for what he intended to be the worlds biggest bookstore. Using
some of the $11 million he had managed to raise thanks to his contacts on Wall Street and
through his intensive networking amongst the West Coast venture capitalists,v he set up his
headquarters in a 400 square foot storeroom, three floors above an art gallery in a slightly
seedy street in Seattle.vi It was furnished with a refrigerator-sized box running the computer
hardware for the Amazon.com Web site which he had just launched, and with packing tables.
But it soon turned out that there were not enough packing tables.
New Name, New Game

Back in Seattle, Bezos decided on Amazon as the name of his new business, after the name
of the worlds longest river, for what he intended to be the worlds biggest bookstore. Using
some of the $11 million he had managed to raise thanks to his contacts on Wall Street and
through his intensive networking amongst the West Coast venture capitalists,v he set up his
headquarters in a 400 square foot storeroom, three floors above an art gallery in a slightly
seedy street in Seattle.vi It was furnished with a refrigerator-sized box running the computer
hardware for the Amazon.com Web site which he had just launched, and with packing tables.
But it soon turned out that there were not enough packing tables.
And so it was that, in the second half of 1995, Bezos and his workers would kneel on the
floor, late into the night, packing books to ship off to the growing number of customers
buying from the Amazon.com Web site.vii The result was aching backs and sore knees, but
Bezos was now convinced that his earlier hunch about buying and selling books differently,
and of using the Internet as a go between vehiclelinking those who had books, with those
who wanted bookshad been accurate.
And so it was that, in the second half of 1995, Bezos and his workers would kneel on the
floor, late into the night, packing books to ship off to the growing number of customers
buying from the Amazon.com Web site.vii The result was aching backs and sore knees, but
Bezos was now convinced that his earlier hunch about buying and selling books differently,
and of using the Internet as a go between vehiclelinking those who had books, with those
who wanted bookshad been accurate.

Creating the New Electronic Service Business Model

From the outset, Bezos objective was to build an on-line store that was customer-friendly and
easy to navigate. He was convinced that the Internet had a fundamental edge over traditional
retailing: constrained neither by available shelf space nor physical locations, on-line stores
could be infinitely big, and so virtually overpower their bricks and mortar counterparts. As
Bezos reflected in an interview:
The idea of having an exhaustive selectionwhen Amazon.com started there were
smaller on-line bookstores, but none of them had the goal of having every book in
print in stock, and that certainly has been our goal from day oneThats something
that matches the on-line environment very well.viii
Creating a Virtual Shopping Experience
Also, the idea behind Amazon.com was not just to replicate, or even do better, on the Web
what traditional, bricks and mortar bookstores did: sell books. It was to provide a different
and enhanced experience for customers interested in books, one in which the hassles of bookbuying were identified, and removed. These included: getting to the store; looking for a book;
waiting to be served; standing in queues to pay; waiting for weeks for out-of-stock books; not
being informed when these books arrived; and, last but not least, paying inflated prices for
physical and personnel infrastructures which were doing customers no favours.ix

598-069-1
Creating the New Electronic Service Business Model

From the outset, Bezos objective was to build an on-line store that was customer-friendly and
easy to navigate. He was convinced that the Internet had a fundamental edge over traditional
retailing: constrained neither by available shelf space nor physical locations, on-line stores
could be infinitely big, and so virtually overpower their bricks and mortar counterparts. As
Bezos reflected in an interview:
The idea of having an exhaustive selectionwhen Amazon.com started there were
smaller on-line bookstores, but none of them had the goal of having every book in
print in stock, and that certainly has been our goal from day oneThats something
that matches the on-line environment very well.viii
Creating a Virtual Shopping Experience
Also, the idea behind Amazon.com was not just to replicate, or even do better, on the Web
what traditional, bricks and mortar bookstores did: sell books. It was to provide a different
and enhanced experience for customers interested in books, one in which the hassles of bookbuying were identified, and removed. These included: getting to the store; looking for a book;
waiting to be served; standing in queues to pay; waiting for weeks for out-of-stock books; not
being informed when these books arrived; and, last but not least, paying inflated prices for
physical and personnel infrastructures which were doing customers no favours.ix
Proximity to Ingram Book in Seattle, one of the worlds largest warehouseswhich

Amazon.com used as its virtual store--not only meant that Amazon could quickly get its hands
on 2.5 million books (more than ten times that of the biggest, physical book shopx), but also
that volumes could be shipped out to customers in record time. In other words, customers
were no longer confined by what was in stock or on the retailers floor. Amazon.com
itself kept within its own warehouse the top selling +/-400 titles. Out-of-print or obscure titles
were ordered directly from publishers and then routed through its warehouse.
Proximity to Ingram Book in Seattle, one of the worlds largest warehouseswhich

Amazon.com used as its virtual store--not only meant that Amazon could quickly get its hands
on 2.5 million books (more than ten times that of the biggest, physical book shopx), but also
that volumes could be shipped out to customers in record time. In other words, customers
were no longer confined by what was in stock or on the retailers floor. Amazon.com
itself kept within its own warehouse the top selling +/-400 titles. Out-of-print or obscure titles
were ordered directly from publishers and then routed through its warehouse.
Getting Beyond Price

As Amazon saw it, the traditional, physical bookstore was riddled with activities and expenses
that had nothing to do with what the customer wanted: these ranged from teams of employees
Getting Beyond Price

As Amazon saw it, the traditional, physical bookstore was riddled with activities and expenses
that had nothing to do with what the customer wanted: these ranged from teams of employees
598-069-1
having to spend time, effort and money looking for prime sites, and then decorating,
redesigning and promoting them, to the need for a huge sales staff, distribution network and
stock clerks just to man a physical store equivalent to Amazons size.
having to spend time, effort and money looking for prime sites, and then decorating,
redesigning and promoting them, to the need for a huge sales staff, distribution network and
stock clerks just to man a physical store equivalent to Amazons size.
Because Amazon had effectively done away with activities and expenses that were not adding
value to the customer experience, initially it was able to charge 30% off select hardbacks, and
20% off paperbacks. While being able to offer books for less was an important element in the
Amazon strategy, it wouldnt be enough, Bezos was certain, to ensure that customers came
back to the site over and over again. To achieve that meant customers had to feel they were
getting superior value. The Amazon.com site not only had an extensive catalogue, but also an
assortment of information about the catalogue entries. For instance, clicking onto the Amazon
Web site (see Exhibit 1 for an illustration of a sample page) allowed browsers to search for
books by author, title, subject, or keyword. More general searches could be done by browsing
in predefined subject areas, such as Biographies, History, Recent Fiction, etc. Typically, a
brief synopsis of the book selected would be included, as well as reviewsboth from the
leading journals, such as The New York Times, as well as from other readers.
Because Amazon had effectively done away with activities and expenses that were not adding
value to the customer experience, initially it was able to charge 30% off select hardbacks, and
20% off paperbacks. While being able to offer books for less was an important element in the
Amazon strategy, it wouldnt be enough, Bezos was certain, to ensure that customers came
back to the site over and over again. To achieve that meant customers had to feel they were
getting superior value. The Amazon.com site not only had an extensive catalogue, but also an
assortment of information about the catalogue entries. For instance, clicking onto the Amazon
Web site (see Exhibit 1 for an illustration of a sample page) allowed browsers to search for
books by author, title, subject, or keyword. More general searches could be done by browsing
in predefined subject areas, such as Biographies, History, Recent Fiction, etc. Typically, a
brief synopsis of the book selected would be included, as well as reviewsboth from the
leading journals, such as The New York Times, as well as from other readers.
Visitors to the Amazon.com Web site were encouraged to write and submit reviews of books
they had read. These reviews then became part of the overall information surrounding the
books in the Amazon.com catalogue. Similarly, Amazon included for certain of its books
Author Interviews. In this case, authors were robotically interviewed by Amazons
specially designed software.xi
For customers with no particular book in mind, but just wanting to see what was availablea
typical reason for entering a physical bookstorethere was the ability to click on the
Reviewed in the Media section of Amazon, to see which books were currently in the
limelight. Alternatively, they could check out the Best-sellers virtual aisle at Amazon, for
the hottest books on the market, or the Award Winners section to keep track of the literary
greats in a variety of fields.
Personalising the Offering
In addition to the extensive and easy-to-use catalogue, the Amazon site also invited readers to
sign up for its personal notification services, called Eyes. Readers would indicate what
kinds of book - either in terms of subjects or authors - they liked to read. Once signed up for
this service, they would receive regular e-mails with reviews of what Amazons editors
considered exceptional books in the categories they were interested in. Customers could
modify or add to their personal reading profiles whenever they wanted simply by e-mailing to
Amazons customer service desk.


598-069-1
Visitors to the Amazon.com Web site were encouraged to write and submit reviews of books
they had read. These reviews then became part of the overall information surrounding the
books in the Amazon.com catalogue. Similarly, Amazon included for certain of its books
Author Interviews. In this case, authors were robotically interviewed by Amazons
specially designed software.xi
For customers with no particular book in mind, but just wanting to see what was availablea
typical reason for entering a physical bookstorethere was the ability to click on the
Reviewed in the Media section of Amazon, to see which books were currently in the
limelight. Alternatively, they could check out the Best-sellers virtual aisle at Amazon, for
the hottest books on the market, or the Award Winners section to keep track of the literary
greats in a variety of fields.
Personalising the Offering
In addition to the extensive and easy-to-use catalogue, the Amazon site also invited readers to
sign up for its personal notification services, called Eyes. Readers would indicate what
kinds of book - either in terms of subjects or authors - they liked to read. Once signed up for
this service, they would receive regular e-mails with reviews of what Amazons editors
considered exceptional books in the categories they were interested in. Customers could
modify or add to their personal reading profiles whenever they wanted simply by e-mailing to
Amazons customer service desk.
Paying for books was done by entering credit card information, which was specially encrypted
to ensure privacy and security. The customers orders were processed as soon as received,
with books in stock packaged and mailed the same day; orders for those not in stock were
immediately placed with the appropriate publisher. Customers were then notified by e-mail as
soon as their order had been shipped.
Paying for books was done by entering credit card information, which was specially encrypted
to ensure privacy and security. The customers orders were processed as soon as received,
with books in stock packaged and mailed the same day; orders for those not in stock were
immediately placed with the appropriate publisher. Customers were then notified by e-mail as
soon as their order had been shipped.
Leveraging Network Externalities

In July 1996 Bezos pioneered the Associates program. He knew that network externalities,
one of the precepts of the modern economy, meant that the value of a network increased
exponentially as more members joined it. In other words, more meant more--for everyone,
including customers.xii The object was to get as many others as possible to join his
network,
4
Leveraging Network Externalities

In July 1996 Bezos pioneered the Associates program. He knew that network externalities,
one of the precepts of the modern economy, meant that the value of a network increased
exponentially as more members joined it. In other words, more meant more--for everyone,
including customers.xii The object was to get as many others as possible to join his
network,
4
598-069-1
therefore, rather than keep it exclusive. That way, customers could find exactly what they
wanted irrespective of its location on the Web, and get to that site quickly and seamlessly, at
the click of an icon. For example, for readers interested in cooking, Amazon provided a direct
link to Starchefs, which specialised in books for gourmets.
therefore, rather than keep it exclusive. That way, customers could find exactly what they
wanted irrespective of its location on the Web, and get to that site quickly and seamlessly, at
the click of an icon. For example, for readers interested in cooking, Amazon provided a direct
link to Starchefs, which specialised in books for gourmets.
Through this collaborative marketing concept, Web site owners also recommended books to
be purchased at Amazon.com. In return, these Amazon.com associates earned referral fees of
up to 15%. The Associate program was free to join, and Amazon.com deliberately did not
require that its associates meet any sales quotas.
Through this collaborative marketing concept, Web site owners also recommended books to
be purchased at Amazon.com. In return, these Amazon.com associates earned referral fees of
up to 15%. The Associate program was free to join, and Amazon.com deliberately did not
require that its associates meet any sales quotas.
Up Up and Away
Up Up and Away
By the end of 1995, Amazons staff reached 110, of which 14 did nothing but answer e-mail
from customers. According to company records, average daily visits to the site by December
of that year were approximately 2200. Initially, Amazon.coms revenues doubled in size
every 2.4 months. By August 1996, book sales were growing at 34% a month, and
Amazon.coms inventory was turning 150 times a year, compared to the three or four times a
year that physical bookstores turned their inventory.xiii The company was also beginning to
pick up some accolades in the press and general market. Time Magazine, for example, rated
Amazon one of the Ten Best Web Sites of 1996. When Bezos was asked why customers
visited and purchased from his site, he responded:
By the end of 1995, Amazons staff reached 110, of which 14 did nothing but answer e-mail
from customers. According to company records, average daily visits to the site by December
of that year were approximately 2200. Initially, Amazon.coms revenues doubled in size
every 2.4 months. By August 1996, book sales were growing at 34% a month, and
Amazon.coms inventory was turning 150 times a year, compared to the three or four times a
year that physical bookstores turned their inventory.xiii The company was also beginning to
pick up some accolades in the press and general market. Time Magazine, for example, rated
Amazon one of the Ten Best Web Sites of 1996. When Bezos was asked why customers
visited and purchased from his site, he responded:
Bill Gates laid it out in a magazine interview. He (Bill Gates) said, I buy my books
at Amazon.com because Im busy and its convenient. They have a big selection, and
theyve been reliable. Those are three of our four core value propositions:
convenience, selection, service. The only one he left out is price: we are the broadest
discounters in the world in any product categoryThese value propositions are
interrelated, and they all relate to the Webxiv
By the end of 1996, average daily visits to the Amazon.com web site had grown to 50,000,
and repeat customers then accounted for 40% of orders. Company headquarters had by now
expanded to two floors: on one, about 25 editorial staff writers wrote the book reviews, and
another 25 or so programmers kept the software running smoothly. The next floor was
basically a room full of computers, and a classroom full of people being trained to run them.
Concentrating on Service
One area where Amazon had to spend just as much on staff and overheads as its physical
counterparts was in the domain of customer service.xv As Bezos observed:


598-069-1
Bill Gates laid it out in a magazine interview. He (Bill Gates) said, I buy my books
at Amazon.com because Im busy and its convenient. They have a big selection, and
theyve been reliable. Those are three of our four core value propositions:
convenience, selection, service. The only one he left out is price: we are the broadest
discounters in the world in any product categoryThese value propositions are
interrelated, and they all relate to the Webxiv
By the end of 1996, average daily visits to the Amazon.com web site had grown to 50,000,
and repeat customers then accounted for 40% of orders. Company headquarters had by now
expanded to two floors: on one, about 25 editorial staff writers wrote the book reviews, and
another 25 or so programmers kept the software running smoothly. The next floor was
basically a room full of computers, and a classroom full of people being trained to run them.
Concentrating on Service
One area where Amazon had to spend just as much on staff and overheads as its physical
counterparts was in the domain of customer service.xv As Bezos observed:
If you make customers unhappy in the physical world, they might each tell six
friends. If you make customers unhappy on the Internet, they can each tell 6000
friends with one message to a newsgroup. If you make them really happy, they can tell
6000 people about you. You want every customer to become an evangelist for you.....
(Being on-line is the same as) a restaurant who has to treat every diner who comes
through the door like a potential reviewer for the Michelin guide. xvi
If you make customers unhappy in the physical world, they might each tell six
friends. If you make customers unhappy on the Internet, they can each tell 6000
friends with one message to a newsgroup. If you make them really happy, they can tell
6000 people about you. You want every customer to become an evangelist for you.....
(Being on-line is the same as) a restaurant who has to treat every diner who comes
through the door like a potential reviewer for the Michelin guide. xvi
Accordingly, Bezos sought to get to know individuals better. Amazon employees were
trained to spend as much time, money and energy on service and building relationships as
they did on selling books. They were encouraged to go to greater lengths to exceed expected
standards when a customer needed assistance on, say, a query title, a mistaken address and so
Accordingly, Bezos sought to get to know individuals better. Amazon employees were
trained to spend as much time, money and energy on service and building relationships as
they did on selling books. They were encouraged to go to greater lengths to exceed expected
standards when a customer needed assistance on, say, a query title, a mistaken address and so
598-069-1
on. When a customer needed help, the humans took over from the machines in full force-and 20% of Amazon staff did nothing but answer queries from the e-mail centre.
on. When a customer needed help, the humans took over from the machines in full force-and 20% of Amazon staff did nothing but answer queries from the e-mail centre.
Bezos belief in how the business should be run was almost religious. From the very
beginning he had dispensed with traditional corporate status symbols. When I worked at
Bankers Trust people measured their self worth by how many ceiling tiles they had in their
office. It was counter productive. At Amazons headquarters everyone has desks made of
old doors, and their computer monitors were propped up on phone directories. The door
desk is a symbol of the fact that we spend money on things that matter to customers.xvii
Bezos belief in how the business should be run was almost religious. From the very
beginning he had dispensed with traditional corporate status symbols. When I worked at
Bankers Trust people measured their self worth by how many ceiling tiles they had in their
office. It was counter productive. At Amazons headquarters everyone has desks made of
old doors, and their computer monitors were propped up on phone directories. The door
desk is a symbol of the fact that we spend money on things that matter to customers.xvii
Getting Big Fast
Getting Big Fast
By the end of 1996-- Amazon.coms first full year of operations-- sales had grown to almost
$16 million. (See Exhibit 2 for operating results for 1995 and 1996). At the same time, and
into the first two quarters of 1997, Bezos began building his executive structure. Seven
individuals joined the company during that period in top executive positions. For information
systems and logistics he found the Vice President in charge of those functions at Wal-Mart,
considered the best in this field in the US. By the summer of 1998 this executive had taken 15
employees from Wal-Mart with him. (see Exhibit 3 for a listing and brief biography of the
executive officers in addition to Jeff Bezos). Later, Bezos said:
By the end of 1996-- Amazon.coms first full year of operations-- sales had grown to almost
$16 million. (See Exhibit 2 for operating results for 1995 and 1996). At the same time, and
into the first two quarters of 1997, Bezos began building his executive structure. Seven
individuals joined the company during that period in top executive positions. For information
systems and logistics he found the Vice President in charge of those functions at Wal-Mart,
considered the best in this field in the US. By the summer of 1998 this executive had taken 15
employees from Wal-Mart with him. (see Exhibit 3 for a listing and brief biography of the
executive officers in addition to Jeff Bezos). Later, Bezos said:
The constraint on our growth is not capital but people bandwidth...smart people,
working hard, passionately and smartly...What excites them is changing the world in
an important and fundamental way. Our motto is: work hard, have fun, make
history.xviii
As 1997 dawned, Bezos was convinced that this was the year he needed to accelerate growth,
announcing his mantra as GBF, for Get Big Fast. Bezos explained:
This is scale business. And what happens is that the fixed costs of doing this business
are very high, and the variable costs of doing this business are extremely low. As a
result, our major strategic objective has always been GBF.We need that in order to
operate successfully what is a scale business.
At the same time, we are investing significant amounts of money in advertising and
marketing in order to introduce ourselves to as many customers as possible, as soon
as possible, as part of this Get Big Fast strategy. We spend marketing dollars at a
level which is disproportionate to a company of our size. And we do that because we
believe this is a critical category formation time where, roughly speaking, maybe a
dollar spent on advertising today is worth $10 spent on advertising next year.xix


598-069-1
The constraint on our growth is not capital but people bandwidth...smart people,
working hard, passionately and smartly...What excites them is changing the world in
an important and fundamental way. Our motto is: work hard, have fun, make
history.xviii
As 1997 dawned, Bezos was convinced that this was the year he needed to accelerate growth,
announcing his mantra as GBF, for Get Big Fast. Bezos explained:
This is scale business. And what happens is that the fixed costs of doing this business
are very high, and the variable costs of doing this business are extremely low. As a
result, our major strategic objective has always been GBF.We need that in order to
operate successfully what is a scale business.
At the same time, we are investing significant amounts of money in advertising and
marketing in order to introduce ourselves to as many customers as possible, as soon
as possible, as part of this Get Big Fast strategy. We spend marketing dollars at a
level which is disproportionate to a company of our size. And we do that because we
believe this is a critical category formation time where, roughly speaking, maybe a
dollar spent on advertising today is worth $10 spent on advertising next year.xix
Throughout 1997 and into 1998, Amazon.com worked on several levels in order to achieve
this objective. It also began tapping outside sources of finance in order to fund its GBF
growth objectives.
Throughout 1997 and into 1998, Amazon.com worked on several levels in order to achieve
this objective. It also began tapping outside sources of finance in order to fund its GBF
growth objectives.
Going Public
In May 1997, Amazon.com went public with an initial public offering of 3,000,000 shares at a
price of $18 per share. Keen demand on the first day of trading prompted Deutsche Morgan
Grenfell, the IPOs underwriters , to increase the size of the offer by 20%. The shares then
opened 63% higher than the $18 offer price. They closed the day at $23.50. Within a week,
Going Public
In May 1997, Amazon.com went public with an initial public offering of 3,000,000 shares at a
price of $18 per share. Keen demand on the first day of trading prompted Deutsche Morgan
Grenfell, the IPOs underwriters , to increase the size of the offer by 20%. The shares then
opened 63% higher than the $18 offer price. They closed the day at $23.50. Within a week,
598-069-1
the shares had fallen below the offer price, and throughout the next two months tended to stay
at that level even when other high tech were gathering record-breaking gains.xx By early
August, however, its price had jumped to $28.75.xxi
the shares had fallen below the offer price, and throughout the next two months tended to stay
at that level even when other high tech were gathering record-breaking gains.xx By early
August, however, its price had jumped to $28.75.xxi
A few months later, Amazon.com negotiated a $75 million, three year credit facility from a
bank consortium led by Deutsche Morgan Grenfell.
A few months later, Amazon.com negotiated a $75 million, three year credit facility from a
bank consortium led by Deutsche Morgan Grenfell.
Creating Presence and Accessibility

Throughout 1997, in order to grow the customer base, Amazon.com signed a variety of multimillion dollar agreements with leading Internet media and search engine gateway sites, which
provided access to Internet services and activities, such as Excite, Yahoo!, and AOL (America
On-Line)three of the six top visited sites. The aim of these agreements was to further
expand the reach and visibility of Amazon.com, and to enhance its strategy of providing
customers with as many points of access to the Amazon.com store as possible. xxii
Creating Presence and Accessibility

Throughout 1997, in order to grow the customer base, Amazon.com signed a variety of multimillion dollar agreements with leading Internet media and search engine gateway sites, which
provided access to Internet services and activities, such as Excite, Yahoo!, and AOL (America
On-Line)three of the six top visited sites. The aim of these agreements was to further
expand the reach and visibility of Amazon.com, and to enhance its strategy of providing
customers with as many points of access to the Amazon.com store as possible. xxii
These exclusive agreements established Amazon.com as the number one bookseller on these
sites by giving Amazon.com a permanent, above-the-fold front screen button (visible
without scrolling down) on the home pages of these Web sites. The button linked users
directly to Amazon.com. so that they didnt have to type in amazon and then wait for the
searching and connecting to happen. The partnership with AOL gave Amazon.com access to
the more than eight million members of AOL; in return, AOL was paid $19 million over three
years, with the possibility of additional payments in the event Amazon.com sales revenues
exceeded thresholds specified in the agreement. xxiii At about the same time Amazon.com
announced a similar, three year, multi-million dollar advertising spot on the Excite search
network. (see exhibit 4 for an example of the AOL advertising)
Between the last quarter of 1997 and the first quarter of 1998, the Amazon.com Associates
program more than doubled, and by February there were more than 30,000 members in the
program. By 1998, Amazon.com had also signed multi-year exclusive or premier associate
relationships with another two of the six top visited sites on the Web, Netscape and GeoCities,
to broaden its access to more customers.
Ongoing Innovation
In addition to working with Gateway sites, Amazon also worked more closely with other
players to provide superior value to customers. For example in 1998 it had launched
Amazon.comAdvantage, a program designed to increase the visibility and sales of books from
independent, smaller, publishers. The objective was to help these smaller publishers, by
ensuring that their books appeared prominently throughout Amazon.coms catalogue,
something which the commercial realities of traditional bookstores didnt always allow.
Bezos was also concerned about offsetting the counter-revolution to his electronic marketing
concept. For example, in the early 1990s Borders, a newcomer to the US book scene, was
instrumental in creating what would become known as the cultural superstore. The idea
behind the concept was that the bookstore serve as a sort of social centre, or literary salon,
complete with cafes, comfortable sitting areas, music sections, desks, and crches. In addition
to a broad range of books, magazines and periodicals, they also sold videos, CDs, and
computer games. Musicians would come into play and writers read from their works.
Borders had not only grown multi-fold since its inception, but had rapidly expanded globally
in a business long considered to be highly localised. It expected to have 450 stores by the
year 2003, designed to appeal to the reading, and music tastes of the over-30s.xxiv


598-069-1
These exclusive agreements established Amazon.com as the number one bookseller on these
sites by giving Amazon.com a permanent, above-the-fold front screen button (visible
without scrolling down) on the home pages of these Web sites. The button linked users
directly to Amazon.com. so that they didnt have to type in amazon and then wait for the
searching and connecting to happen. The partnership with AOL gave Amazon.com access to
the more than eight million members of AOL; in return, AOL was paid $19 million over three
years, with the possibility of additional payments in the event Amazon.com sales revenues
exceeded thresholds specified in the agreement. xxiii At about the same time Amazon.com
announced a similar, three year, multi-million dollar advertising spot on the Excite search
network. (see exhibit 4 for an example of the AOL advertising)
Between the last quarter of 1997 and the first quarter of 1998, the Amazon.com Associates
program more than doubled, and by February there were more than 30,000 members in the
program. By 1998, Amazon.com had also signed multi-year exclusive or premier associate
relationships with another two of the six top visited sites on the Web, Netscape and GeoCities,
to broaden its access to more customers.
Ongoing Innovation
In addition to working with Gateway sites, Amazon also worked more closely with other
players to provide superior value to customers. For example in 1998 it had launched
Amazon.comAdvantage, a program designed to increase the visibility and sales of books from
independent, smaller, publishers. The objective was to help these smaller publishers, by
ensuring that their books appeared prominently throughout Amazon.coms catalogue,
something which the commercial realities of traditional bookstores didnt always allow.
Bezos was also concerned about offsetting the counter-revolution to his electronic marketing
concept. For example, in the early 1990s Borders, a newcomer to the US book scene, was
instrumental in creating what would become known as the cultural superstore. The idea
behind the concept was that the bookstore serve as a sort of social centre, or literary salon,
complete with cafes, comfortable sitting areas, music sections, desks, and crches. In addition
to a broad range of books, magazines and periodicals, they also sold videos, CDs, and
computer games. Musicians would come into play and writers read from their works.
Borders had not only grown multi-fold since its inception, but had rapidly expanded globally
in a business long considered to be highly localised. It expected to have 450 stores by the
year 2003, designed to appeal to the reading, and music tastes of the over-30s.xxiv
598-069-1
One of the drawbacks of an on-line bookstore like Amazon.com was that it could not offer
comfy sofas and cappuccinos to those who browsed through its virtual aisles. So Bezos
determinedly set about finding innovative ways to enhance the overall customer experience,
and get customers to feel involved with Amazon.com as a company and brand. For
example in announcing the July 1997 agreement with Pulitzer-Prize winning author John
Updikewhereby visitors to the Amazon.com Web site would jointly create a story, on the
Web, with the best selling novelist over 44 days. The project entailed that Updike write the
beginning of an original story (entitled Murder Makes the Magazine) exclusively for
Amazon.com. Over the next 44 days, visitors to the site could write and submit their own
paragraphs to continue the story. The writers of paragraphs selected by the Amazon.com
editorial staff to continue the story each received $1000.
One of the drawbacks of an on-line bookstore like Amazon.com was that it could not offer
comfy sofas and cappuccinos to those who browsed through its virtual aisles. So Bezos
determinedly set about finding innovative ways to enhance the overall customer experience,
and get customers to feel involved with Amazon.com as a company and brand. For
example in announcing the July 1997 agreement with Pulitzer-Prize winning author John
Updikewhereby visitors to the Amazon.com Web site would jointly create a story, on the
Web, with the best selling novelist over 44 days. The project entailed that Updike write the
beginning of an original story (entitled Murder Makes the Magazine) exclusively for
Amazon.com. Over the next 44 days, visitors to the site could write and submit their own
paragraphs to continue the story. The writers of paragraphs selected by the Amazon.com
editorial staff to continue the story each received $1000.
Enhancing the Customer Interface

Hand in hand with such customer involvement, fun initiatives, Amazon.com continuously
enhanced and upgraded its customer interface technologies and infrastructures. In the summer
of 1997, for example, it launched a new recommendation center on its Web site. Features
ranged from offering customers personalised book recommendations based upon their specific
profiles and interests, and other customer ratings. Since many people didnt know precisely
what they wanted to read next, an If You Like This Author selection gave them a suggested
list of other authors. Bezos and his team also began working on systems that would help
individuals find the precise books that would change the world for them: If you can do that
you are creating real value for the world.xxv
Enhancing the Customer Interface

Hand in hand with such customer involvement, fun initiatives, Amazon.com continuously
enhanced and upgraded its customer interface technologies and infrastructures. In the summer
of 1997, for example, it launched a new recommendation center on its Web site. Features
ranged from offering customers personalised book recommendations based upon their specific
profiles and interests, and other customer ratings. Since many people didnt know precisely
what they wanted to read next, an If You Like This Author selection gave them a suggested
list of other authors. Bezos and his team also began working on systems that would help
individuals find the precise books that would change the world for them: If you can do that
you are creating real value for the world.xxv
Also, Amazon.com developed and launched a proprietary technology called 1-Click which for
the first time gave customers the ability to make purchases on the Web with just one click of
the mouse, eliminating the need for customers to fill out order information every time they
returned to the site. Bezos claimed that the 1-Click represented a new standard for ease of
buying on or off the Web.xxvi
Readers were not the only ones benefiting from Amazons innovations. Authors (accustomed
to getting royalty statements once a year from publishers) could check to see how their new
book was doing on a daily basis from a globally assembled listing, updated continuously,
prepared by Amazon, for what Bezos termed a global literary stock market. And students
were also using the Amazon lists as reference sites (as one student involved with a project put
it, its so much easier than going to the library!)
Stretching the Brand
In the early spring of 1998, Amazon.com invited customers, artists, music industry
professionals, and music lovers everywhere to help build the music store of their dreams.
As David Risher, VP of Product Development, put it: Every day customers give us
suggestions about how to improve our bookstore. Many of our most popular features are the
result of those suggestions. Our music team is completely focused on building a store that
addresses the desires of music lovers.xxvii Some of the questions visitors to the site answered
included Tell us about your dream music store.: how does it help you find music you like?
How does it help you avoid music you wont? What makes it unique? Customers were also
asked to publish their opinionsboth positive and negative-- by reviewing and rating CDs
which other potential customers could then read as they made their decisions about what to
buy. In appreciation for these suggestions, Amazon.com entered all visitors who offered input


598-069-1
Also, Amazon.com developed and launched a proprietary technology called 1-Click which for
the first time gave customers the ability to make purchases on the Web with just one click of
the mouse, eliminating the need for customers to fill out order information every time they
returned to the site. Bezos claimed that the 1-Click represented a new standard for ease of
buying on or off the Web.xxvi
Readers were not the only ones benefiting from Amazons innovations. Authors (accustomed
to getting royalty statements once a year from publishers) could check to see how their new
book was doing on a daily basis from a globally assembled listing, updated continuously,
prepared by Amazon, for what Bezos termed a global literary stock market. And students
were also using the Amazon lists as reference sites (as one student involved with a project put
it, its so much easier than going to the library!)
Stretching the Brand
In the early spring of 1998, Amazon.com invited customers, artists, music industry
professionals, and music lovers everywhere to help build the music store of their dreams.
As David Risher, VP of Product Development, put it: Every day customers give us
suggestions about how to improve our bookstore. Many of our most popular features are the
result of those suggestions. Our music team is completely focused on building a store that
addresses the desires of music lovers.xxvii Some of the questions visitors to the site answered
included Tell us about your dream music store.: how does it help you find music you like?
How does it help you avoid music you wont? What makes it unique? Customers were also
asked to publish their opinionsboth positive and negative-- by reviewing and rating CDs
which other potential customers could then read as they made their decisions about what to
buy. In appreciation for these suggestions, Amazon.com entered all visitors who offered input
598-069-1
into a drawing for a $1000 gift certificate, redeemable on-line for a purchase of music, books,
or both.
into a drawing for a $1000 gift certificate, redeemable on-line for a purchase of music, books,
or both.
Bursting into Song

Then in June of that year, Amazon.com expanded into music. More than 125000 CDs were
offered, ten times the selection of the average music store, at discounts of up to 40%. Similar
to the book searching facilities, music fans could search by CD title, artists, song title, or
label, and also listen to more than 225,000 songs. There were also expert and customer
reviews, interviews with artists, essential lists, news and an updated index of the hottest CDs.
A few weeks later the site, at customer request, was expanded to include 42000 classical and
opera CDs. The Amazon.com music store now had more than 200,000 CDs, 25 times the
selection of the average physical music store. More than just the selection, Amazon
underscored that the real difference with the physical stores was that, especially with classical
music, customers want to be able to choose from all the available recordings, yet quickly
find the one they want.xxviii
Bursting into Song

Then in June of that year, Amazon.com expanded into music. More than 125000 CDs were
offered, ten times the selection of the average music store, at discounts of up to 40%. Similar
to the book searching facilities, music fans could search by CD title, artists, song title, or
label, and also listen to more than 225,000 songs. There were also expert and customer
reviews, interviews with artists, essential lists, news and an updated index of the hottest CDs.
A few weeks later the site, at customer request, was expanded to include 42000 classical and
opera CDs. The Amazon.com music store now had more than 200,000 CDs, 25 times the
selection of the average physical music store. More than just the selection, Amazon
underscored that the real difference with the physical stores was that, especially with classical
music, customers want to be able to choose from all the available recordings, yet quickly
find the one they want.xxviii
Also based on demand and feedback from customers, the company launched a mini store
within the Amazon.com Web site, aimed specifically at children. It was called Amazon.com
Kids, and featured a catalogue of more than 100,000 books for children, teens and their
parents. In addition, the mini-site had in-depth articles, reviews, interviews, and targeted
search and recommendation services. Childrens books had always been amongst the most
popular items at Amazon.com.
In the second half of 1998, Amazon.com spent $250 million to purchase two Internet
companies: PlanetAll, a provider of highly personalised online services for 1.5 million
subscribers which enabled customers to automatically update their address books, calendars
and reminders on a minute-for-minute basis, and Junglee Corp., a maker of database systems
which let customers find any kind of merchandise they were looking for on the Net, and
which shared its revenues with the portals who co-branded its services.xxix
In reflecting on these purchases, Paul Gillin from Computerworld Magazine had the following
to say:
I joined the faithful last month when Amazon magically tracked down a mint edition
of a book my father wrote in the 1960s. It had been out of print for 20 years.
Barnesandnoble.com had never even heard of the title. Amazon had it for me in a
month..


598-069-1
Also based on demand and feedback from customers, the company launched a mini store
within the Amazon.com Web site, aimed specifically at children. It was called Amazon.com
Kids, and featured a catalogue of more than 100,000 books for children, teens and their
parents. In addition, the mini-site had in-depth articles, reviews, interviews, and targeted
search and recommendation services. Childrens books had always been amongst the most
popular items at Amazon.com.
In the second half of 1998, Amazon.com spent $250 million to purchase two Internet
companies: PlanetAll, a provider of highly personalised online services for 1.5 million
subscribers which enabled customers to automatically update their address books, calendars
and reminders on a minute-for-minute basis, and Junglee Corp., a maker of database systems
which let customers find any kind of merchandise they were looking for on the Net, and
which shared its revenues with the portals who co-branded its services.xxix
In reflecting on these purchases, Paul Gillin from Computerworld Magazine had the following
to say:
I joined the faithful last month when Amazon magically tracked down a mint edition
of a book my father wrote in the 1960s. It had been out of print for 20 years.
Barnesandnoble.com had never even heard of the title. Amazon had it for me in a
month..
The Junglee technology will let Amazon become the middleman between consumers
and a wide variety of products consumers might want to buy on the Web. The
analogue to Wal-Mart's sprawling discount stores could be Amazon's widely respected
brand. Once consumers do business with Amazon, they tend to come back again and
again. And there's no reason they'll buy only books. xxx
Said another analyst from a research firm: Amazon is ''a lot more personal than a Wal-Mart is
ever going to be:
The Junglee technology will let Amazon become the middleman between consumers
and a wide variety of products consumers might want to buy on the Web. The
analogue to Wal-Mart's sprawling discount stores could be Amazon's widely respected
brand. Once consumers do business with Amazon, they tend to come back again and
again. And there's no reason they'll buy only books. xxx
Said another analyst from a research firm: Amazon is ''a lot more personal than a Wal-Mart is
ever going to be:
Amazons ability to expand beyond its collection of 3 million books and CDs
demonstrates one of the Internet's most alluring qualities. On one hand, consumers
are attracted to its tremendous convenience. They can shop when it's raining out, don't
need to gas up or face grouchy sales clerks. But even more important for business
Amazons ability to expand beyond its collection of 3 million books and CDs
demonstrates one of the Internet's most alluring qualities. On one hand, consumers
are attracted to its tremendous convenience. They can shop when it's raining out, don't
need to gas up or face grouchy sales clerks. But even more important for business
598-069-1
598-069-1
growth, the ability to automate human tasks, transfer data more efficiently and cut
down on errors makes it easier to diversify into other products.xxxi
growth, the ability to automate human tasks, transfer data more efficiently and cut
down on errors makes it easier to diversify into other products.xxxi
Pursuing the International Track
By 1998, 22% of the companys sales were outside the US, and this figure was growing.
Traditionally, readers outside the US had had to wait months before they could find US
publications in their local bookstores, due on the one hand to logistical reasons and on the
other to regulatory issues. In the UK for instance, readers had to wait for the official UK
publication date of American editions, which was frequently half a year after the US
publication date. Some publishers and retailers in the UK had threatened to use legislative
means to keep Amazon from selling in their home market.
By 1998, 22% of the companys sales were outside the US, and this figure was growing.
Traditionally, readers outside the US had had to wait months before they could find US
publications in their local bookstores, due on the one hand to logistical reasons and on the
other to regulatory issues. In the UK for instance, readers had to wait for the official UK
publication date of American editions, which was frequently half a year after the US
publication date. Some publishers and retailers in the UK had threatened to use legislative
means to keep Amazon from selling in their home market.
Bezos pursued the international track however:
Bezos pursued the international track however:

We want to make it possible for anybody in the world to order a German-language

book, a Japanese language booknot just an English language book. So we need to
have local customer service operations, local distribution centres, to really service
those markets as if we were a local company there.xxxii
Therefore, that same year, Bezos spent $55 million to acquire three European companies:
Bookpages, one of the largest on-line bookstores in the UK with access to all 1.2 million
books in print in the UK; Telebook, which was Germanys number one on-line bookstore,
with a catalogue of nearly 400,000 German language titles; and Internet Movie Database, a
UK based, international movie database service. This last company had an extremely detailed
index and comprehensive collection of 150,000 films and TV shows, and had long been a hub
for film buffs, journalists and industry insiders. xxxiii
Entering the European Market
By early October, Amazon formally entered the European market with the launch of two new
Web sites, one in the UK--Amazon.co.uk-- and the other in Germany--Amazon.de. Both were
the re-branded versions of the two he had purchased earlier in the year. The UK site was
headquartered and had a distribution centre in Slough, and carried a complete catalogue of 1.2
million UK titles in print plus easy and fast access to 200,000 US titles. A staff of UK editors
was recruited to provide recommendations and reviews. (see exhibit 5 for Home Page)
Amazon.de was headquartered and had a distribution centre in Regensburg, and editorial and
marketing offices in Munich. Initially featuring 335,000 titles from German publishers, and
fast access to 373,000 US titles, which were expected to grow. A Munich-based staff of
expert editors would develop reviews and recommendations of German title books. (see
exhibit 6 for Home Page)

Pursuing the International Track
We want to make it possible for anybody in the world to order a German-language

book, a Japanese language booknot just an English language book. So we need to
have local customer service operations, local distribution centres, to really service
those markets as if we were a local company there.xxxii
Therefore, that same year, Bezos spent $55 million to acquire three European companies:
Bookpages, one of the largest on-line bookstores in the UK with access to all 1.2 million
books in print in the UK; Telebook, which was Germanys number one on-line bookstore,
with a catalogue of nearly 400,000 German language titles; and Internet Movie Database, a
UK based, international movie database service. This last company had an extremely detailed
index and comprehensive collection of 150,000 films and TV shows, and had long been a hub
for film buffs, journalists and industry insiders. xxxiii
Entering the European Market
By early October, Amazon formally entered the European market with the launch of two new
Web sites, one in the UK--Amazon.co.uk-- and the other in Germany--Amazon.de. Both were
the re-branded versions of the two he had purchased earlier in the year. The UK site was
headquartered and had a distribution centre in Slough, and carried a complete catalogue of 1.2
million UK titles in print plus easy and fast access to 200,000 US titles. A staff of UK editors
was recruited to provide recommendations and reviews. (see exhibit 5 for Home Page)
Amazon.de was headquartered and had a distribution centre in Regensburg, and editorial and
marketing offices in Munich. Initially featuring 335,000 titles from German publishers, and
fast access to 373,000 US titles, which were expected to grow. A Munich-based staff of
expert editors would develop reviews and recommendations of German title books. (see
exhibit 6 for Home Page)
The Giants Begin to Respond
The Giants Begin to Respond
Bezos had always told his people, obsess about customers, not competitors.xxxiv Yet by the
spring of 1997, there were some who felt that the competition had finally woken up, and that
Amazon.com would have to pay more attention to their moves and motives. Also, the
competitive landscape in Europe was in the process of opening up. Great Britain had
abolished the Net Book Agreement, which had set the prices at which books could be sold,
and basically forbade underpricing. Others in the EU were expected to follow, leading the
way to what could become price warfare.
Bezos had always told his people, obsess about customers, not competitors.xxxiv Yet by the
spring of 1997, there were some who felt that the competition had finally woken up, and that
Amazon.com would have to pay more attention to their moves and motives. Also, the
competitive landscape in Europe was in the process of opening up. Great Britain had
abolished the Net Book Agreement, which had set the prices at which books could be sold,
and basically forbade underpricing. Others in the EU were expected to follow, leading the
way to what could become price warfare.
10
10
598-069-1
Barnes & Noble Makes the First Move

Barnes & Noble was the leading US bookstore, with over 1000 retail outlets spread across the
country. Beginning in 1992 it had invested heavily in exploiting the trend towards book
superstores, and by 1997 had tripled its revenues thanks to this move. In May of that year,
it decided to launch its own Web site. The company underscored that we do not view this as
a Barnes & Noble vs. Amazon situation. There are over 500 bookstore sites on the Web.xxxv
Some analysts immediately stacked up Barnes & Nobles vital statistics against those of
Amazon, and wondered how Amazon could compete. (See Exhibit 7 for key financial
differences between Amazon and Barnes & Noble, tallied for the most recent four quarters).
Barnes & Noble Makes the First Move

Barnes & Noble was the leading US bookstore, with over 1000 retail outlets spread across the
country. Beginning in 1992 it had invested heavily in exploiting the trend towards book
superstores, and by 1997 had tripled its revenues thanks to this move. In May of that year,
it decided to launch its own Web site. The company underscored that we do not view this as
a Barnes & Noble vs. Amazon situation. There are over 500 bookstore sites on the Web.xxxv
Some analysts immediately stacked up Barnes & Nobles vital statistics against those of
Amazon, and wondered how Amazon could compete. (See Exhibit 7 for key financial
differences between Amazon and Barnes & Noble, tallied for the most recent four quarters).
The Barnes & Noble site (called barnesandnoble.com) offered access to 400,000 titles
available for next-day delivery to customers homes from a 350,000 square foot New Jersey
warehouse. Because of its buying power and relationships with 20,000 publishers, Barnes &
Noble was able to discount 30% of all hardcovers and 20% off all paperbacks. According to
analysts, Barnes & Noble operated at a 40% gross margin, versus 20% for Amazon, meaning
it had twenty cents more flexibility to offer for each dollar spent.xxxvi
The Barnes & Noble site (called barnesandnoble.com) offered access to 400,000 titles
available for next-day delivery to customers homes from a 350,000 square foot New Jersey
warehouse. Because of its buying power and relationships with 20,000 publishers, Barnes &
Noble was able to discount 30% of all hardcovers and 20% off all paperbacks. According to
analysts, Barnes & Noble operated at a 40% gross margin, versus 20% for Amazon, meaning
it had twenty cents more flexibility to offer for each dollar spent.xxxvi

When the Barnes & Noble Web site opened in May, it was accessed at least once by 0.5% of
PC households, equal to about 90,000 homes. In June its share was at 0.4%, and in July of
1997 it was 0.3%. Amazons audience reach was at 3.1% of all PC households in May; 3.2%
in June, and 4% in July.
In September, Amazon lowered its prices by offering a selection of 500 books, known as
editors picks, at a 40% discount. Barnes & Noble did not follow.xxxvii Also in September,
Amazon.com opened a new, 200,000 square foot distribution centre in Delaware on the East
Coast, and completed the 70% expansion of its Seattle distribution centre. Together, these
distribution augmentations gave the company nearly six times more floor space than it had
previously.
In early November 1998 Barnes & Noble made a bid to acquire, for $600 million, the Ingram
Books, the largest book distributor in the US with 11 warehouses spread across the country
(four out of five book store customers are within easy reach of Ingrams warehouses). Ingram
also supplied 58% of the books sold by Amazon.com.xxxviii
The Force of Bertelsmann is Felt
In early 1998, the other great giant of the book industry (sometimes called the 800 pound
gorilla of the global book publishing and retail industryxxxix) began to rise to the Internet
challenge. The 163 year old, still privately-run German conglomerate Bertelsmann, was the
second largest media company in the world (right after Disney, and ahead of Time Warner),
with revenues of close to 25 billion Deutsche Mark. A vertically integrated firm, with
everything from a printing company to a book club, the global media conglomerates interests
spanned books (as owner of Doubleday and Random House, it was the largest publisher of
English language books in the world) magazines, television, music and--through its 50%
ownership of AOL in Europe, which had one of the largest on-line services in Europe--the
Internet.xl
However, it took a newly appointed CEO to see the critical strategic mistake the company had
made in not recognising the synergies between books and the Internet. As he put it:
11

598-069-1
When the Barnes & Noble Web site opened in May, it was accessed at least once by 0.5% of
PC households, equal to about 90,000 homes. In June its share was at 0.4%, and in July of
1997 it was 0.3%. Amazons audience reach was at 3.1% of all PC households in May; 3.2%
in June, and 4% in July.
In September, Amazon lowered its prices by offering a selection of 500 books, known as
editors picks, at a 40% discount. Barnes & Noble did not follow.xxxvii Also in September,
Amazon.com opened a new, 200,000 square foot distribution centre in Delaware on the East
Coast, and completed the 70% expansion of its Seattle distribution centre. Together, these
distribution augmentations gave the company nearly six times more floor space than it had
previously.
In early November 1998 Barnes & Noble made a bid to acquire, for $600 million, the Ingram
Books, the largest book distributor in the US with 11 warehouses spread across the country
(four out of five book store customers are within easy reach of Ingrams warehouses). Ingram
also supplied 58% of the books sold by Amazon.com.xxxviii
The Force of Bertelsmann is Felt
In early 1998, the other great giant of the book industry (sometimes called the 800 pound
gorilla of the global book publishing and retail industryxxxix) began to rise to the Internet
challenge. The 163 year old, still privately-run German conglomerate Bertelsmann, was the
second largest media company in the world (right after Disney, and ahead of Time Warner),
with revenues of close to 25 billion Deutsche Mark. A vertically integrated firm, with
everything from a printing company to a book club, the global media conglomerates interests
spanned books (as owner of Doubleday and Random House, it was the largest publisher of
English language books in the world) magazines, television, music and--through its 50%
ownership of AOL in Europe, which had one of the largest on-line services in Europe--the
Internet.xl
However, it took a newly appointed CEO to see the critical strategic mistake the company had
made in not recognising the synergies between books and the Internet. As he put it:
11
598-069-1
[For two years] We had tremendous discussion about book retailing on the Internet.
In the meantime Amazon took the market. On the Internet, three months is a year. They
have two years start on us. That means eight or ten years...xli
[For two years] We had tremendous discussion about book retailing on the Internet.
In the meantime Amazon took the market. On the Internet, three months is a year. They
have two years start on us. That means eight or ten years...xli
Another top executive of the German conglomerate added: We were late. But not too late.
The financial power of Bertelsmann is rather bigger now.xlii
Another top executive of the German conglomerate added: We were late. But not too late.
The financial power of Bertelsmann is rather bigger now.xlii
Bertelsmanns first move into Internet was in November 1997, when it launched Boulevard
Online in Germany, with a catalogue of 290000 mainly German language books.xliii A few
months later it announced the creation of BooksOnline, a Web site it intended for the US and
Europe. The site would sell books from all publishers, not just those owned by Bertelsmann.
Bertelsmanns first move into Internet was in November 1997, when it launched Boulevard
Online in Germany, with a catalogue of 290000 mainly German language books.xliii A few
months later it announced the creation of BooksOnline, a Web site it intended for the US and
Europe. The site would sell books from all publishers, not just those owned by Bertelsmann.
Bertelsmann planned to spend more than 100 million in its stated quest to capture the
majority share of the online book market, and overtake Amazon.com as the leader.xliv At the
same time, according to the Seattle Times, Bertelsmann began opening talks with
Amazon.com about a possible co-operation in the online book industry.xlv One top executive
at the German company stated: Jeff Bezos has used multimedia technology to create a
community atmosphere--the club atmosphere of Bertelsmann in the 1950s.xlvi In the 1950s,
Bertelsmann had pioneered the notion of selling books directly to consumers through the book
club concept. By 1998, its book club had 25 million members world-wide, to whom it sold
700,000 volumes daily (making it the worlds largest booksellerxlvii) and its music clubs had
close to 10 million members.xlviii In 1997 and 1998, however, results were flat for
Bertelsmann, primarily because of a drop in its global book club business.xlix
Bertelsmann planned to spend more than 100 million in its stated quest to capture the
majority share of the online book market, and overtake Amazon.com as the leader.xliv At the
same time, according to the Seattle Times, Bertelsmann began opening talks with
Amazon.com about a possible co-operation in the online book industry.xlv One top executive
at the German company stated: Jeff Bezos has used multimedia technology to create a
community atmosphere--the club atmosphere of Bertelsmann in the 1950s.xlvi In the 1950s,
Bertelsmann had pioneered the notion of selling books directly to consumers through the book
club concept. By 1998, its book club had 25 million members world-wide, to whom it sold
700,000 volumes daily (making it the worlds largest booksellerxlvii) and its music clubs had
close to 10 million members.xlviii In 1997 and 1998, however, results were flat for
Bertelsmann, primarily because of a drop in its global book club business.xlix
Bertelsmann Joins Forces With Barnes & Noble

Bertelsmann could not reach an agreement with Jeff Bezos. In October 1998, Bertelsmann
paid $200 million for 50% of barnesandnoble.com (which had just recently been spun off as
an independent company by Barnes & Noble). Because of this, Bertelsmann abandoned its
planned launch of BooksOnline in the United States, although it still expected to launch
BooksOnline in Europe by the end of the year.
By end October 1998, the barnesandnoble.com site had more than four million books, and
claimed to have the largest selection of in-stock titles of any bookseller online, with over
650,000 titles in its distribution centre and two million in-stock rare and out-of-print books.
The site also had access to over 2.5 million additional titles from more than 50,000 publisher
imprints. It had now become the exclusive bookseller to AOL in Europe. Also it had
strategic partnerships with 10 of the top 20 Web sites, and paid what it claimed were the
highest commissions to its affiliate network. It had also added new features to its site, such as
customer reviews, recommendations based on a customers past purchases, and free electronic
greeting cards.l


598-069-1
Bertelsmann Joins Forces With Barnes & Noble

Bertelsmann could not reach an agreement with Jeff Bezos. In October 1998, Bertelsmann
paid $200 million for 50% of barnesandnoble.com (which had just recently been spun off as
an independent company by Barnes & Noble). Because of this, Bertelsmann abandoned its
planned launch of BooksOnline in the United States, although it still expected to launch
BooksOnline in Europe by the end of the year.
By end October 1998, the barnesandnoble.com site had more than four million books, and
claimed to have the largest selection of in-stock titles of any bookseller online, with over
650,000 titles in its distribution centre and two million in-stock rare and out-of-print books.
The site also had access to over 2.5 million additional titles from more than 50,000 publisher
imprints. It had now become the exclusive bookseller to AOL in Europe. Also it had
strategic partnerships with 10 of the top 20 Web sites, and paid what it claimed were the
highest commissions to its affiliate network. It had also added new features to its site, such as
customer reviews, recommendations based on a customers past purchases, and free electronic
greeting cards.l
In November 1998, a new CEO --who had been head of AOLs highly successful UK
operations--was appointed to take the helm of barnesandnoble.com.li
In November 1998, a new CEO --who had been head of AOLs highly successful UK
operations--was appointed to take the helm of barnesandnoble.com.li
Borders --and Others-- Enter The Space

Borders announced that it would launch its own Web site in the summer of 1998. Borders
Online, as it was called, intended to sell books, music and videos, as well as mimic its chain
strategy with access to staff, authors and a virtual coffee joint--Borders Cafe Espresso--which
offered online chats.lii
Borders --and Others-- Enter The Space

Borders announced that it would launch its own Web site in the summer of 1998. Borders
Online, as it was called, intended to sell books, music and videos, as well as mimic its chain
strategy with access to staff, authors and a virtual coffee joint--Borders Cafe Espresso--which
offered online chats.lii
12
12
598-069-1
Other retailers, especially in the UK, also began planning to open up sites. WH Smith became
the first of these when it purchased, in June of 1998, the Oxford-based Internet Bookshop. It
paid 8.8 million, or 265 pence per share, a huge premium to the companys closing price of
85 pence. The 1997 sales of Internet Bookshop had totalled 2.12 million, and it had posted a
loss of 406,000 for the year.liii
Other retailers, especially in the UK, also began planning to open up sites. WH Smith became
the first of these when it purchased, in June of 1998, the Oxford-based Internet Bookshop. It
paid 8.8 million, or 265 pence per share, a huge premium to the companys closing price of
85 pence. The 1997 sales of Internet Bookshop had totalled 2.12 million, and it had posted a
loss of 406,000 for the year.liii
Coming from another end of the market were such online sites as Bookstacks, part of the
Internet mall, NetMarket--run by the US direct marketing giant CUC. NetMarket sold
everything from kitchen appliances and home furnishings, travel and cars, to music and
books. Similar to a discount mall and geared to the mass market, their prices were low,
selection narrow, and the site had no editorial reviews, author interviews, or customer
commentaries. liv
Coming from another end of the market were such online sites as Bookstacks, part of the
Internet mall, NetMarket--run by the US direct marketing giant CUC. NetMarket sold
everything from kitchen appliances and home furnishings, travel and cars, to music and
books. Similar to a discount mall and geared to the mass market, their prices were low,
selection narrow, and the site had no editorial reviews, author interviews, or customer
commentaries. liv
But, as Jeff Bezos, Amazon.coms founder and CEO, kept saying, who was to say that the
real competition would not come from a not-so-obvious source?
But, as Jeff Bezos, Amazon.coms founder and CEO, kept saying, who was to say that the
real competition would not come from a not-so-obvious source?
Innovations were coming on stream daily. Bookstores and publishers were merging. Online
Originals, a London-based venture created by an American author and book lover, was a
publishing company that operated solely on the Internet, distributing book length works in
digital form, using e-mail for both orders and delivery. The company solicited authors to
write innovative and thought-provoking fiction or non-fiction, in English or French; did
everything publishers do, and then sold the works, over the Net, charging $7 (4) per book,
giving authors 50% of the order revenues.lv And Gates, through his Microsoft Network
(MSN), was moving in on almost every industry: travel, car sales, investment, and news.
More than anyone else, Bezos knew that Web based commerce didnt respect traditional
industry boundaries, or barriers. After all, he had come from no-where. Said Bezos:
Thats why ..I believe our success will continue only as far as we provide the
best customer experience. That means we have to have the biggest selection. The
easiest-to-use Web site. The lowest prices. And the best purchase decision
information.lvi
The Earths Biggest Bookstore
Even as early as mid-1997, Amazon.com had become not only the leading on-line bookseller,
but also the leading Internet retailer. Although it had yet to make any profit (and none was
expected until 2000 at the earliestlvii) it had, over its short existence, generated sales on
average at an annualised rate of $600 million, and was growing at around 30% every three
months. lviii (See Exhibit 8 for annual 1997 and 1996 balance sheets; Exhibit 9 for the
Operating Statements; Exhibit 10 for Quarterly 1996,1997,1998 Balance Sheets; Exhibit 11
for Quarterly 1996,1997,1998 Operating Results; Exhibit 12 for growth in cumulative
customer accounts and in repeat orders as a percentage of all orders.)
Demand Feeds Demand
By early 1998, there had also been an acceleration in new customer acquisition: whereas it
had taken the company 27 months to acquire its first million customers, it took them less than
six months to acquire the second million.lix In terms of revenue, Amazon.com had become the
third largest bookseller in the US, on-line or off-line, and it had remained the leading on-line
shopping site in any category.lx It was selling over three million products to close to five
million customers in over 160 countries. Amazons music site had also become the number
13


598-069-1
Innovations were coming on stream daily. Bookstores and publishers were merging. Online
Originals, a London-based venture created by an American author and book lover, was a
publishing company that operated solely on the Internet, distributing book length works in
digital form, using e-mail for both orders and delivery. The company solicited authors to
write innovative and thought-provoking fiction or non-fiction, in English or French; did
everything publishers do, and then sold the works, over the Net, charging $7 (4) per book,
giving authors 50% of the order revenues.lv And Gates, through his Microsoft Network
(MSN), was moving in on almost every industry: travel, car sales, investment, and news.
More than anyone else, Bezos knew that Web based commerce didnt respect traditional
industry boundaries, or barriers. After all, he had come from no-where. Said Bezos:
Thats why ..I believe our success will continue only as far as we provide the
best customer experience. That means we have to have the biggest selection. The
easiest-to-use Web site. The lowest prices. And the best purchase decision
information.lvi
The Earths Biggest Bookstore
Even as early as mid-1997, Amazon.com had become not only the leading on-line bookseller,
but also the leading Internet retailer. Although it had yet to make any profit (and none was
expected until 2000 at the earliestlvii) it had, over its short existence, generated sales on
average at an annualised rate of $600 million, and was growing at around 30% every three
months. lviii (See Exhibit 8 for annual 1997 and 1996 balance sheets; Exhibit 9 for the
Operating Statements; Exhibit 10 for Quarterly 1996,1997,1998 Balance Sheets; Exhibit 11
for Quarterly 1996,1997,1998 Operating Results; Exhibit 12 for growth in cumulative
customer accounts and in repeat orders as a percentage of all orders.)
Demand Feeds Demand
By early 1998, there had also been an acceleration in new customer acquisition: whereas it
had taken the company 27 months to acquire its first million customers, it took them less than
six months to acquire the second million.lix In terms of revenue, Amazon.com had become the
third largest bookseller in the US, on-line or off-line, and it had remained the leading on-line
shopping site in any category.lx It was selling over three million products to close to five
million customers in over 160 countries. Amazons music site had also become the number
13
598-069-1
one seller of CDs on the Internet in its first full quarter of music sales, and the total number of
Associates had grown to 140,000.
one seller of CDs on the Internet in its first full quarter of music sales, and the total number of
Associates had grown to 140,000.
At about the same time, Barnes & Noble had announced a loss of $9 million on a $15 million
turnover for its on-line operations. lxi By the second quarter 1998, Amazon.com had about 10
times the sales and four times the customers of Barnes & Nobles Web site.
Barnesandnoble.coms revenues for the second quarter grew 470%, against 316% for
Amazon.com.lxii
At about the same time, Barnes & Noble had announced a loss of $9 million on a $15 million
turnover for its on-line operations. lxi By the second quarter 1998, Amazon.com had about 10
times the sales and four times the customers of Barnes & Nobles Web site.
Barnesandnoble.coms revenues for the second quarter grew 470%, against 316% for
Amazon.com.lxii
Amazon had become the standard for new ways of buying and selling books. As one
publisher put it, When you think of selling books on-line, you think of Amazon today.lxiii
And, with a market value of over $6 billionlxiv, Jeff Bezos 42% stake in the company was
now worth more than $2 billion.lxv (see Exhibit 13 for the share price performance of
Amazon.com till 30 October 1998).
Amazon had become the standard for new ways of buying and selling books. As one
publisher put it, When you think of selling books on-line, you think of Amazon today.lxiii
And, with a market value of over $6 billionlxiv, Jeff Bezos 42% stake in the company was
now worth more than $2 billion.lxv (see Exhibit 13 for the share price performance of
Amazon.com till 30 October 1998).

Amazon.com continued to pursue its innovation strategy. It was working with a company
called NuvoMedia on a hand held device allowing readers to download the books they wanted
directly off the Web. Bertelsmann Ventures, the venture capital fund of Bertelsmann, was a
strong investor in NuvoMedia, as was Barnes & Noble, who intended to sell the item in its
bookstores.lxvi Bertelsmann was also investing heavily in e-books and private online systems
for the business information market, which had already begun to replace traditional books.
The Future
Despite the ever more turbulent competitive picture, Bezos reflected on his company with
pride, and he was enthusiastic about the future:
I hope that 25 years from now people look and find something great that we did. I
think people will say that we kicked off this electronic commerce thing. That we were
pioneers there...I hope also that 25 years from now, Amazon.com has demonstrated
that it is an important and lasting company...I am hopeful that there will be a lot of
innovation from Amazon.com in the future around the notion of personalization and
customization of the store for each and every customer. We have made some progress
there already. I tell people--and I believe it firmly-- that we are at the Kitty Hawk
stage of electronic commerce. We know 2% of what we will know 10 years from now,
and most of that learning is going to revolve around personalization--the notion of
making the store ideal for a particular customer, not for the mythic average
customer.lxvii

598-069-1
Amazon.com continued to pursue its innovation strategy. It was working with a company
called NuvoMedia on a hand held device allowing readers to download the books they wanted
directly off the Web. Bertelsmann Ventures, the venture capital fund of Bertelsmann, was a
strong investor in NuvoMedia, as was Barnes & Noble, who intended to sell the item in its
bookstores.lxvi Bertelsmann was also investing heavily in e-books and private online systems
for the business information market, which had already begun to replace traditional books.
The Future
Despite the ever more turbulent competitive picture, Bezos reflected on his company with
pride, and he was enthusiastic about the future:
I hope that 25 years from now people look and find something great that we did. I
think people will say that we kicked off this electronic commerce thing. That we were
pioneers there...I hope also that 25 years from now, Amazon.com has demonstrated
that it is an important and lasting company...I am hopeful that there will be a lot of
innovation from Amazon.com in the future around the notion of personalization and
customization of the store for each and every customer. We have made some progress
there already. I tell people--and I believe it firmly-- that we are at the Kitty Hawk
stage of electronic commerce. We know 2% of what we will know 10 years from now,
and most of that learning is going to revolve around personalization--the notion of
making the store ideal for a particular customer, not for the mythic average
customer.lxvii
How could Amazon achieve this? What were the options for Bezos as 1998 drew to a close?
Should he consolidate his position with his present customers, stretching his brand as far as
possible so as to get a broader and wider share of their spend? Or continue to expand his
customer base? Should he continue his huge investment in marketing (see Exhibits 14 and 15
for advertising) and technology? Or quickly show profits? Or, like everyone else, should he
simply sell out to one of the big competitorswho had already expressed interest in the
prospect, as they typically grew via acquisitionand retire, at the age of 34, to some tropical
isle?
How could Amazon achieve this? What were the options for Bezos as 1998 drew to a close?
Should he consolidate his position with his present customers, stretching his brand as far as
possible so as to get a broader and wider share of their spend? Or continue to expand his
customer base? Should he continue his huge investment in marketing (see Exhibits 14 and 15
for advertising) and technology? Or quickly show profits? Or, like everyone else, should he
simply sell out to one of the big competitorswho had already expressed interest in the
prospect, as they typically grew via acquisitionand retire, at the age of 34, to some tropical
isle?
The group of executives at the London-based business school decided they needed a break
before discussing the future of Amazon, and of Jeff Bezos, and they quickly headed for the
Christmas party still going strong. .
14
The group of executives at the London-based business school decided they needed a break
before discussing the future of Amazon, and of Jeff Bezos, and they quickly headed for the
Christmas party still going strong. .
14


598-069-1
15
598-069-1
EXHIBIT 1
AMAZON.COM HOME PAGE
EXHIBIT 1
AMAZON.COM HOME PAGE
15
598-069-1
EXHIBIT 2
AMAZON.COM INCOME STATEMENT FOR 1995 (JULY -DECEMBER) AND 1996
(FIRST FULL YEAR) (in $000s)
EXHIBIT 2
AMAZON.COM INCOME STATEMENT FOR 1995 (JULY -DECEMBER) AND 1996
(FIRST FULL YEAR) (in $000s)
1996
1995
Net Sales
15,746
511
Cost of sales
12,287
409
Gross Profit
3,459
102
Operating Expenses: Marketing & Sales
6,090
200
Product development
2,313
171
General & administrative
1,035
35
Total Operating Expenses
9,438
406
Loss From Operations
(5,979)
(304)
Interest income
202
1
Interest expense
-Net Loss
(5,777)
(304)
Source: Amazon.Com, Inc., Form 10-K For the Year Ended 31 December 1997.
1996
1995
Net Sales
15,746
511
Cost of sales
12,287
409
Gross Profit
3,459
102
6,090
200
Product development
2,313
171
1,035
35
9,438
406
(5,979)
(304)
Interest income
202
1
Interest expense
-Net Loss
(5,777)
(304)
Note: Small discrepancies from quarter-to-quarter, and year-to-year, due to rounding effects,
and to minor differences between audited and non-audited statements within Amazon.com
quarterly reports.
16


598-069-1
quarterly reports.
16
598-069-1
598-069-1
EXHIBIT 3
AMAZON.COM EXECUTIVE OFFICERS
EXHIBIT 3
AMAZON.COM EXECUTIVE OFFICERS
Jeff Bezos, 33 years old. President, CEO and Chairman of the Board
George Aposporos, 38 years old. Joined the company in May 1997 as Vice President of
Business Development. From 1995-1997 had been founder and president of Digital Brands,
Inc., a strategic consulting and interactive marketing firm.
George Aposporos, 38 years old. Joined the company in May 1997 as Vice President of
Business Development. From 1995-1997 had been founder and president of Digital Brands,
Inc., a strategic consulting and interactive marketing firm.
Joy Covey, 33 years old. Joined the company in December 1996 as Chief Financial Officer
and Vice President of Finance & Administration. Previously had been Vice President,
Operations, , at Avid Technology, a developer of digital media systems. Harvard MBA and
JD.
Joy Covey, 33 years old. Joined the company in December 1996 as Chief Financial Officer
and Vice President of Finance & Administration. Previously had been Vice President,
Operations, , at Avid Technology, a developer of digital media systems. Harvard MBA and
JD.

Richard Dalzell, 39 years old. Joined the company in August 1997 as Vice President and
Chief Information Officer. Had been Vice President, Information Systems and Logistics, at
Wal-Mart since 1994.
Mary Engstrom, 34 years old. Joined the company in February 1997 as Vice President of
Publisher Affairs. Had been Vice President of Product Marketing at Symantec Corporation, a
developer of information management and productivity enhancement software.
Sheldon Kaphan, 44 years old. Appointed in March 1997 as Vice President and Chief
Technology Officer. From October 1994 to March 1997 had been Vice President of R&D at
Amazon.com.
John Risher, 31 years old. Joined the company in February 1997 as Vice President of
Product Development. From 1991-1997, held a variety of marketing and product
management positions at Microsoft, including Founder and Product Unit Manager for MS
Investor, Microsofts Web site for personal investment.
Joel Spiegel, 41 years old. Joined in March 1997 as Vice President of Engineering.
Previously held several positions at Microsoft, including Multimedia Development Manager
for Windows 95.
17

Jeff Bezos, 33 years old. President, CEO and Chairman of the Board
Richard Dalzell, 39 years old. Joined the company in August 1997 as Vice President and
Chief Information Officer. Had been Vice President, Information Systems and Logistics, at
Wal-Mart since 1994.
Mary Engstrom, 34 years old. Joined the company in February 1997 as Vice President of
Publisher Affairs. Had been Vice President of Product Marketing at Symantec Corporation, a
developer of information management and productivity enhancement software.
Sheldon Kaphan, 44 years old. Appointed in March 1997 as Vice President and Chief
Technology Officer. From October 1994 to March 1997 had been Vice President of R&D at
Amazon.com.
John Risher, 31 years old. Joined the company in February 1997 as Vice President of
Product Development. From 1991-1997, held a variety of marketing and product
management positions at Microsoft, including Founder and Product Unit Manager for MS
Investor, Microsofts Web site for personal investment.
Joel Spiegel, 41 years old. Joined in March 1997 as Vice President of Engineering.
Previously held several positions at Microsoft, including Multimedia Development Manager
for Windows 95.
17


598-069-1
18
598-069-1
EXHIBIT 4
AOL ADVERTISEMENT
EXHIBIT 4
AOL ADVERTISEMENT
18


598-069-1
19
598-069-1
EXHIBIT 5
AMAZON UK HOME PAGE
EXHIBIT 5
AMAZON UK HOME PAGE
19


598-069-1
20
598-069-1
EXHIBIT 6
AMAZON GERMANY HOME PAGE
EXHIBIT 6
AMAZON GERMANY HOME PAGE
20
598-069-1
598-069-1
EXHIBIT 7
CHIEF DIFFERENCES BETWEEN AMAZON AND BARNES & NOBLE AS OF
MAY 1997
(Financial results are for the most recent four quarters: Amazon is through March 31,
1997; Barnes & Noble through February 1, 1997)
(Financial results are for the most recent four quarters: Amazon is through March 31,
1997; Barnes & Noble through February 1, 1997)
Revenue
Profit (Loss)
Cash
Working Capital
Inventory
Net Properties & Equipment
Stores Operated
AMAZON.COM
$30.9 million
($8.4 million)
$7.2 million
$79,000
$939,000
$2.5 million
1
BARNES & NOBLE

$2.45 billion
$51.2 million
$19.0 million
$145.5 million
$732.2 million
$421.6 million
1008

Source: Randy Whitestone, Barnes & Noble Takes on Amazon Bookstore Battle,
Inter@ctive Week, 6 May 1997
21

EXHIBIT 7
CHIEF DIFFERENCES BETWEEN AMAZON AND BARNES & NOBLE AS OF
MAY 1997
Revenue
Profit (Loss)
Cash
Working Capital
Inventory
Net Properties & Equipment
Stores Operated
AMAZON.COM
$30.9 million
($8.4 million)
$7.2 million
$79,000
$939,000
$2.5 million
1
BARNES & NOBLE

$2.45 billion
$51.2 million
$19.0 million
$145.5 million
$732.2 million
$421.6 million
1008
Source: Randy Whitestone, Barnes & Noble Takes on Amazon Bookstore Battle,
Inter@ctive Week, 6 May 1997
21
598-069-1
598-069-1
ASSETS
Current Assets: Cash & cash equivalents
Short term investments
Inventories
Prepaid expenses and other
TOTAL CURRENT ASSETS
Fixed Assets, Net
Deposits
Deferred charges
TOTAL ASSETS
LIABILITIES &STOCKHOLDERS EQUITY
Current Liabilities: Accounts Payable
Accrued advertising
Accrued product development
Other liabilities and accrued expenses
Current portion of long term debt
TOTAL CURRENT LIABILITIES
Long term portion of debt
Long term portion of capital lease obligation
COMMON STOCK, $0.01 par value, authorised shares:
100,000,000; issues and outstanding shares:23,937,169 and
15,900,229 shares in 1997 and 1996 respectively
Additional paid-in capital
Deferred compensation
Accumulated deficit
TOTAL STOCKHOLDERS EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
1997
1996
109,810
15,256
8,971
3,298
137,335
9265
166
2240
149,006
6,248
-571
321
7,140
985
146
-8,271
32,697
3,454
-6,167
1,500
43,818
76,521
181
239
2,852
598
500
920
-4,870
--159
63,792
(1,930)
(33,615)
28,486
149,006
9,873
(612)
(6025)
3,401
8,271
EXHIBIT 8
AMAZON.COM BALANCE SHEET (in $000s, except share data)


EXHIBIT 8
AMAZON.COM BALANCE SHEET (in $000s, except share data)
quarterly reports.
22
ASSETS
Current Assets: Cash & cash equivalents
Inventories
Prepaid expenses and other
TOTAL CURRENT ASSETS
Fixed Assets, Net
Deposits
Deferred charges
TOTAL ASSETS
LIABILITIES &STOCKHOLDERS EQUITY
Current Liabilities: Accounts Payable
Accrued advertising
Other liabilities and accrued expenses
TOTAL CURRENT LIABILITIES
Long term portion of debt
Long term portion of capital lease obligation
COMMON STOCK, $0.01 par value, authorised shares:
100,000,000; issues and outstanding shares:23,937,169 and
15,900,229 shares in 1997 and 1996 respectively
Additional paid-in capital
Accumulated deficit
TOTAL STOCKHOLDERS EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
1997
1996
109,810
15,256
8,971
3,298
137,335
9265
166
2240
149,006
6,248
-571
321
7,140
985
146
-8,271
32,697
3,454
-6,167
1,500
43,818
76,521
181
239
2,852
598
500
920
-4,870
--159
63,792
(1,930)
(33,615)
28,486
149,006
9,873
(612)
(6025)
3,401
8,271
quarterly reports.
22
598-069-1
598-069-1
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
1997
147,758
118,945
28,813
38,964
12,485
6,573
58,022
(29,209)
1,898
(279)
($27,590)
EXHIBIT 9
AMAZON.COM INCOME STATEMENT (in $000s)
1996
15,746
12,287
3,459
6,090
2,313
1,035
9,438
(5,979)
202
-($5,777)

quarterly reports.
23

EXHIBIT 9
AMAZON.COM INCOME STATEMENT (in $000s)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
1997
147,758
118,945
28,813
38,964
12,485
6,573
58,022
(29,209)
1,898
(279)
($27,590)
1996
15,746
12,287
3,459
6,090
2,313
1,035
9,438
(5,979)
202
-($5,777)
quarterly reports.
23
598-069-1
598-069-1

Cash & cash equivalents

Inventories
Prepaid expenses & other
Equipment, net
Deposits
Total Assets
Liabilities & Equity
Account payable
Accrued expenses & others
Total liabilities
Preferred stock
Common stock & paid-in capital
Accumulated deficit
Total stockholders equity
Total Liabilities & Stockholders Equity
June 30 1997
53692
1652
1162
3564
328
63098
December 31 1996
6248
571
321
985
146
8271
10327
7211
17538
-61328
(15768)
45560
63098
2852
2018
4870
7970
1456
(6025)
3401
8271
September 30
1997
44867
3494
2732
1784
4403
347
57447
December 31
1996
6248
-571
321
985
146
8271
EXHIBIT 10
QUARTERLY BALANCE SHEETS
(1996, 1997, 1998) (in $000s)

Inventories
Equipment, net
Deposits
Total Assets
Accounts payable
15386
2852
Accrued advertising
-598
-500
Other liabilities & accrued expenses
4462
920
Total liabilities
19848
4870
Preferred stock
6
Common stock
238
159
Additional paid in capital
63749
9873
(2291)
(612)
Accumulated deficit
(24278)
(6025)
37418
3401
Total liabilities & stockholders equity
57447
8271
Source: Amazon.Com Press Release
quarterly reports.
24

EXHIBIT 10
(1996, 1997, 1998) (in $000s)

Inventories
Equipment, net
Deposits
Total Assets
Account payable
Accrued expenses & others
Total liabilities
Preferred stock
Common stock & paid-in capital
Accumulated deficit
Total Liabilities & Stockholders Equity
June 30 1997
53692
1652
1162
3564
328
63098
December 31 1996
6248
571
321
985
146
8271
10327
7211
17538
-61328
(15768)
45560
63098
2852
2018
4870
7970
1456
(6025)
3401
8271
September 30
1997
44867
3494
2732
1784
4403
347
57447
December 31
1996
6248
-571
321
985
146
8271

Inventories
Equipment, net
Deposits
Total Assets
Accounts payable
15386
2852
Accrued advertising
-598
-500
4462
920
Total liabilities
19848
4870
Preferred stock
6
Common stock
238
159
63749
9873
(2291)
(612)
Accumulated deficit
(24278)
(6025)
37418
3401
57447
8271
quarterly reports.
24
598-069-1
EXHIBIT 10 (cont.)
(1996, 1997, 1998) (in $000s)
EXHIBIT 10 (cont.)
(1996, 1997, 1998) (in $000s)
March 31
1998
98600
18220
11674
4399
9773
293
2048
145007
December 31
1997
109810
15256
8971
3298
9265
166
2240
149006
March 31
1998
98600
18220
11674
4399
9773
293
2048
145007
December 31
1997
109810
15256
8971
3298
9265
166
2240
149006
34374
5349
8071
684
48478
181
32697
3454
6167
1500
76521
181
34374
5349
8071
684
48478
181
32697
3454
6167
1500
76521
181
-242
63952
-239
63793
--
-242
63952
-239
63793
--
(1493)
(42874)
19827
145007
(1930)
(33615)
28486
149006
(1493)
(42874)
19827
145007
(1930)
(33615)
28486
149006
Inventories
Fixed assets, net
Deposits
Deferred charges
Total Assets
Liabilities & stockholders equity
Accounts payable
Accrued advertising
Long term debt
Long term portion of capital lease
obligation
Preferred stock
Common stock
Note receivable from officer of common
stock
Accumulated deficit
Cash & cash equivalents & investments


598-069-1
On 27 April 1998 Amazon.com announced a two-for-one stock split, effective 1 June 1998.
The share and per share data have not been restated to reflect this split.
quarterly reports.
25
Inventories
Fixed assets, net
Deposits
Deferred charges
Total Assets
Accounts payable
Accrued advertising
Long term debt
obligation
Preferred stock
Common stock
stock
Accumulated deficit
On 27 April 1998 Amazon.com announced a two-for-one stock split, effective 1 June 1998.
The share and per share data have not been restated to reflect this split.
quarterly reports.
25
598-069-1
598-069-1
EXHIBIT 10 (Cont.)
(1996, 1997, 1998) (in $000s)

Inventories
Fixed assets, net
Deposits
Goodwill & other purchased intangibles
Deferred charges
Total Assets
Accounts payable
Accrued advertising
Long term debt
obligation
Preferred stock
Common stock
stock
Other gains/losses
Accumulated deficit
339919
17035
12487
14014
284
52398
7622
443759
December 31
1997
125066
8971
3298
9265
166
-2240
149006
47556
9971
13713
684
332225
181
32697
3454
6167
1500
76521
181
-497
104368
--
-479
63552
--
(1301)
(35)
(64100)
39429
443759
(1930)
-(33615)
28486
149006
June 30 1998
quarterly reports.
26


June 30 1998
EXHIBIT 10 (Cont.)
(1996, 1997, 1998) (in $000s)

Inventories
Fixed assets, net
Deposits
Deferred charges
Total Assets
Accounts payable
Accrued advertising
Long term debt
obligation
Preferred stock
Common stock
stock
Other gains/losses
Accumulated deficit
339919
17035
12487
14014
284
52398
7622
443759
December 31
1997
125066
8971
3298
9265
166
-2240
149006
47556
9971
13713
684
332225
181
32697
3454
6167
1500
76521
181
-497
104368
--
-479
63552
--
(1301)
(35)
(64100)
39429
443759
(1930)
-(33615)
28486
149006
quarterly reports.
26
598-069-1
598-069-1

Inventories
Fixed assets, net
Deposits
Deferred charges
Total Assets
Accounts payable
Accrued advertising
Long term debt
obligation
Preferred stock
Common stock
stock
Other gains/losses
Accumulated deficit
September 30
1998
14856
322404
19772
17625
23821
582
213064
7590
619740
December 31
1997
1876
123499
8971
3363
9726
169
-2240
149844
60046
11857
26868
684
340392
103
33027
3454
6570
1500
76521
181
-527
298322
(1099)
-483
67552
--
(2943)
590
(115633)
179764
619714
(1930)
-(37514)
28591
149844
EXHIBIT 10 (Cont.)
(1996, 1997, 1998) (in $000s)
quarterly reports.
27


EXHIBIT 10 (Cont.)
(1996, 1997, 1998) (in $000s)

Inventories
Fixed assets, net
Deposits
Deferred charges
Total Assets
Accounts payable
Accrued advertising
Long term debt
obligation
Preferred stock
Common stock
stock
Other gains/losses
Accumulated deficit
September 30
1998
14856
322404
19772
17625
23821
582
213064
7590
619740
December 31
1997
1876
123499
8971
3363
9726
169
-2240
149844
60046
11857
26868
684
340392
103
33027
3454
6570
1500
76521
181
-527
298322
(1099)
-483
67552
--
(2943)
590
(115633)
179764
619714
(1930)
-(37514)
28591
149844
quarterly reports.
27
598-069-1
598-069-1
EXHIBIT 11
QUARTERLY OPERATING RESULTS
(1996 and 1997) (in $000s)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
2nd Q.97
27855
22633
5222
7773
2808
1708
12289
(7067)
362
-(6705)
2nd Q.96
2230
1753
477
696
394
163
1253
(776)
9
-(767)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
3rd Q.97
37887
30717
7170
11516
3998
1972
17486
(10316)
688
(19)
(9647)
3rd Q.96
4173
3262
911
2251
755
377
3383
(2472)
92
-(2380)
4th Q.97
66011
53119
12892
16306
4520
1920
22746
(9854)
517
-(9337)
4th Q.96
8468
6577
1891
2938
901
447
4286
(2395)
96
-(2299)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
quarterly reports.
28


EXHIBIT 11
(1996 and 1997) (in $000s)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
2nd Q.97
27855
22633
5222
7773
2808
1708
12289
(7067)
362
-(6705)
2nd Q.96
2230
1753
477
696
394
163
1253
(776)
9
-(767)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
3rd Q.97
37887
30717
7170
11516
3998
1972
17486
(10316)
688
(19)
(9647)
3rd Q.96
4173
3262
911
2251
755
377
3383
(2472)
92
-(2380)
4th Q.97
66011
53119
12892
16306
4520
1920
22746
(9854)
517
-(9337)
4th Q.96
8468
6577
1891
2938
901
447
4286
(2395)
96
-(2299)
Net Sales
Cost of sales
Gross Profit
Product development
Interest income
Interest expense
Net Loss
quarterly reports.
28
598-069-1
Net Sales
Cost of sales
Gross Profit
Product development
Amortization of goodwill & other purchased intangibles
Interest income
Interest expense
Net Loss
1st Q.97
16005
12484
3521
3906
1575
1142
6623
(3102)
(3038)
2nd Q.98
115977
89786
26191
26452
8060
3262
5413
43187
(16996)
3334
(7564)
(21226)
2nd Q.97
27855
22633
5222
7773
2808
1708
12289
(7067)
362
-(6705)
3rdQ .98
153698
118823
34875
35717
13374
4978
3rd Q.97
37887
30717
7170
11516
3998
1972
Net Sales
Cost of sales
Gross Profit
Product development
Amortization
of
goodwill
&
other
purchased
intangibles/M&A related costs
20512
76381
17486
(41506)
(10316)
Interest income
4754
688
Interest expense
(8419)
(19)
Net Loss
(45171)
(9647)
quarterly reports.
29


EXHIBIT 11 (cont.)
(1997 and 1998) (in $000s)
1st Q.98
Net Sales
87375
Cost of sales
68054
Gross Profit
19321
19503
Product development
6729
1963
28195
(8874)
Interest income
1640
Interest expense
(2025)
Net Loss
(9259)
598-069-1
EXHIBIT 11 (cont.)
(1997 and 1998) (in $000s)
1st Q.98
Net Sales
87375
Cost of sales
68054
Gross Profit
19321
19503
Product development
6729
1963
28195
(8874)
Interest income
1640
Interest expense
(2025)
Net Loss
(9259)
Net Sales
Cost of sales
Gross Profit
Product development
Amortization of goodwill & other purchased intangibles
Interest income
Interest expense
Net Loss
1st Q.97
16005
12484
3521
3906
1575
1142
6623
(3102)
(3038)
2nd Q.98
115977
89786
26191
26452
8060
3262
5413
43187
(16996)
3334
(7564)
(21226)
2nd Q.97
27855
22633
5222
7773
2808
1708
12289
(7067)
362
-(6705)
3rdQ .98
153698
118823
34875
35717
13374
4978
3rd Q.97
37887
30717
7170
11516
3998
1972
Net Sales
Cost of sales
Gross Profit
Product development
Amortization
of
goodwill
&
other
purchased
intangibles/M&A related costs
20512
76381
17486
(41506)
(10316)
Interest income
4754
688
Interest expense
(8419)
(19)
Net Loss
(45171)
(9647)
quarterly reports.
29
598-069-1
598-069-1
EXHIBIT 12
GROWTH IN CUMULATIVE CUSTOMER ACCOUNTS AND REPEAT ORDERS
Repeat Customer Orders as

% of All Orders
50%
55%
58%
60%
63%
64%

June 30, 1997

September 30,1997
December 30, 1997
March 30, 1998
June 30, 1998
September 30, 1998
Cumulative Customer
Accounts
610,000
940,000
1,510,000
2,260,000
3,140,000
4,500,000

EXHIBIT 12
GROWTH IN CUMULATIVE CUSTOMER ACCOUNTS AND REPEAT ORDERS
30
June 30, 1997

September 30,1997
December 30, 1997
March 30, 1998
June 30, 1998
September 30, 1998
Cumulative Customer
Accounts
610,000
940,000
1,510,000
2,260,000
3,140,000
4,500,000
Repeat Customer Orders as

% of All Orders
50%
55%
58%
60%
63%
64%
30
Copyright 1998 Sandra Vandermerwe, Imperial College Management School, London, UK. Not to be used or reproduced without permission.
EXHIBIT 13
AMAZON.COM SHARE PRICE EVOLUTION
AND VOLUME SOLD

EXHIBIT 13
AMAZON.COM SHARE PRICE EVOLUTION
AND VOLUME SOLD

31
598-069-1
31
598-069-1
EXHIBIT 14
AMAZON.COM TWO-PAGE ADVERTISEMENT

EXHIBIT 14
AMAZON.COM TWO-PAGE ADVERTISEMENT

32
598-069-1
32
598-069-1


598-069-1
33
598-069-1
EXHIBIT 15
AMAZON.COM ADVERTISEMENT FOR UK
EXHIBIT 15
AMAZON.COM ADVERTISEMENT FOR UK
33
598-069-1
598-069-1
REFERENCES
REFERENCES
Suresh Kotha, Competing on the Internet: The Case of Amazon.com., European Management Journal, 2
April 1998.
ii
Tim Clark, Newsmakers: Jeff Bezos, Turning to a Global page, CNET News.com, 8 April 1998
iii
A Fable Concerning Ambition: Would Britains Leading On-Line Bookseller Have Done Better in the United
States?, The Economist, 21 June 1997.
iv
v
vi
Survey of Electronic Commerce: A River Runs through It--Amazon.com. offers a Glimpse of the Future, and
It May Surprise You, The Economist, 10 May 1997.
vii
Lisa Bowman, Amazon.com Founder Shares the Secrets of His Success, ZDNetNews, 28 July 1998.
viii
Tim Clark, Newsmakers: Jeff BezosTurning to a Global Page, CNET News.com, 8 April 1998
ix
More on Amazons new way of doing business in Sandra Vandermerwe, Customer Capitalism: The New
Business Model for Increasing Returns by Becoming The Customer Choice, London: Nicholas Brealey, 1999.
x
It May Surprise You, The Economist, 10 May 1997
xi
ibid.
xii
For more on network externalities, see for instance: John Hagel and Arthur Armstrong, Net Gain: Expanding
Markets Through Virtual Communities, Boston, Harvard Business School Press, 1997; Kevin Kelly, New Rules
for the New Economy, London: 4th Estate, 1998; Sandra Vandermerwe, Customer Capitalism: The New Business
Model for Increasing Returns by Becoming the Customer Choice, London: Nicholas Brealey, 1999.
xiii
Suresh Kotha, Competing on the Internet: The Case of Amazon. Com, European Management Journal,
April 1998.
xiv
Whos Writing the Book on Web Business?, Fast Company, October/November 1996.
xv
xvi
April 1998.
xvii
Lucy Kellaway, Billionaire Nerd With His Own Bandwidth, Financial Times, 13 November 1998.
xviii
ibid.
xix
Tim Clark: Newsmakers: Jeff Bezos--Turning to a Global Page, CNET News.com, 8 April 1998.
xx
Jane Martinson, Online Bookseller Seen as One of the Last Free Investor Lunches As Shares Slump After
Debut, Financial Times, 10 June 1997.
xxi
Alice Rawsthorn, Webs for Book Worms: Retailers On-Line Sales Speak Volumes, Financial Times, 2
August 1997.
xxii
Amazon.com Press Release: Yahoo! and Amazon.com. to Deliver Innovative New Navigational Service for
Books on the Web, 7 July 1997.
xxiii
Amazon.com Press Release: Amazon.com and AOL Announce Multi-Million Dollar Advertising and
Promotional Agreement, Bringing Together Number 1 On-line Bookseller with Number 1 Internet On-line
Service, 8 July 1997.
xxiv
Information on Borders from Alice Rawsthorn, "Interview with Bob DiRomualdo, Borders: Book Lover With
a Fresh Shelf Life", Financial Times, 2 September 1998.
xxv
xxvi
Amazon.com Press Release: Amazon.com Catapults Electronic Commerce to Next Level with Powerful
New Features, 23 September 1997.
xxvii
Amazon.com Press Release: Amazon.com Invites Music Lovers to Help Build the Ultimate Music Store,
23 April 1998.
xxviii
Amazon.com Press Release: Amazon.com Adds Classical CDs to Earths Biggest Book and Music Store,
9 September 1998.
xxix
Paul Schindler, Amazons Acquisition Strategy, CMPNET, TechWeb, 5 August 1998; Steven vonder Haar,
Amazon.com Buys Pair of Internet Companies, Inter@ctive Week Online, 4 August 1998.
xxx
Paul Gillin, Computerworld Magazine, 10 August 1998.
xxxi
Amazon: Wal-Mart of the Web? USA Today, 12 August 1998.
xxxii
34


Suresh Kotha, Competing on the Internet: The Case of Amazon.com., European Management Journal, 2
April 1998.
ii
iii
iv
v
vi
It May Surprise You, The Economist, 10 May 1997.
vii
Lisa Bowman, Amazon.com Founder Shares the Secrets of His Success, ZDNetNews, 28 July 1998.
viii
Tim Clark, Newsmakers: Jeff BezosTurning to a Global Page, CNET News.com, 8 April 1998
ix
More on Amazons new way of doing business in Sandra Vandermerwe, Customer Capitalism: The New
Business Model for Increasing Returns by Becoming The Customer Choice, London: Nicholas Brealey, 1999.
x
xi
ibid.
xii
For more on network externalities, see for instance: John Hagel and Arthur Armstrong, Net Gain: Expanding
Markets Through Virtual Communities, Boston, Harvard Business School Press, 1997; Kevin Kelly, New Rules
for the New Economy, London: 4th Estate, 1998; Sandra Vandermerwe, Customer Capitalism: The New Business
Model for Increasing Returns by Becoming the Customer Choice, London: Nicholas Brealey, 1999.
xiii
April 1998.
xiv
Whos Writing the Book on Web Business?, Fast Company, October/November 1996.
xv
xvi
April 1998.
xvii
xviii
ibid.
xix
xx
Jane Martinson, Online Bookseller Seen as One of the Last Free Investor Lunches As Shares Slump After
Debut, Financial Times, 10 June 1997.
xxi
Alice Rawsthorn, Webs for Book Worms: Retailers On-Line Sales Speak Volumes, Financial Times, 2
August 1997.
xxii
Amazon.com Press Release: Yahoo! and Amazon.com. to Deliver Innovative New Navigational Service for
Books on the Web, 7 July 1997.
xxiii
Amazon.com Press Release: Amazon.com and AOL Announce Multi-Million Dollar Advertising and
Promotional Agreement, Bringing Together Number 1 On-line Bookseller with Number 1 Internet On-line
Service, 8 July 1997.
xxiv
Information on Borders from Alice Rawsthorn, "Interview with Bob DiRomualdo, Borders: Book Lover With
a Fresh Shelf Life", Financial Times, 2 September 1998.
xxv
xxvi
Amazon.com Press Release: Amazon.com Catapults Electronic Commerce to Next Level with Powerful
New Features, 23 September 1997.
xxvii
Amazon.com Press Release: Amazon.com Invites Music Lovers to Help Build the Ultimate Music Store,
23 April 1998.
xxviii
Amazon.com Press Release: Amazon.com Adds Classical CDs to Earths Biggest Book and Music Store,
9 September 1998.
xxix
Paul Schindler, Amazons Acquisition Strategy, CMPNET, TechWeb, 5 August 1998; Steven vonder Haar,
Amazon.com Buys Pair of Internet Companies, Inter@ctive Week Online, 4 August 1998.
xxx
Paul Gillin, Computerworld Magazine, 10 August 1998.
xxxi
Amazon: Wal-Mart of the Web? USA Today, 12 August 1998.
xxxii
34
598-069-1
598-069-1
xxxiii
Jennifer Sullivan, Amazons Not Just a Book Worm, Wired News, 29 April 1998.
xxxv
Randy Whitestone, Barnes & Noble Takes on Amazon Bookstore Battle, Inter@ctive Week, 6 May 1997.
xxxvi
Ibid.
xxxvii
John Labate, Rival Fails to Threaten Amazon.com, Financial Times, 9 September 1997.
xxxviii
Richard Waters and John Labate, Brought to Book: The Internet Retailing War is Turning into a Struggle
Over Distribution, Financial Times, 10 November 1998.
xxxix
Bertelsmann Plans a Big Bang in the Online Book Market, Internet Magazine Daily News, 20 August
1998. See also Marc Gunther, Bertelsmanns New Media Man, Fortune, 23 November 1998.
xl
Geoff Shandler, Bertelsmanns Online Blitzkrieg, Salon Magazine, 7 July 1998; Stacy Perman. The Book
on Bertelsmann, Time.com., vol. 151, no. 13, 6 April 1998; Bertelsmanns Bismarck, The Economist, 7
November 1998.
xli
Bertelsmanns Bismarck, The Economist, 7 November 1998.
xlii
Internet Book Selling: Making a Mark, The Economist, 10 October 1998.
xliii
Internet Bookshop Opened By Bertelsmann, Wall Street Journal Europe, 17 February 1998.
xliv
Bertelsmann Plans a Big Bang in the Online Book Market, Internet Magazine Ds, 20 August 1998.
xlv
German Firm May Seek Amazon Partnership, Seattle Times, 18 August 1998
xlvi
xlvii
xlviii
Geoff Shandler, Bertelsmanns Online Blitzkrieg, Salon Magazine, 7 July 1998
xlix
German Media Group Reports Flat Year, Financial Times, 19 August 1998.
l
Barnes & Noble Expands Online Book Selections, Adds Features, Bloomberg News, CNET Investor, 20
October 1998.
li
barnesandnoble.com Press Release: Jonathan Bulkeley Named CEO, 4 November 1998.
lii
Jennifer Sullivan, Borders Online Opens This Week, WiredNews, 5 May 1998.
liii
WH Smith Takes Over Internet Bookshop for 8.8 Million, Financial Times, 9 June 1998.
liv
The Promise of Internet Megastores, The Economist, 1 November 1997.
lv
Tim Jackson, Publish and Be Scanned, Financial Times-- Inside Track, 14 September 1998, and Alice
Rawsthorn, Online Books Jump off the Page in a Novel Approach to Publishing, Financial Times, 23 June
1998.
lvi
Lucy Kellaway, Billionaire Nerd on His Own Bandwidth, Financial Times, 13 November 1998.
lvii
Jodi Mardesich and Marc Gunther, Is Competition Closing In On Amazon.com?, Fortune, 9 November
1998.
lviii
Richard Waters and John Labate, Brought to Book: The Internet Retailing War is Turning Into a Struggle
lix
Amazon.com Press Release: Amazon.com Announces Financial Results for First Quarter 1998, 27 April
1998
lx
ibid
lxi
Brands Bite Back, The Economist, 21 March 1998.
lxii
Lex Column: Barnes & Noble, Financial Times 21 August 1998.
lxiii
David Streitfeld, "Paper Money on the Net: Amazon.com Rewrites Bookselling Script", The International
Herald Tribune, 11-12 July 1998.
lxiv
Tim Clark, Why The Street Loves Amazon.com, CNET News, 8 April 1998
lxv
lxvi
Jeff Pelline, Bertelsmann Funds Web Books, CNETNews.com, 22 June 1998; Coming Soon: The
Paperless, Portable Book, Business Week, 6 July 1998.
lxvii
xxxiii
35
Jennifer Sullivan, Amazons Not Just a Book Worm, Wired News, 29 April 1998.
xxxv
Randy Whitestone, Barnes & Noble Takes on Amazon Bookstore Battle, Inter@ctive Week, 6 May 1997.
xxxvi
Ibid.
xxxvii
John Labate, Rival Fails to Threaten Amazon.com, Financial Times, 9 September 1997.
xxxviii
Richard Waters and John Labate, Brought to Book: The Internet Retailing War is Turning into a Struggle
xxxix
Bertelsmann Plans a Big Bang in the Online Book Market, Internet Magazine Daily News, 20 August
1998. See also Marc Gunther, Bertelsmanns New Media Man, Fortune, 23 November 1998.
xl
Geoff Shandler, Bertelsmanns Online Blitzkrieg, Salon Magazine, 7 July 1998; Stacy Perman. The Book
on Bertelsmann, Time.com., vol. 151, no. 13, 6 April 1998; Bertelsmanns Bismarck, The Economist, 7
November 1998.
xli
Bertelsmanns Bismarck, The Economist, 7 November 1998.
xlii
xliii
Internet Bookshop Opened By Bertelsmann, Wall Street Journal Europe, 17 February 1998.
xliv
Bertelsmann Plans a Big Bang in the Online Book Market, Internet Magazine Ds, 20 August 1998.
xlv
German Firm May Seek Amazon Partnership, Seattle Times, 18 August 1998
xlvi
xlvii
xlviii
Geoff Shandler, Bertelsmanns Online Blitzkrieg, Salon Magazine, 7 July 1998
xlix
German Media Group Reports Flat Year, Financial Times, 19 August 1998.
l
Barnes & Noble Expands Online Book Selections, Adds Features, Bloomberg News, CNET Investor, 20
October 1998.
li
barnesandnoble.com Press Release: Jonathan Bulkeley Named CEO, 4 November 1998.
lii
Jennifer Sullivan, Borders Online Opens This Week, WiredNews, 5 May 1998.
liii
WH Smith Takes Over Internet Bookshop for 8.8 Million, Financial Times, 9 June 1998.
liv
The Promise of Internet Megastores, The Economist, 1 November 1997.
lv
Tim Jackson, Publish and Be Scanned, Financial Times-- Inside Track, 14 September 1998, and Alice
Rawsthorn, Online Books Jump off the Page in a Novel Approach to Publishing, Financial Times, 23 June
1998.
lvi
Lucy Kellaway, Billionaire Nerd on His Own Bandwidth, Financial Times, 13 November 1998.
lvii
Jodi Mardesich and Marc Gunther, Is Competition Closing In On Amazon.com?, Fortune, 9 November
1998.
lviii
Richard Waters and John Labate, Brought to Book: The Internet Retailing War is Turning Into a Struggle
lix
Amazon.com Press Release: Amazon.com Announces Financial Results for First Quarter 1998, 27 April
1998
lx
ibid
lxi
Brands Bite Back, The Economist, 21 March 1998.
lxii
Lex Column: Barnes & Noble, Financial Times 21 August 1998.
lxiii
David Streitfeld, "Paper Money on the Net: Amazon.com Rewrites Bookselling Script", The International
Herald Tribune, 11-12 July 1998.
lxiv
Tim Clark, Why The Street Loves Amazon.com, CNET News, 8 April 1998
lxv
lxvi
Jeff Pelline, Bertelsmann Funds Web Books, CNETNews.com, 22 June 1998; Coming Soon: The
Paperless, Portable Book, Business Week, 6 July 1998.
lxvii
xxxiv


xxxiv
35

Amazon Service Marketing Case Study

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Amazon Service Marketing Case Study

Uploaded by

Copyright:

Available Formats

1998 S.

Vandermerwe, Imperial College Management School, London, UK

Distributed by The Case Centre

Rest of the world

1998 S. Vandermerwe, Imperial College Management School, London, UK

Educational material supplied by The Case Centre

Marketing a New Electronic Go-Between Service

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Distributed by The European Case Clearing House, England and USA.

Educational material supplied by The Case Centre

This case was prepared by

The debate in the executive classroom had raged on for over an

Jeff Bezos probably hadnt figured on sore knees and an aching

AMAZON.COM: MARKETING A NEW

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

AMAZON.COM: MARKETING A NEW

This case was prepared by

The debate in the executive classroom had raged on for over an

Jeff Bezos probably hadnt figured on sore knees and an aching

The Growth of the Internet

The Growth of the Internet

Bezos Moves to Seattle

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Bezos Moves to Seattle

New Name, New Game

New Name, New Game

Educational material supplied by The Case Centre

Creating the New Electronic Service Business Model

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Creating the New Electronic Service Business Model

Proximity to Ingram Book in Seattle, one of the worlds largest warehouseswhich

Proximity to Ingram Book in Seattle, one of the worlds largest warehouseswhich

Getting Beyond Price

Getting Beyond Price

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Leveraging Network Externalities

Leveraging Network Externalities

used or reproduced without permission.

used or reproduced without permission.

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Getting Big Fast

Getting Big Fast

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Creating Presence and Accessibility

Creating Presence and Accessibility

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Enhancing the Customer Interface

Enhancing the Customer Interface

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Bursting into Song

Bursting into Song

Purchased for use by Zulfi Bhutto on 14-May-2015. Order ref F250215.

Educational material supplied by The Case Centre

Bezos pursued the international track however:

Bezos pursued the international track however:

Educational material supplied by The Case Centre

We want to make it possible for anybody in the world to order a German-language