To Disassemble Amazon, Cut Here
Over time, Amazon has become a vertical monopoly, like Standard Oil.
Vertical Integration is an extremely powerful force for reducing costs, to the point where competing against a company like that becomes harder and harder until the company is either broken up, or someone manages to attack it effectively.
Amazon can be viewed in a series of logical layers, which can easily be split into different businesses.
Each layer is it’s own profitable venture *and* it provides an advantage for the other parts of their business.
I believe Amazon should be split up, but until then, let’s focus on strategically competing against them.
Let’s look at Amazon by logical layer, starting at the bottom. Each of these layers existing independently would be beneficial to our economy.
The specific implementation is a separate discussion from the clear benefit.
Amazon Web Services (AWS)
AWS is Amazon’s cloud provider. They were the first to market with a modern cloud infrastructure, and they still charge a premium over their competitors due to a combination of name recognition, developer base, and ease of use.
How AWS came to be
There are lots of stories about the formation of AWS, but this much we know: 10 years ago, Amazon Web Services, the…
Any online store requires computing resources. This means physical machines which run the various parts of the business. Historically this would have been done with dedicated systems, which can often result in waste as you split services into logical chunks.
AWS allows Amazon to grow its infrastructure in a scalable manner and sell their spare capacity to others in order to reduce or completely eliminate that cost.
If anti-trust regulators were to split Amazon, this would be the first logical business.
It would be difficult to compete with AWS in terms of size. Much of the management software that allows them to scale at this layer is either Open Source or has Open Source alternatives, but there would be a lot to learn and their economies of scale would be difficult to overcome.
The most effective competition method would be commoditizing their services instead. While running something at their scale would be difficult, building a small private cloud at low cost is relatively low cost if you have the expertise.
Charge for your time setting up the infrastructure and websites and you can either give away computing power to small companies or build private clouds for larger companies.
You won’t get rich using the machines, but enough people following this path would eat at their profit margins like a school of piranhas devours a larger animal.
Online Store Platform
This is Amazon’s website/store itself.
Originally Amazon’s online store was how they sell products that they source and distribute. It has since expanded to allow other people to source and sell products as well.
By selling on Amazon’s platform, you can more easily get a market, and you can even choose to allow them to handle the shipping of your goods. For products they can produce on demand, like t-shirts and books, you can be completely hands-off other than initial content creation.
Since creating the store, they’ve already started creating their own products. Amazon produces electronics in addition to books. They sell products branded with their name, like Amazon batteries.
They can sell these batteries for cheaper since they know they also get to keep the cut that other vendors would need to share with them. No need to advertise when you can just feature your own products. No need to worry about shipping when you have a whole delivery infrastructure.
Amazon’s sales platform is ultimately the most exploitative part of their business. Their warehouses force long hours for insufficient pay. They partner with independent businesses for delivery while spending their money finding ways to use drones to cut them out of the delivery process.
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Amazon creates its own electronics, often as a delivery vehicle for its digital content services. You can buy a Fire 7 tablet for $49.99 if you’re willing to allow them to show you ads or $64.99 without ads. The cost is likely just shy of $50, which indicates that they likely expect to make their money on the content.
The same is true of Fire TV devices, and their commercial flop of a cellphone.
To be clear, this is not meant to disparage the products. They’re actually quite reasonable, other than the destructive effects of the company as a whole.
Digital Content Platform
I’m talking about the Kindle store, Audible, Prime Video, Prime Music, etc.
Each of these services is reasonable on its own, but they each take advantage of the rest of the business in order to operate.
Prime Video and Prime Music are inferior to Netflix, Hulu, Spotify, and other services, but they can offer content for free to their existing Prime delivery customers.
That free content also exists as a loss leader for the pay aspects of those services. You can listen to some music for free, while the rest requires a purchase. You can watch some movies for free, while the rest require rental or purchase.
In the Kindle store, you pay for the mainstream content, but they also provide a platform for new writers to publish on and set cheap or free prices. You can even create ebooks for content that you did not create, as long as the copyright has expired. Each new creator on the platform increases the potential value of the platform.
Self-publishing your content on a different platform could be more difficult. Putting in that effort can help you understand better though, and does not require working with a destructive company. I’m looking at Reedsy for my next book (the previous one was a tech book for Packt Publishing).
Reedsy: Find the perfect editor, designer or marketer | Reedsy
Reedsy allows authors to find and work with the best publishing professionals: from developmental editors to book cover…
For free audiobooks, look at LibriVox.