In the past> decade, Jeff Bezos's online bookstore has exploded into an enterprise that sells everything snowplows, canned goods, you name it. More recently, Amazon.com (AMZN)
With so many revenue streams, it's little wonder the Seattle-based company has been able to post robust results through the third quarter of the year, despite an obvious chill on consumer spending. But critics say this is no time for a company to be straying too far from its original mission and that with its new ventures, Amazon now finds itself going head-to-head with bare-knuckle competitors like Wal-Mart (WMT),
Amazon's profit margins have shrunk a bit as the firm spends more money on areas that are, at least initially, less profitable. Judging by its stock, Wall Street has some reservations. Lazard Capital analyst Colin Sebastian, for instance, expects this holiday season to be worse than usual thanks to higher competition for fewer consumer dollars. "The company is not immune," he says.
Bezos, though, is adamant that Amazon's ever-growing business tributaries are important bets. With characteristic calmness, he shrugs off criticism that Amazon is moving too far from its bookish core. "It's always been our decision to let the customer choose what they want," he says, adding with a grin, "you get thick skin after a while."
SmartMoney recently talked with Bezos about Amazon. Here are some highlights:
SMARTMONEY: Your handlers said I could only talk to you about Kindle but that you wouldn't give specifics on its sales. That sounds paranoid.
JEFF BEZOS: We don't disclose numbers as policy, but you can ask me anything.
SM: Amazon has about 6 percent of all U.S. sales online. That's huge. Why muck it up with all the other businesses you've added, like manufacturing [the Kindle] and your new customer-service software?
Bezos: We are responding to customer needs.
SM: No one asked for the Kindle.
Bezos: True. It's not the customers' job to invent for themselves. Four years ago we thought about extensions to our business. We took a look at what we're good at. On Kindle, we had been selling e-books for years, but you needed an electron microscope to see the sales.
SM: Citigroup analyst Mark Mahaney doubled his Kindle sales prediction and compares it to the iPod. What is the potential in numbers, not words like significant and meaningful?
Bezos: I don't know. Our approach is not to set a goal. Our approach has been to create the best physical model and let customers choose.
SM: And now you're selling your own computing platform like Web storage and payment services to small businesses.
Bezos: We launched our Web services two years ago; it's the equivalent of creating an electric grid, but for computing. Recently, I went to Luxembourg and visited a 300-year-old brewery. It had this gigantic relic of a generator from when it had to make its own electricity. As soon as they could buy off-grid, they did. Making their own electricity didn't make their beer taste better. It's the same for running your own data center.
SM: How important could this become to Amazon?
Bezos: Assuming we execute well? Significant and meaningful.
SM: Funny. Today's technology is such that we will soon have a cheaper, better version of Kindle. When will that happen, and what features can we expect?
Bezos: We will have new versions and new prices, but no date is set. We will continue to put content on. We want to make every book ever written available.
SM: What new features might we expect from the Kindle? Color? Animation? When I tried to read the newspaper on my Kindle, I couldn't easily jump to the business section.
Bezos: Color or animation isn't likely. E Ink [the type of technology Kindle employs] display doesn't support color in a commercial way. Plus, the rapid screen updates required for animation create eyestrain. The Kindle is more like a printed page easier on your eyes. We will do on-air updates. Perhaps we'll create better user interface to improve what you're talking about for a newspaper.
SM: You are creating some original content to sell over the Kindle. There's a speech by author Mitch Albom, for example. Publishers your suppliers won't like that.
Bezos: We are working with publishers to make their books available on Kindle. We are not buying copyrights from them. We're also making self-publishing easier and supporting a lot of small publishers.
SM: Perhaps the larger issue is that adults are reading less than they did 10 years ago, according to the National Endowment for the Arts. Isn't this a concern?
Bezos: We humans evolve with our tools they change us. But our network-connected tools have not kept pace with everything we need. The tools we've been building the past couple of decades make information snacking more convenient I like my BlackBerry; it's good for e-mail and chunks of text. But you don't want to read a 300-page novel from a laptop.It's not comfortable.The Kindle was built for long-form reading.
SM: So as the Internet shortens our attention span, you think the Kindle will lengthen it?
Bezos: Yes, I think people will read more, not less.
SM: How are you doing in digital video, another new Amazon service?
Bezos: We are testing streaming on demand for Amazon Unbox, which was renamed Amazon Video on Demand. It's an early phase for all industry. We want to have universal selection on demand. Right now we have about 40,000 movies and TV shows.
SM: Music downloads are available through your Amazon mp3 store. Is there room for more price competition with Apple, the market leader?
Bezos: We are already heavily competing. Apple sells a song at 99 cents, versus our 89 cents. Plus ours are DRM [digital rights management]-free, so that they can be shared. We are also deeply discounting albums through our "Daily Deals."
SM: You stay deeply involved in all these businesses. Without going into the succession rap about your indisputably talented staff, it seems you risk spreading yourself too thin.
Bezos: I've been doing this for years. I promise I won't.