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Amazon Dominated Nearly Everything This Year

With $100 billion in revenue in sight, Amazon’s terrifying logistical takeover of the world may soon be complete.

Peter Macdiarmid / Getty

2014 was a grim year for Amazon in the news: there was the six months of bad publicity after company’s protracted contract dispute with Hachette, the catastrophic failure of the Amazon Fire smartphone, and the concerns about the company’s profitability that dogged its stock price, resulting in its stock dipping 20 percent in the first half of the year. There were nods to Amazon Web Services (hugely profitable, expanding), Amazon Prime (changing the face of retail, expanding), its increased commitment to producing original content (promising) and its revenue (still shooting up), but from a narrative perspective, 2014 was an epic year of bad press for Amazon.

But now, at the end of 2015, the overall narrative about Amazon is triumphant. The company grew this year and it grew dramatically: After posting a small loss in the first quarter, Amazon posted substantial profits in the next two, to the surprise of nearly everyone. (It’s possible that Amazon was also surprised—as analyst Ben Thompson told Vox’s Matthew Yglesias “AWS [Amazon Web Services—the company’s insanely profitable cloud computing division] is simply spinning off more cash than Amazon knows what to do with.”) Amazon will almost certainly break $100 billion in revenue for the first time on the back of continued growth in e-commerce, particularly Amazon Prime, as well as AWS. Amazon’s investments in original programming seem to be paying off as well: its television shows, offered to Prime subscribers, have proven to be both both popular and critically acclaimed—in September, Amazon shows took home five Emmys.

But here’s the thing: Everything that contributed to Amazon’s success this year were items that contributed to its growth last year, just slightly less so. The biggest difference is that last year, many of Amazon’s investors were nervous about the company’s profitability.

Writing about Amazon in the short-term is hard to do. Amazon has good quarters and it has bad quarters, it has years of good press and years of bad press, but the year in Amazon is pretty much always the same: Its revenue increases, its stock increases (with fluctuations), it reinvests that revenue in new programs, initiatives and technologies, and it grows relentlessly. Amazon resists narratives because Amazon has only one narrative: complete commercial domination.

As The Awl’s John Hermann put it earlier this year:

Amazon is admirably clear in its intention to become a logistics machine the likes of which the world has never seen. Its fixation on efficiency over profit is usually characterized as a rare example of true long-term planning, but it is better understood as a fixation on solving systems: an expression of a philosophy that demands not just the domination of a market, but the destruction of its appeal to competitors. It’s an economist’s dream, a business that has been allowed by investors to effectively operate as a non-profit dedicated to economic perfection.

 Or, as Matt Yglesias put it, on the opening of Amazon’s brick-and-mortar store in Seattle:  “Amazon is driven by a relentless desire to conquer literally everything in its path.”

Still, Amazon is ending 2015 on a phenomenal note. Wall Street, which has always been in Amazon’s corner, is ecstatic; the company’s stock has soared to $600 a share after it delivered the unexpected profits. Two things seem clear. One is that Amazon has shown no sign that it intends to forsake growth for profitability. The other is that Amazon has two juggernauts on its hands: its surging ecommerce division, which includes Amazon Prime, and Amazon Web Services, which posts vastly higher margins than ecommerce.

In a rapturous piece in The New York Times in November, a “couple” of investors told Farhad Manjoo that they were no longer investing in ecommerce startups because they believed that Amazon was too great a barrier to entry in the marketplace. The narrative surrounding this year’s Black Friday was that ecommerce had finally surpassed brick-and-mortar shopping. If Amazon effectively owns ecommerce for the foreseeable future, that’s a very big deal, especially considering that in 2015, Amazon expanded the retail calendar beyond the traditional brick-and-mortar parameters. It not only offered a host of sales throughout the year, but launched “Prime Day,” a sort of Black Friday in July. Prime Day was widely mocked—big deals were promised, and the offerings weren’t great—but it was also fantastically successful, outperforming the company’s Black Friday sales for 2014. And Prime continues to surge. One analyst told Manjoo that he expects 50 percent of American households to have a Prime subscription by 2020, which is insane when you consider that only 52 percent of Americans said they used the Internet in the year 2000. 

Amazon Web Services, Amazon’s most profitable entity, it will also continue to expand. In October, AWS announced it was upgrading its technology and “are saying that every possible computing workload can run on their system.” According to Manjoo, “Deutsche Bank estimates that AWS, which is less than a decade old, could soon be worth $160 billion as a stand-alone company. That’s more valuable than Intel.”

The question facing Amazon’s investors at the end of 2015: What’s next? Has the company finally hit “critical scale,” as some stock forecasters think, a point where it will consistently deliver profits to its investors, even as it continues to expand? Or have we just reached the end of a familiar cycle, in which Amazon invests a substantial amount of money in new initiatives, time goes by, investors start to get nervous that the company will never consistently produce profits, the investments mature and everyone gets excited, and then Amazon starts the whole cycle over again?

But these questions are for people who worry about bond ratings. To me, the most interesting question is to ask is what kind of economy Amazon is working to create? Looking back at the past year, we can start to put a picture together.

Amazon has detested middlemen for its entire existence, for reasons that are both philosophical and practical. Despite being based in Washington state, Amazon is an ur Silicon Valley company: it believes it can do everything more efficiently itself. (Retail, even when done by Amazon, is a low-margin business, so every cent counts.)

After keeping a remarkably light footprint, Amazon has made significant investments in infrastructure, particularly warehouses. This investment is partly a reflection of the scale that Amazon is operating at, but it’s also a reflection of Amazon’s ambitions. Whether or not its high-profile flirtation with drone delivery gets approved by the FAA, same-day delivery is the ultimate goal. How Amazon will accomplish this remains an open question. It’s possible that they’ll continue to invest in creating their own private postal service. (UPS and USPS are already struggling to keep up with Prime, even with USPS doing Sunday deliveries)

Another is that Amazon’s high-profile (and disappointing) bookstore is an indication of things to come: As Yglesias argued, it’s possible that the bookstore is an experiment in creating a more efficient “same-day delivery depot,” a warehouse that also earns money. Both the investment in infrastructure and the bookstore point to one particular irony in Amazon’s development: For all its talk of robot workers and drones, Amazon is increasingly adopting older retail forms as it grows market share and revenue.

For same day delivery to work, it’ll have to be cheap and fast, and one of the biggest challenges facing same-day delivery in the tight-margined world of retail is that it’s expensive. It’s also not entirely clear how much people want it. Still in its nascent stages, early reports suggest that people are curious, but unwilling to pay for it.

The question of demand plays an even greater role in two of the consumer electronics Amazon launched this year: the Amazon Echo (“Siri on steroids”) and the Amazon Dash Button (a sort-of keychain you press when you run out of toilet paper.) These are both interesting gadgets, but as Hermann wrote at The Awl, many of Amazon’s new products “feel, first and foremost, like solutions to Amazon’s problems, not yours.” The Echo solves the problem of using a computer or other device to play music or look up the weather, but in many ways it seems like a less-douchey, but also less-useful Bluetooth headset. The Dash solves the problem of running out to buy toilet paper or diapers, but these are problems that aren’t always anticipated days in advance, they’re typically ones we want solved right away. These may be arguments for same day shipping, but until Amazon solves that particular problem, in a way that makes it more convenient than running out—something that’s easy to do in the large cities where same day delivery makes the most sense—the Dash seems gratuitous.

Another explanation for these gadgets is that they’re part of a project to enmesh Amazon deeply into the fabric of its customers lives. Amazon doesn’t want to just be an ecommerce platform, it wants to play a role throughout your day, not just when you want to buy something. Amazon wants to make every aspect of human life, not just commerce, more efficient. Another, less cynical explanation is that these gadgets are part of a general project of experimentation. (The failure of the Fire Phone doesn’t seem to have dissuaded Amazon from hardware in the least) Amazon would rather reinvest its profits than pay them out as dividends, so Echo and Dash are worth a shot—both products feel like they’re a few years away from fulfilling their promise, but if you have the cash on hand, they’re worth a shot.

Amazon’s relationship to labor was as confused as ever in 2015. The biggest individual Amazon story of 2015 was the New York Times report about the company’s grueling workplace culture, from Jodi Kantor and David Streitfeld, who had broken the Hachette story the year before. The article painted a picture of a workforce that’s overworked, constantly stressed, encouraged to snitch on one another, and discarded when the circumstances of their lives affected their work. (Some workers reported being punished by their bosses after suffering a miscarriage and contracting cancer.)

Amazon pushed back hard. Jeff Bezos sent a company-wide email saying “I don’t recognize this Amazon and I very much hope you don’t, either” and former White House Press Secretary Jay Carney attacked the credibility of Streitfeld and Kantor and their sources two months later.  While nothing in the Times report was unique to Amazon or the tech world, it still provided a disturbing picture of its workplace, the dark side of an office culture that is relentless in its drive for success. (In November, Amazon expanded its paid leave program for its employees.)

In December of 2014, Amazon won its Supreme Court case against workers in its warehouses who demanded to be paid for mandatory screenings to prevent theft. But Amazon’s warehouse problems continued in 2015. In October, days after Carney fought back against the New York Times, The Huffington Post published “The Life and Death of an Amazon Warehouse Temp,” a heartbreaking story about the realities of low-wage work. Amazon has increasingly relied on third-party labor providers to staff its warehouses, which it will presumably do to a greater degree as it expands its infrastructure.

Amazon also entered the service economy this year, introducing Amazon Home Services, “a new and simple way to buy and schedule professional services such as furniture assembly, house cleaning, and lawn care directly on Amazon” in the spring. As Hermann wrote in The Awl, “Amazon’s pitch, that ‘service pros’ will now ‘compete for your business based on price, quality, and availability’ suggests an orderly state of affairs in which power has been transferred back to you, the customer, away from variously competent and self-interested small businesses,” while Amazon also profits. The company’s entry into the service economy is unsurprising, but it suggests a distrust for workers in general, and the same distaste for work-life balance that also characterized the Times story, and the steady stream of reports of mistreatment at the company’s warehouses that appear each year.

In late October, four Amazon Prime Now drivers sued the company, which had classified them as contractors rather than as full employees. This is a distinction the company also uses for its warehouse workers, a distinction that saves Amazon millions of dollars in salaries and benefits. It’s part of the reason they’ve grown so quickly over two decades—by treating labor exactly how they want, no matter the human or economic consequences. Amazon’s massive revenue has been consistently converted into more growth, but it does not seem to have had any kind of impact on its treatment of the labor force. After all, the company’s vaunted obsession with cost-cutting and hyper-efficiency very much extends to labor, and in this respect, Amazon is not significantly different than Walmart: Its workers are a resource, and resources are expected to maximize output at the lowest possible cost.

Which brings us back one final time to the New York Times. The report was more damning than anything that came out during the 2014 battle with Hachette, or the Fire Phone flop, but it didn’t tarnish the company’s year the way the others did because it came out when investors were overjoyed with the company’s performance. (Though books remain a major part of Amazon’s business, they haven’t featured into this year-end review because, a year after Hachette, things more or less returned to normal. Publishers and Amazon are back to more or less cooperating while quietly eyeing one another’s business models with suspicion, if not outright disdain.)

And ultimately, there’s no reason to believe that Amazon’s profitability is intentional or that it’s here to stay. As Matt Yglesias argued in a recent piece, “Amazon will only start booking large consistent profits when the company’s leaders run out of new ideas to invest in. Right now they are not out of ideas, as you can easily tell from the wide range of businesses they are halfway into.”

Amazon got to this point by sticking to their plan, so why would they deviate from it now? The only way that could possibly happen would be if the company was simply making too much money to avoid paying some of it to its stockholders, and that seems unlikely, at least for now. In 2015, we’re beginning to get a sense of just how ambitious Amazon is. Through its vast expansion of labor—from home services to warehousing and logistics to delivery—Amazon is casting its tentacles into new parts of the economy and remaking them in its own image. Amazon’s influence on the American economy is greater than ever been before, and it will almost certainly be even greater next year. There are some reasons to feel good about this—no company is more committed to making it easier for consumers to buy things—and a lot of reasons to be troubled.