‘You’re Stupid If You Don’t Get Scared’: When Amazon Goes From Partner to Rival

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From The Wall Street Journal:

It is with a certain dread every autumn that some companies described by Amazon.com Inc.  as its technology partners gather at a Las Vegas convention and find out if Andy Jassy has new plans to encroach on their turf.

These firms run their software on Amazon’s vast array of servers—part of what is known as “the cloud”—and from there sell use of their programs to others. Over nearly three hours, the boss of the Amazon Web Services unit walks the stage, revealing a road map of brand-new features Amazon itself plans to offer, a few of which inevitably compete with partners.

Last November, Emil Eifrem, one of roughly 100,000 people watching Mr. Jassy’s keynote in the hall or remotely, braced for what he expected to be one of the announcements, a data-graphing service. Mr. Eifrem’s company, Neo4j Inc., says it defined the technology, which allows customers to analyze data on Amazon’s platform and others. Two years ago, as it researched the market, Amazon visited Neo4j asking for help building a similar product, said Mr. Eifrem, Neo4j’s chief executive. Neo4j declined.

Mr. Jassy did announce Amazon’s competing service in Las Vegas and made it widely available this week. “When Amazon launches in your space, you’re stupid if you don’t get scared by that,” Mr. Eifrem said, “because they do tend to outcompete everyone.”

Amazon’s web-services business has been blazingly successful, and a look at how that came to be stands as a master class in how Amazon wins—and why now it has become a political target. The unit has become the Seattle company’s cash cow, providing 73% of its operating income, or $1.4 billion, on about 11% of its $51 billion in total revenue it reported in the most recent quarter.

. . . .

A web-services platform such as Amazon’s lets businesses and other entities rent computing resources at giant server farms, allowing them to do computing tasks in the so-called cloud rather than buying their own servers and software. Amazon was early to build such a platform, and in doing so it upended the information-technology industry, pressuring incumbents that sold hardware and software.

Mr. Jassy’s strategy echoes one Amazon employed in retail. There, it built a dominant platform and became a powerful ally to brands and vendors of goods sold on its website. Then Amazon also began selling its own brands and goods that competed with some of its vendors.

In its cloud services, Mr. Jassy built a platform that can weave a multitude of programs in a seamless web of offerings, its own as well as partners’. And Amazon then began selling its own services that compete with some.

“On top of everyone’s mind is this black-widow behavior,” said Bill Richter, chief of Qumulo Inc., a Seattle startup that offers data storage and management on Amazon’s system. Amazon doesn’t compete with his company, but every year, he said, “we pray there’s not some big announcement” of an Amazon service that will.

. . . .

One reason there is angst but no visible pain when Amazon suddenly competes is that there is plenty of business to go around, said Tod Nielsen, CEO of a cloud-application company named FinancialForce.com Inc. “The total addressable market is so big. We’re really in the early days of the land grab.”

Mr. Jassy said in a November interview that Amazon is providing services that customers are asking for. “You’ll continue to see us add services as customers tell us they make sense and they want them from us.” He declined this week to comment further. In a 2016 interview, he said: “In every one of the spaces where we have built further up the stack, our ecosystem partners who’ve built significant offerings on top of our platform have done just fine. These are gigantic markets.”

. . . .

“In many ways, Amazon is nothing except a data company,” said James Thomson, a former Amazon manager who advises brands that work with the company. “And they use that data to inform all the decisions they make.”

Link to the rest at The Wall Street Journal 

7 thoughts on “‘You’re Stupid If You Don’t Get Scared’: When Amazon Goes From Partner to Rival”

  1. Your daily dose of ADS ‘From The Wall Street Journal’, in a convenient ‘we hope you choke on it’ dry chalky horse pill.

    At the same time, they seem to have liked the vote that allows states to go after internet taxes. (Paywalled, so I couldn’t see if they’d realized that the new taxing would make it actually safer for smaller businesses to sell through the bigger shops – like Amazon …

    https://www.wsj.com/articles/state-sales-tax-officials-rev-their-engines-1529618398

    https://www.wsj.com/articles/us-supreme-court-rules-states-can-require-online-merchants-to-collect-sales-taxes-1529591376

  2. I worry about Amazon’s imprints, and have since Author Earnings started showing that Amazon was staking out the middle ground in prices between indies on the lower end in general, and traditional publishers at the higher, with prices that way exceeded indie prices (16.99 for an ebook???).

    Amazon Imprints is an opaque system which is NOT available to submit to. There are rumors of a white-glove program by which an agent can send a book Amazon’s way; I don’t know if it existed ever, or still exists, but have not been able to find a way into it, and would feel odd asking an agent that question. But in every AE report, the Amazon ‘middle’ was bigger.

    If they are using their data, it doesn’t help many of us.

    In that way, Amazon (with its data) is in direct competition with indie writers and publishers (who have no equivalent data, and can’t even get close).

    It would just be nice if there were a path in.

    • White Glove was no secret:

      https://www.thebookseller.com/news/amazons-white-glove-tempts-agents

      And over the years there have been two open roads into AmazonPublishing:

      The more recent SCOUT program, apparently ending, and tbe older ENCORE, which might still be active:

      https://www.thecreativepenn.com/2009/05/18/amazon-encore/

      With the former anybody could submit, with the latter, they contacted you if your self published title triggered tbeir “alarms”.

      APub has grown big enough that they might already have enough authors under contract and not need to be too active in recruiting.

      • Thanks for the links, Felix. I tried every one – most of them are dead.

        Kindle Scout is dead. Encore doesn’t appear alive (links are from 2009), either, and any white glove program is just as hidden as usual.

        I can easily see Amazon taking the books/authors which their data show are already successful, and giving them a push. As in their new bookstores, where a very limited selection of bestsellers is made available on the spot.

        But that only gets you more of the same.

        The problem of discovery is the same one agents and publishers have: if you let anyone submit, you will get buried in submissions. Those are hardly “open roads into Amazon.”

        • Open roads are available to anybody.
          Are you sure you’re not looking for a shortcut instead?

          As for White Glove, what’s the problem with offering a contact point for Agent-asisted Indies to get into KDP? If some authors prefer to give an agent 15% to put their story on KDP instead of doing it themselves…?

          The Bookseller piece pointed out why it exists; enticing agented authors to keep ebook rights and only sell print rights. With tradpub rights grabs, White Glove probably has few takers, anyway.

          Hardly something a pure Indie needs to care about.

          The equation hasn’t really changed since KU was launched.

          Write a good story.
          Go wide or go KU.
          Market as best you can.
          See what happens.

          The only shortcut out there is going Indie.
          Everything else is hard work of one kind or another.

    • I also have a concern about Amazon imprints, Alicia. One of their major advantages is the Amazon marketing machine, which of course uses their own data.

      Many (most?) of the books in Prime Reading are Amazon imprints. Amazon sends a monthly email advertising these books to Prime customers. (I opted out after a while because it seemed as if all the books they were recommending were their own imprints and not necessarily what I was interested in.)

      I just took a look at the current offerings, and there seems to be more of a mix now. Also included are older traditionally published titles (including Harry Potter and the Sorcerer’s Stone and The Handmaid’s Tale), which lure potential readers to peruse the rest of the list.

      And, of course, Amazon imprints are all in KU, another pool of readers who, after they pay their monthly fee, are reading those books for free, not $16.99.

  3. In that way, Amazon (with its data) is in direct competition with indie writers and publishers (who have no equivalent data, and can’t even get close).

    Every book in KDP is in direct competition with independent writers and publishers. That means every independent ebook is in direct competition with every other independent ebook.

    Some competitors are strong, and some are weak. Like every other market.

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