[News Inside Companies] Amazon Celebrates 30th Anniversary After Sweeping 'World No.1' Titles

Amazon Achieves $2 Trillion Market Cap 30 Years After Founding
Big Hits in Retail, Cloud, Streaming, and Advertising
Previously Independently Operated Businesses... "Next 10 Years Will Be Integration"

The stock price of Amazon, the largest e-commerce platform in the United States, hit $200 (approximately 278,000 won) for the first time since its listing in 1997. This record high was set on the 2nd of this month (local time), just before its 30th anniversary. Amazon's stock price has risen 32% so far this year. Jeff Bezos, the founder of Amazon and the world's second-richest person, saw his net worth increase by 24% from the beginning of the year to $219 billion. Aware of the high stock price, Bezos announced that he would sell $5 billion worth of Amazon shares.

[Image source=Reuters Yonhap News]

Amazon started as an online bookstore in a garage in Seattle, USA, on July 5, 1994. Thirty years later, it has become the world's largest e-commerce company. It has also established itself as a leader in cloud computing services and video streaming services, becoming a truly global big tech company. Amazon is currently the fifth company in the world to reach a market capitalization of $2 trillion.

The Amazon Kingdom Built by Bezos... Unstoppable Business Expansion

Starting with online book sales, Amazon expanded its product range to DVDs, music CDs, video games, electronics, clothing, furniture, food, toys, and more, laying the foundation for e-commerce. Despite aggressive low-price competition from Chinese companies like Temu and Shein, Amazon remains the world's number one. JP Morgan estimates that Amazon will sell $554 billion worth of goods through its online platform in the U.S. this year. This means that 42% of U.S. e-commerce is conducted through Amazon, showing a significant gap compared to the second-place Walmart (6%).

Having established its footing in retail, Amazon restructured its business in 2006 by launching Amazon Web Services (AWS), a cloud computing service. AWS holds about 40% of the global cloud market, making it the leader. AWS accounts for 17% of Amazon's total revenue, a significant portion that has grown rapidly in recent years. AWS has been a major driver of Amazon's recent stock price surge.

Jeff Bezos Amazon Founder
Photo by Reuters Yonhap News

Amazon responded quickly to the generative artificial intelligence (AI) boom that began last year. Amazon invested $4 billion in Anthropic, an AI company considered a rival to OpenAI, the developer of ChatGPT, and provides Anthropic's AI models to its cloud customers. Additionally, Amazon has started upgrading its chronically unprofitable voice AI assistant, Alexa, into a next-generation AI assistant in collaboration with Anthropic. In November last year, Amazon also unveiled its newly developed AI semiconductor, 'Trainium 2.'

Besides this, Amazon offers the video streaming service Prime Video based on its paid membership, Amazon Prime. Amazon is also the third-largest advertising business globally, following Alphabet and Meta Platforms. Over 30 years, Amazon's business has continuously diversified beyond retail.

Despite its diverse businesses, Amazon has maintained a structure where business units operate independently. A former Amazon executive revealed to a media outlet that at Amazon, even if a particular business generates significant profits, other business units do not rely on those profits to operate. This structure reflects the management philosophy of founder Bezos.

"Focus on Seeking Value Creation by Linking Existing Businesses"

The UK-based Economist recently spotlighted Amazon's 30th anniversary, reporting that the "e-commerce kingdom (Amazon) is uniting various parts from Prime Video to AWS." This suggests that while Amazon focused on business diversification over the past 30 years, it is now time to explore ways to create value by linking existing businesses. The Economist predicts that "Amazon's next decade will be an era of integration."

Andy Jassy, CEO of Amazon
Photo by Reuters

After Bezos stepped down as CEO in 2021, the responsibility for linking Amazon's future businesses and creating value has fallen to current CEO Andy Jassy. Jassy has already expanded the advertising business by linking Amazon Prime services with Prime Video. With over 300 million Amazon Prime members worldwide and access to related data, the advertising impact is significant, meeting advertisers' demands effectively.

The Economist reported that "Amazon's advertising business is estimated to have an operating margin of about 40%" and that Amazon is growing its advertising business from its website to Prime Video. JP Morgan estimates that Amazon's advertising revenue will increase by 6% this year from Prime Video advertising alone.

The market views that CEO Jassy faces the challenge of building connections between Amazon's core businesses, e-commerce and AWS. This means creating a new structure that links the two businesses in various ways, such as using generative AI to summarize customer reviews and manage inventory in retail, while simultaneously providing this data to AWS customers.

The Economist noted, "Microsoft (MS) leads the AI market, Alphabet is attempting to re-enter the e-commerce market, and Walmart has launched a membership similar to Prime, stepping into the advertising market," concluding that "Amazon's biggest threat is competition."