The company that began as a loss-making book e-tailer near the dawn of the Internet has become an only slightly profitable behemoth with its tentacles in everything from smartphones to movie production and most recently, travel, with the upcoming launch of its travel site for which it plans to offer hotel deals in and around major cities. And that doesn’t even count the separate passel of ventures by Amazon Founder and CEO Jeff Bezos.
But has Amazon spread its considerable resources and ambitions too far? Investors long have decried its unslakable drive to diversify as a main reason the company’s profit margins have remained thin at best. And there are some new bits of evidence, too, that Amazon has overreached, such as the awful marketplace reception for the Fire smartphone that it introduced last summer.
Amazon, of course, has come a long way from its origins as the bane of bricks-and-mortar booksellers. Not too far into its history, Amazon diversified into becoming a huge online store for all kinds of entertainment products, and then for all sorts of general merchandise. Now there are few shopping searches that would be complete without a review of Amazon.
But over the last several years, fueled in part by rivalry with Google and fellow tech titan Apple, Amazon had diversified widely into just about every adjacent business it could come up with. The company has poured cash into new brands of hardware such as Kindle e-readers and Kindle Fire tablets, has introduced Fire TV for watching digitally delivered shows and movies and has created “Echo” as its answer to Apple’s Siri virtual assistant.
Amazon also gave the impression of being an imperialistic juggernaut by hassling with Hachette over writers’ fees for e-books and by taking Meanwhile, Bezos has added to the uber aura around Amazon by personally buying—and planning to reinvent—the Washington Post and with other eclectic ventures that also includes a company that’s participating in the private race into space.
With the Fire smartphone, however, Amazon may finally have bit off more than it could chew. Rumored for a couple of years, the phone running on Google’s Android operating system made its debut last summer at $199. But it flopped in the marketplace and soon was available for just $1 with a two-year AT&T contract. Amazon took a $170-million third-quarter charge on inventory commitments, largely due to dismal sales of Fire.
Critics such as Wired.com said that the phone was “overpriced for what it offered” and “failed to deliver” what customers want: quality apps on quality hardware.
“Amazon is going [in] too many different directions,” Kevin Paul Scott, co-founder of ADDO Worldwide and author of the book, 8 Essential Exchanges, told CEO Briefing. “It is coming across as a master of none rather than the master of all” and could cause Amazon big problems in the future.
So far, Bezos has managed to advance and hold together one of the world’s great new companies even as he has spread Amazon into more and more businesses. It’ll be interesting to see if the Fire smartphone proves to be anomalous to that record of success—or the first sign that the CEO needs to rein in his goals.