Amazon Turns 30 – What Will the Next Decade Bring?

In 1994, Jeff Bezos, a Wall Street investment manager who had just turned 30, quit his job and moved to Seattle to start a business out of his garage. On July 5, 1994, he founded his company in Washington state as Cadabra, but changed it to Amazon because (according to company legend) a lawyer misheard its original name as “cadaver.”

When Amazon began trading a year later, Bezos’ hunch that books were the perfect product for an e-commerce startup proved correct. Within two months, Amazon—billing itself “the largest bookstore on Earth”—was doing $20,000 a week in revenue. By 1998, the company—already diversifying its product offerings—changed its slogan to “the largest book and music store on Earth.”

The company expanded outside the U.S. that same year, with its first international sites launched in the U.K. and Germany. In 1999, as Internet use exploded and e-commerce began to flourish, Bezos was Time The magazine’s Person of the Year for his success in online shopping.

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Amazon’s stock was battered by the bursting of the dot-com bubble, falling from more than $4 (after a stock split) in November 1999 to just 30 cents in September 2001. But that was a temporary setback for Amazon. A key driver of growth was the launch of Amazon Marketplace in November 2000, when the company allowed third parties to sell directly to consumers. Amazon’s later milestones included the launch of Amazon Web Services (a cloud computing service for third parties) in 2006, and the launch of Amazon Prime (a membership subscription model that included free shipping) and the first Kindle e-reader in 2007.

Where is Amazon now?

Better than ever. Amazon shares surged during the pandemic, then fell back again—by about half in 2022. But they’ve been steadily climbing since then, hitting all-time highs around $200, and by the end of June, Amazon’s market cap had reached $2 trillion. To put that in context, when Amazon went public in May 1997, its initial share price of $18 (adjusted to account for the many stock splits that followed) was the equivalent of nine cents.

On this new record, it crossed the dollar mark in July 1998, then the $10 mark in 2011. In 2020, the stock topped $100—more than 1,000 times its initial level—and is now worth twice that. In other words, a $10,000 investment when Amazon went public would now be worth more than $22 million. So it’s made a lot of people very rich—not least Bezos himself. He stepped down as CEO in 2021, but still owns a 9% stake worth about $180 billion; he recently sold a few billion.

What about revenue?

The stock’s surge comes as revenue has soared in recent years, jumping from $280 billion in 2019 to $386 billion in 2020 and to $575 billion in 2023 — fueled by rapid growth in advertising, Prime, Amazon Web Services (AWS), and third-party services. The company is now led by Bezos’ longtime protégé and chief of staff Andy Jassy. He was the founder and CEO of AWS, its cloud computing division, which is expected to generate more than $100 billion in revenue on its own by 2024.

For all the overall revenue growth, the underlying challenge is that e-commerce as a share of overall retail sales appears to be weakening, says Greg Petro in Forbes. In the U.S., Amazon’s estimated sales of goods in the past year are as high as $540 billion, while its overall share of the retail economy is 15.6%—only slightly up from the previous year. For Amazon, e-commerce sales have grown just 5% in the past 12 months, a third of their pre-COVID pace. Given that this retail segment (when you include shipping and other services sold to suppliers) still accounts for two-thirds of revenue, that’s a concern.

What are the other challenges?

Some are reputational and regulatory. Many of us love Amazon because it delivers useful things cheaply to our doors. But we also hate it a little because it is a data-hungry, supposedly monopolistic giant that invades our privacy to sell us things, and pays its exhausted workers as little as possible. Amazon’s “big secret” remains that it’s hard to tell exactly how profitable it is and where its profits come from, because (apart from AWS) it refuses to break it down into divisions, says Stacy Mitchell in Atlantic.

The company has a long history of reinvesting in its business and reporting relatively low taxable profits compared to revenue. But the impression it likes to give that its shopping platform operates on “razor-thin margins” — relying instead on AWS for the bulk of its profits — is highly questionable. In fact, that’s being directly challenged by a live antitrust lawsuit filed earlier this year by the US Federal Trade Commission, which alleges that anticompetitive practices at Amazon’s marketplace division are unfairly driving up prices across the internet.

What will the next decade bring for Amazon?

Antitrust scrutiny will be intense and could hamper growth, he says EconomistThe second challenge is generative AI, where Microsoft has taken the lead, while Amazon’s dominance in cloud computing is waning. In 2022, its market share was 13 points higher than Microsoft’s; now it’s just six points. In retail, too, the threat from big rivals is growing.

Alphabet and Meta are “trying to get back into” e-commerce, while Walmart (the dominant player in the $2 trillion U.S. grocery market) is moving into online advertising and has launched a Prime-like subscription service. While Amazon’s “fourth decade will be harder than its third,” its astonishing track record of customer focus and innovation should serve it well.

During the dot-com crisis, skeptics called the company “Amazon.bomb.” Skeptics scoffed when it diversified into cloud computing. “It would be a mistake to dismiss Amazon again today”—and a potentially costly one.

This article was first published in MoneyWeek magazine. Enjoy exclusive, early access to news, views and analysis from our team of financial experts at MoneyWeek Subscription.