Millions of people use Amazon for their day-to-day purchases in every category and niche you can imagine. A study from BloomReach in 2015 found that 44 per cent of online customer goes directly to Amazon.com before checking any other website. And that number has increased since 2013 when a Forrester published a report saying that 30 per cent of online shoppers bypass others and visit Amazon first before purchasing.
How Was Amazon Started?
In 1994, Jeff Bezos was working with Wall Street. When he turned 30, he began realizing the opportunity in the internet revolution and decided to quit his job and founded an internet company.
“The wake up call was finding this startling statistic that web usage in the spring of 1994 was growing at 2,300 percent a year. You know, things just don’t grow that fast. It’s highly unusual, and that started me about thinking, “What kind of business plan might make sense in the context of that growth?” Jeff Bezos says.
He grabbed his pen and paper and made the list of top 20 products that he could potentially sell on the internet. Due to their low cost and universal demand with easy transportation, books were selected to be sold at the beginning.
According to Quora, the original name was going to be “Cadabra,” but Bezos misheard it as “cadaver.” One can easily believe that Amazon has a ton of success since day one, but it is not true. In fact, Jeff’s startup took many turns over the initial years to reach the heights at which it stands today.
Earlier, Amazon was not the retailer of “everything”. The company primarily focused on books. However, this scenario changed quite a bit over these years as Amazon now sells everything from toys to clothes to furniture to grocery and much more.
Amazon issued its initial public offering stock at a price of $18 per share on May 15, 1997. Amazon had a solid business plan, but investors were worried about Bezos’ future as he had no intentions to make the company profitable for next 5 years.
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The plan was a bit frustrating for investors. It ended up being a blessing for Amazon as this strategy helped Amazon survive in the dot-com bubble burst when most of the e-commerce company failed to keep it up.
Amazon finally became profitable in the first quarter of 2001 with a revenue of $1 billion and a net profit of about $5 million. This was indeed a small profit for the company, but this justified Jeff’s plan that he set in place.
Jeff Bezos Early Life
Jeff spent his summers at his grandfather’s ranch in southern Texas where he laid pipes, vaccinated cattle and fixed windmills. At 18-year-old, he dreamt of building a space hotel and amusement park for 2 to 3 million people in the orbit. In a newspaper interview, he conveyed that the whole idea was to preserve the earth and evacuate humans.
Born in Albuquerque, New Mexico, Jeff Bezos was raised in Houston, Texas and graduated from the Princeton University in 1986 with degrees in electrical engineering and computer science. Jeff worked at Wall Street from 1986 to early 1994 before founding Amazon.
Jeff also founded an aerospace company Blue Origin in 2000 to fulfil his childhood dreams of building space hotels. The company successfully tested a flight which reached space in 2015. The company has now planned to begin commercial suborbital human spaceflight till late 2018.
Jeff bought The Washington Post in 2013 for $250 million in cash. He currently manages all his business investment through his venture capital firm, Bezos Expeditions. In 2017, Jeff became the richest person int he world with an estimated net worth of over $90 billion. As on August 2018, his net worth is $143.1 billion.
Funding and Cash Flow
Initially, Amazon was funded by Bezos’ father’s personal savings. They invested a large fraction of their life savings in what today is Amazon. And you know, that was a very bold decision for them because they were unfamiliar with the internet revolution and the opportunities it brought with itself.
His father was not betting on the company but betting on his son, as was his mother. Bezos told them that there was a seventy per cent chance that they would lose their hard earned money, which was around a few hundred thousand dollars, and they did it anyway.
Amazon raised a series A round worth $8 million from Kleiner Perkins Caufield & Buyers in 1995. In 1997, the company filed an IPO and went public to raise additional capital from the people. By 1999, the value of series A round investments in Amazon created returns of over 550 times for Kleiner Perkins Caufield & Buyers.
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With sales falling short of expectations, Amazon.com received a $100 million investment from AOL Time Warner. That investment was part of a broader deal in which AOL bought technology from Amazon to operate its online shopping channels. Amazon’s revenues were $668 million in the quarter, up 16 per cent from a year ago, but below the $680 million in the investment fiscal.
Within two months of launch, the company hit sales of $20,000 every week. However, Jeff Bezos kept reinvesting and Amazon has continued to plough their revenue back into growth. Below chart depicts Amazon’s continued focus on growth with zero profits and raising revenue.
Important Amazon Milestones
In 1994, Bezos quit his job and launches Amazon out of a garage. Within 30 days, the sales rise to over $10,000 a week. In 1995, Bezos raises $8 million round and in 1997, the company goes public at $18 per share.
In 1999, the Time Magazine named Jeff Bezos as “Person of the Year” for his fame in online shopping industry. From 1999 to 2009, Amazon continues to grow to heights for 10 years. In 2009, Bezos acquired Zappos through a stock swap and in 2013 acquires the Washington Post.
List of Mergers and Acquisitions by Amazon
Amazon has made over 50 notable company acquisitions and 65+ investments over the years. Its first Acquisition was in 1998 while the latest being in 2018. Amazon acquired PillPack and Ring in 2018.
1998: PlanetAll, Junglee, Bookpages.co.uk (later became Amazon UK).
1999: Internet Movie Database (IMDb), Alexa, Accept.com, and Exchange.com
2003: CDNow (Defunct)
2004: Joyo.com, an e-commerce site in China.
2005: BookSurge, Mobipocket.com, and CreateSpace.com.
2006: Shopbop, a women’s luxury retailer.
2007: DPReview.com and Brilliance Audio.
2008: Audible.com, Fabric.com, Box Office Mojo, AbeBooks, Shelfari, and Reflexive Entertainment.
2009: Zappos, Lexcycle, SnapTell, Stanza (Kindle Rival).
2010: Touchco., Woot, Quidsi, BuyVIP, and Amie Street.
2010: Toby Press
2011: LoveFilm, The Book Depository, Pushbutton, and Yap
2012: Kiva Systems, TeachStreet, and Evi
2013: IVONA Software, GoodReads, and Liquavista
2014: Double Helix Games, comiXology, Twitch
2015: Annapurna Labs, 2lemetry, ClusterK, Shoefitr, Safaba Translation Systems, Elemental Technologies, AppThwack
2016: NICE, Curse, Inc., Biba Systems, Cloud9 IDE, Emvantage Payments Pvt. Ltd.
2017: Harvest.ai, Thinkbox Software, Do.com, Souq.com, Whole Foods Market, GameSparks, Graphiq, Wing.ae, Body Labs, Goo Technologies, Blink Home
In the initial days, it was very difficult to see Amazon’s future and presume it to be the number one retailer in the world. But, that’s what exactly happened. Amazon now has separate and dedicated online websites for different markets including the United States, Canada, United Kingdom, Italy, Japan, China and India among others.
The company has launched its own digital wallet known as Amazon Pay where users can recharge mobile, pay bills and use it to shop on Amazon. Amazon has also dived into Cloud Computing business with its Amazon Web Services division renting cloud space and services to developers and companies.