Over the past year, Amazon’s stock has risen by about 50%, while Apple’s has fallen by 24%. This is a sign that some of Amazon’s longer term investments are starting to pay off, while Apple is struggling a bit to create the new categories for growth a company its size needs in order to maintain what had been an incredibly long and consistent winning streak. Apple and Amazon are both impressive companies, doing impressive things, delivering great products and services and, for the most part, delighting their customers. But I think amidst all the hoopla and near-halo effect surrounding Apple, it makes sense to step back and consider what Amazon is accomplishing.
I’ll admit that, on a personal level, I have a bit of a love-hate relationship with Amazon. I’m dismayed at the effect Amazon has had on brick and mortar stores, and the physical shopping experience in general, in the same way that WalMart, while impressive in its own right, has taken a serious whack out of Main Street. But as a customer, industry observer, and consultant, I am awed at how many good bets Amazon has made and at its consistently high level of execution. Let’s look at some areas:
Amazon Prime. Yes, the b-school case studies have already been written about Prime. And about how it might have been a loss leader in its first couple of years. Free two day shipping might be the gateway drug, but Prime cements the customer relationship in the fiercely competitive world of digital commerce. Just when you think Prime might not be ‘worth it’ because you didn’t buy a lot of stuff last year or use Amazon’s streaming music service, Amazon throws another goodie into the Prime pot, nearly guaranteeing that auto-renewal for numerous products and services. iTunes was once that baby. Now, it’s Prime.
Amazon Web Services. In an already crowded world of cloud and web services, Amazon was brilliant in spotting a vacuum for small and medium-sized businesses who felt ignored by the Silicon Valley heavyweights and wanted to grow modularly. AWS is the IT on-ramp for companies in the way that, in its heyday, AOL was the onramp for consumer internet and Apple was for smartphones.
But it’s fascinating to see how Amazon is continuing to shape and evolve AWS, adding services and capabilities in a way that almost anticipates the needs of its customers (i.e. big data, analytics, IoT) and expand the unit’s scope. For example, five days ago, Amazon acquired Italy-based NICE, a SaaS vendor of software and services for high-performance and technical computing. On Tuesday, Amazon launched Lumberyard, a new 3D game engine that enables developers to build and operate cloud-based games with the help of AWS.
Market Segmentation. This is an area where Amazon’s strengths are under-recognized. For example, with AWS, Amazon smartly focused on the needs of small and medium-sized business. Kindle is another great example. Rather than try to replicate the iPad as others in the Android sphere have done, Amazon has developed numerous versions of the Kindle that address a particular (and I would argue under-served) segment of the market: the Paperwhite for readers and a few SKUs of the Fire oriented toward content/media consumption.
The Kindle Fire for Kids shows how Amazon thinks through the needs of a particular segment – in this case, both the kids and the parents. For example, there’s an attractive subscription pricing option, a bevy of curated content appropriate for kids and focused on reading and education (addressing a segment of parents who are concerned about this issue), a solid parental controls capability, and a no questions asked two-year replacement policy. I doubt Amazon is making much of a profit on the device itself or even the content but I’m confident they’re monetizing this in indirect ways and over the long haul.
Television. For all the ink spilled about Apple TV and the fawning over its grand plans to reinvent the model, Amazon TV outflanks Apple TV in just about every respect. Ultra HD, a better bundle of channels and OTT content for those who want to cut the cord, integration with Alexa, who in my mind, is better than Siri, and a good package of content for Prime subscribers. Plus, they have invested heavily in original content, with more hits than misses. As well, the user experience with Amazon TV compared to the Apple TV is smoother. It just works and is not buggy. And you can download content, which is a huge advantage over other streaming services.
Software Experience. This is an area where Apple has lost ground. iTunes feels bloated and outdated. Its productivity applications, from Mail to Calendar to Cloud, are not best-of-breed. Now, Amazon is not in all these areas. It picks and chooses its spots. But I find that, in many cases, Amazon has put function over form. Their stuff just works.
Innovation. I’ll admit that I was skeptical of the Echo. But this product has proven to be a sleeper hit. Why? Well, it’s an attractive piece of hardware that does a lot of little things really well and that, on a collective basis, proves to be surprisingly useful and a bit magical. Sort of what we thought about the iPhone and the iPad when they were first introduced. And with Alexa, they’ve taken voice recognition to a new level. With the Echo, I believe Amazon has, so far, outflanked Apple’s HomeKit in the smart home race.
I also believe Amazon panders a little less to the investment community than Apple does. Apple is under relentless pressure to meet what have become unrealistic expectations, which I believe has caused the company to release products or features that are either not fully thought through or not quite ready for market. Don’t get me wrong here – the iPhone is still the best phone, Apple’s computers are still the best computers, and their ecosystem is still the best ecosystem.
And Amazon is by no means perfect. They have had some major product failures, such as the Fire Phone (though they cut their losses pretty quickly). They have had working conditions in the U.S. akin to those Apple has gotten pummeled for in China. The New York Times piece last year on what it’s like to work at Amazon, even if it were only half true, is disturbing. The company does not always play well with others. And Amazon is pretty obtuse about discussing the performance of its individual parts. But you can see in the company a confidence and a connection with customers. This might seem a trite example, but you sense it in their TV commercials, in a way that you did in Apple’s, circa 2011-14. It’s an interesting time to reflect on what this founding member of the dot-com era has pulled off over the better part of 20 years.