Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

2012Watch: Jeff Bezos Is Looking Cooler ... And Amazon Is Getting Hotter

Posted by Tom Foremski - January 11, 2012

Jeff Bezos is getting a lot more attention these days from the media and it's for all the right reasons: he has a distinct vision and his success is hard earned.

I had the great pleasure of meeting Jeff Bezos a few years ago (above, with Matt Greeley CEO of BrightIdea) and I was very impressed. It was a casual conversation but surprisingly striking in many ways. He clearly loves challenging conventional wisdom and exploring contrarian business strategies.

The media loves personalities but there are few left in the tech industry. I remember the golden years when there were plenty of flamboyant personalities in tech. Now there are very few, and the tech leadership is bland and becoming ever blander.

Steve Jobs' death leaves a position open for the media's built-in desire to focus on a strong personality that communicates well, runs a successful business, and is driven by a disciplined vision of the future. Someone who has been around for a while rather than a boy wonder. It's an important job and Steve Jobs did it well: helping to drag us all into the future.

Jeff Bezos fits that role. As founder and CEO of Amazon he runs a vast chunk of global online commerce -- more than 40 per cent in the US and growing. And he is willing to take big risks on ventures such as the Kindle, plus cutting big Hollywood content deals.

What's even more impressive about Mr Bezos is that Amazon's success is drawn from very slim profit margins. Steve Jobs led an Apple with huge profit margins and was able to stash a massive cash hoard.

Same for Bill Gates, Larry Ellison, and Larry Page - lucrative profit margins with plenty of cash in the bank -- it help gloss over many mistakes and bad decisions. Mr Bezos doesn't have the luxury of a big float, he has to be right about key decisions the first time -- not the second or third time.

Here's AMZN's operating profit margin: 2.47% in its most recent quarter.

GOOG's is 33%, AAPL -- 31%, MSFT -- 39%.

AMZN has to be successful on less than one-tenth of the operating profit margins of these tech leaders. That's impressive.

Amazon's razor thin margins are a key component of Mr Bezos' business strategy in keeping competition away: how low can you go? It's a lot easier to take on an incumbent when they hold a price umbrella high above your head.

Amazon can thrive on margins that none of the tech leaders could bear for longer than a quarter.

It's also an effective way to discourage hostile takeovers. Estimates of Apple's cash and market securities holdings at the end of 2011 are $100 billion -- more than enough to launch a generous bid for AMZN, market cap $82 billion.

But AMZN's profit margins are so thin they would kill AAPL's margins, it's shareholders wouldn't let it happen. The same is true for many other companies that might want to buy AMZN. Its razor thin margins are a better protection against being swallowed up than any poison pill provision.

So how do you compete against a monster company that can thrive on single digit profit margins and can't be acquired? It's a brilliant business strategy.

He has a distinct vision of the future especially around the rapidly converging worlds of tech and media. I've often written about how Silicon Valley is becoming a Media Valley and Amazon is very much in the lead pack, despite being in Seattle. it's a high technology-enabled media company -- just like Google, Facebook, eBay, Yahoo!, AOL, and increasingly Microsoft, plus thousands of startups.

All of these things place Jeff Bezos in an excellent position to become a key communicator for the emerging technologies of the (near) future -- a role that Steve Jobs performed well.

This renewed media interest in Jeff Bezos is also helping to refurbish the image of Amazon--from being a drab and unexciting place to work, into a cool place to be-- which is hugely important in attracting top talent.

Here's a recent example of Amazon's new hipness, from Matt Rosoff: (Click on image for original:)<

Here are some of the reasons people want to work at Amazon:

- It has a great looking new campus in a hip district of Seattle, compared with its former HQ in an old VA Hospital in a dull neighborhood.

- Amazon Web Services is hugely successful -- it is the top choice of the coolest Silicon Valley and New York city startups.

- Amazon is rapidly becoming a media company and that's sexy.

- Kindle tablets are succeeding where Tablet makers have failed and that means Amazon can build a significant gadget business, maybe even a smart phone business too.

- Amazon is hiring a lot of people -- 8,000 worldwide in its most recent quarter. Momentum is a great boost for company morale.

- The most important reason to work at Amazon is that there are a lot of cutting edge projects underway and that's the number 1 way to recruit top software engineers. Forget perks like top chefs in the canteen, the best engineers want to work at places where they can hone their skills on great projects.

Jeff Bezos is very high on my very short 2012 CEO Watch list. So is Larry Page but more on him later.


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