The numbers were pretty bad, big miss on revenue and guidance below analyst expectations. It seems the market was pricing in even worse numbers, given the terrible stock performance over the last quarter and last 18 months. It's really only up 6-7% over yesterday's close after taking out today's fear drop related to the abysmal FB report yesterday. After FB's most disastrous ER in modern history for a megacap, just about anything looks better in comparison.
The stock was already down a lot in the last few days. Investors just had a moment of relief to learn that the reality was not as bad as they imagined.
Most of their net income was from the Rivian investment?
Net income increased to $14.3 billion in the fourth quarter, or $27.75 per diluted share, compared with $7.2 billion, or $14.09 per diluted share, in fourth quarter 2020. Fourth quarter 2021 net income includes a pre-tax valuation gain of $11.8 billion included in non-operating income from our common stock investment in Rivian Automotive, Inc., which completed an initial public offering in November.
I'm pretty sure it does not work that way unless they sell. Rivian's IPO changed the nature of Amazon's investment so that probably triggered the reporting. Now it won't affect the bottom line unless they sell or some other major event occurs.
It actually does work that way. They consider these investments as cash equivalents so they are reported mark to market, which will be a significant paper loss that can offset profits elsewhere and make for an ugly looking quarter.
> With the continued expansion of Prime member benefits as well as the rise in wages and transportation costs, Amazon will increase the price of a Prime membership in the U.S., with the monthly fee going from $12.99 to $14.99, and the annual membership from $119 to $139. This is the first time Amazon has raised the price of Prime since 2018. For new Prime members, the price change will go into effect on February 18, 2022, and for current Prime members, the new price will apply after March 25, 2022, on the date of their next renewal.
Wow, $14.99/month is a stark difference with the €2.99/month that they charge for a Prime subscription here in The Netherlands. I wonder if they will increase the subscription fee here to the same level once they reach the desired market share in the video streaming and e-commerce spaces here.
2-day delivery would be uncompetitive in The Netherlands. Next day delivery is the standard for webshops here, and most offer same day delivery as a paid upgrade when you either order before noon or live in a large city.
yeah, it'd be nice if Amazon had an urban discount in the US :). Deliveries to large multifamily buildings must be tons more efficient than to the 'burbs.
The Dutch East India Company was worth around 6B adjusted dollars. Where are they now...
Obviously Amazon is not invincible, but it's hard to imagine a scenario where they get beaten. It's going to take the ground shifting out from under them.
Walmart only announced their prime competitor in 2020 (Walmart+) and AWS is absolutely ripe for disruption on many fronts, including bandwidth fees. If you look around at cloud providers, it is getting to be a very crowded space (AWS, GCP, Azure, OCI, IBM, etc.) and there is no guarantee AWS will remain the go-to for the low hanging fruit web hosting use cases which can be currently handled by virtually everybody.
If anything, I would point to Firebase and GCP as the tools that have driven the most innovation over the last few years, and AWS is looking more and more like a utility with a very big service cost (bandwidth) that can absolutely be disrupted.
Talk of Walmart as a main competitor only makes me more sure that no one will touch Amazon any time soon. They bought Jet.com for 3.3B in 2016 to try to compete with Amazon. Any day now, any day...
Not sure I agree. Sure, they bungled Jet... that's fair.
But WM has been extremely competitive for us. AMZ went from same day to 2 day for us around COVID and never came back.
WM standard delivery is 2 days and way more reliable. Moreover, if they have items in the store, they'll just bring it to you...in an hour or so. Food, clothes, games, fishing poles, medicine, you name it. That's a huuuge advantage that AMZ just doesn't have in most places.
And sadly to say, WM generally has more reputable products for widget X than Amazon, which are often just 10 rebranded knockoffs of something.
I keep prime and appreciate Amazon, but to say WM isn't competing is vastly underestimating the landscape. If anything, I see WM overtaking AMZ for most typical orders.
The problem with this theory is that if AWS ever faces a significant threat due to their bandwidth fees they'll probably end up lowering them even if it's at a loss for a while. I don't think AWS is at all threatened by other "kitchen sink" providers but by competitors providing better service for specific use cases.
AWS has many competitors, definitely not unassailable. For a new company to go cloud, I would be happy shopping between Azure/AWS/GCP(but not really) to get a desirable deal.
Amazon however has this logistics empire built over past decade. It would remain untouchable for a long time.
If I understand correctly, their net sales went up nearly 100 billion dollars in 2021, but their small increase in income entirely came from AWS.
It's a pretty common theory that their retail division is just around the corner from reaping massive economies of scale. But they just had one of the biggest retail years ever had by a company in history and might have lost money overall.
Does anyone without Prime really miss it? Or did you cancel and regret it? Mine is up for renewal at the end of this month, fairly certain I'm not going to renew regardless of a price hike.
I don't miss it. Just watch out that they select automatically the non free option for shipping even if there is a free option with the same expected delivery. (This is for > $25 orders.) I'm located far from a distribution center so that might make a difference.
Not him, but I miss when search results weren't clogged up with 80 copies of the same piece of shit from the same Chinese factory branded as 80 different items, and rampantly astroturfed reviews. The website used to lead faster and was smoother to use, customer service was much better, less amazon pushing air fryers and rice cookers and other flavor of the month useless shit.
This. I’ll also add that the reviews themselves were a great resource when researching the a product space — 10 years back I’d use Amazon rather than google for learning before buying. Now both are garbage; I get some value out of restricting search results to Reddit and then filtering by time (past month, year, etc), but Reddit will inevitably destroy that once they have shareholders to appease. Sigh.
Yes, small purchases through Amazon (enabled by Prime due to no price minimum for 'free' shipping). I picked up a tip on Hacker News to avoid small ~$20 USD purchases because it adds up, and this habit has saved me a lot of money.
Only 22 orders placed in 2021, and a spot check of ~15 of the items would ship "free" anyways. I don't care enough to check every single item, but of the ones I checked I could not find a single one that would have an added shipping cost.
The "2 day guarantee" doesn't really exist anymore, so I have to ask - what am I paying for?
Similar experience here. I also found that Wal-Mart has a similar selection (lower prices for some items) to Amazon. It shares the same price threshold for free shipping, and also arrives sooner (reliably two to three days from Wal-Mart in my area, versus five to seven from Amazon without Prime).
Canceled 5 years ago and don't miss it at all. Sometimes I will have to spend 10 minutes longer looking for a supplier online, but I can get all the same things for a similar price and I haven't had any of the issues I used to with Prime like receiving fake shampoo (with brand names misspelled), I get equal or better product quality, and I feel better supporting local businesses.
Added bonus is I found myself impulsively ordering less useless crap since it requires more thought to order and isn't delivered immediately.
tried prime 10 years ago and it wasn't anything worth writing about. i dont order that many products from them anyway and if i do i would just batch them up to get free shipping
It probably depends on how you use it. Many of my relatives have cancelled it without a problem.
I buy all sorts of one day/same day items that I would need to go to a store for otherwise (virtually anything that isn’t fresh food that you might want same day like toothpaste or soap or bandages), so I could never give it up.
Just earlier today, I was looking to buy some isopropyl alcohol spray. There was one that was listed as "Get by Sun Feb 6". Out of curiosity, I applied that filter.
Now that item had disappeared. And a much smaller list of items where none of them were actually available tomorrow, and in fact, most were a week slower than the first I found.
What do you mean "up for renewal"? You can cancel Prime at any time, there's no contract term.
(Personally I keep Prime mostly for Prime Video, and a few other perks. I typically only buy a few things from Amazon each month, so the free fast shipping is a bonus for me, not a must-have).
This is a manufactured argument. 99% of their question was "do you value prime enough to keep paying for it", it was nice of the person to let them know that you can quit anytime and get a prorated return of money for the annual subscription price but really wasn't the main point of the question.
OK, seems like they changed their policy at some point and it no longer mentions pro-rated refunds:
"Paid members who haven't used their benefits are eligible for a full refund of the current membership period. We'll process the refund in three to five business days."
Have cancelled mine a few years back as I realized the only thing I was using is 2-day shipping but I have been just ordering multiple items which exceed $25 to leverage FREE shipping and usually they ship fast. So no need for Prime for me!
It's easy enough to get free shipping without Prime (just wait until there are enough items in the cart to get free shipping). But I'm still getting value out of Prime streaming so I'm keeping Prime until that changes.
We cancelled once for about 6 months. We missed it. You never realize how many little things you buy are only available on the internet, and a couple of bad customer service experiences made me really appreciate Amazon.
Cancelling has made me more deliberate about my purchases, which I think has been a net positive. There's a reason why every retailer wants to decrease friction in purchases and sometimes that little bit of friction is a good thing for your wallet.
There is no way I could not renew. I use it way too much. I easily save that much in gas and probably 10x that in valuable personal time not having to go to walmart/best buy/etc
Walmart has their “Plus” offering that is $99 and gives the same kind of free shipping as Prime. If you’re okay with it, you can also get free grocery delivery from your local store.
Reaping economies does not happen the quarter/year you grow fast, it takes time to realize that. At high growth phase you are spending a lot on inefficient processes and it takes time to normalize that ( even for Amazon)
Also last year was expensive for logistics, very expensive in part due to the supply chain bottlenecks and delays and using alternative shipping like flying more than ships etc. However prices for shipping on Amazon has not really gone up that much, the lack of profitability may reflect that as well.
I'm endlessly surprised that no one seems to question the insanity that advertising can be the major source of revenue for so many company.
Advertising, by its nature, derives it's value from the sale of other goods.
It should be concerning that more and more companies, major household names, make their money off of advertising. It fundamentally doesn't make sense.
How much of advertising revenue comes from companies that themselves ultimately don't make a profit? So much of our current economy is an illusion created by shuffling around huge amounts of investor capital to make it look like there is money flowing everywhere.
Certain industries have always had bigger profit margins than others.
Turns out that advertising is inherently more scarce than consumer goods; while you can manufacture as many consumer goods as the market will absorb, you cannot just manufacture more human attention. Instead you must compete for the limited pool of attention that already exists, and established players like Google and Facebook control vast amounts of attention without much effort.
This supports a huge differential between the "cost" of serving an ad and its market value, whereas if you're charging $500 for a toaster somebody else will be selling them for $400 by the end of the month.
As for the huge sums of money: it's just a cost of doing business. As long as the manufacturers have still have nonzero profit margins, and as long as advertising delivers as much value as it costs, it's a stable equilibrium.
Damodaran keeps a table of industries by net margin:
oh they work. Tell you what, let's each launch mobile apps. I'll spend $10,000 a month on advertising and you spend $0. At the end of the year we'll see who has more users.
More and more companies go online, try to get customers. So they all spend money on getting customers buying their product. Even if the ads costs 50% of their profits.. That's ok.
So, big advertisers like Google and FB make money off almost ANY company that becomes successful trough ads. The funny thing is: If there are competitors then google or FB is making even more money, because they are all bidding for the add-spot. And google is walking away with the money. And, yeah, some companies lose money to try to push the competitors out of market. Through ads.
Advertising is all about eyeballs and ears. The biggest advertisers have always been household names.
e.g. Any television channel (e.g. BBC, CNN, ESPN, MSNBC, SiFi), any newspaper/magazine (NYT, Life, etc), all of radio, every storefront and its flyers (e.g. Safeway, Wallgreens, Costco).
These are all directly or indirectly advertising companies that have been household names for the last 100+ years.
The only difference now is (unlike for billboards), digital real-estate is very cheap and can be owned by a single conglomerate, rather than a decentralized group of capital holders.
1. To profit they'd have to slow down investments in improvements to logistics, and they didn't. It doesn't seem like the year to do it?
2. Increased labor costs.
You can't figure this stuff out from first principles; you have to look at what they're doing.
They are making billions from retail indirectly now. Retail proper can break even. Advertising makes most of their profit outside of AWS. A large part of the advertising revenue is in retail from sellers paying to have their product offerings show up in search results.
The most significant piece of information, in my opinion, is that this is the first time that Amazon has broken out advertising services. This disclosure might be contributing to their stock performing well after hours, given their guidance miss.
Advertising grew 32% year over year to $9.7 billion during the quarter, which puts them third after Google ($61.2 billion) and Facebook ($28.3 billion).
Forward looking guidance is made by the company for the next quarter in the current quarter. Missing guidance means that company which lot of visibility into its sales and operations had unanticipated changes to its operations and that is generally bad.
Analysts estimates are made by Wall Street predicting performance of the company without insider info (in theory), top analysts generally get access to companies they cover while company management are not supposed to disclose any material non public information in such meetings, even when following the law to letter lot of indirect information would become available, Matt Levine has written often on Regulation FD [1] . The point is estimates have some basis in fact and information as well.
The change in cash flow especially cash flow less leases leads me to believe they are massively expanding either data centers, warehouses, or both. New aws regions? New amazon country launches? Or more if each in their existing locales? Either way, those are some hefty new investments they put cash down for.
I see such a big disconnect between AMZN and GOOGL. Google is so much cheaper compared to Amazon. And this past quarter showed, Google is executing at a much better pace and quality.
For example, PEG is nearly 3x for AMZN. At such size and scale, how are investors betting that Amazon will continue to out grow the rest of tech monopolies?
Google has only one business - search, and so far hasn't been able to show an ability to build another money printing machine, and actually an opposite - they are failing at cloud for example. Compare that to AMZN which has already 2 - the store/marketplace and the AWS. That difference between 1 and 2 is humongous. The tech history is littered with one-trick ponies.
Increasing the cost of Prime now??? My recent prime orders have all exceeded 1-2weeks for delivery.
Prime is really losing its stickiness for me:
The only things I get from Prime that are of value to me are:
1) 5% off all purchases using a Prime CC.
- I can get 2% with other cards and have the freedom to pick and choose where I buy from.
2) Free shipping (that once was quick, but now it isn't and I have had no communication as to why and when it will return)
- $139 pays for a lot of shipping - particularly if I am patient and aggregate orders.
Dropping Prime gives me the moral benefit of kicking a monopolizing data thief to the curb. Starting to sound like a no-brainer.
Do you lose the 5% if you aren't a prime customer? I though that was just 5% on Amazon purchases but I could be wrong. But I agree in terms of speed of delivery, a lot of items aren't prime (super dark patterns on this front) and the ones that are get delayed by a few days normally. I don't use Prime Video or anything else from Amazon so maybe I should re-consider my subscription. They are now just shy of what I pay for /every/ JetBrains product annually with a whole lot less useful for me.
Hmm, well then it really comes down to "Do 2% of your Amazon Purchases equal $140 or more?" (Aka, do you spend more than $7000 at Amazon), last year I did spend more than that so I guess Prime pays for itself in my case.
Another huge stock surge for a company that is already huge, similar to Google two days ago. A portfolio composed of 10 of the biggest, most dominant tech and payment processing companies would have posted an annual CACR since 2009 of 35%. [1] It would also have smaller drawdowns than the S&P 500. That is as good as Renaissance Medallion (after fees). A 2x leverage version of such a hypothetical fund would have done 10-20% better than Medallion before fees.
[1] https://greyenlightenment.com/2022/02/01/why-infrastructure-...
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[ 3.0 ms ] story [ 127 ms ] threadand it is seen as sticky enough to not lose tons of subscribers.
To me it is like a steal
Net income increased to $14.3 billion in the fourth quarter, or $27.75 per diluted share, compared with $7.2 billion, or $14.09 per diluted share, in fourth quarter 2020. Fourth quarter 2021 net income includes a pre-tax valuation gain of $11.8 billion included in non-operating income from our common stock investment in Rivian Automotive, Inc., which completed an initial public offering in November.
The Netherlands is like a quarter of the area of New York state alone, and has about the same population.
Obviously Amazon is not invincible, but it's hard to imagine a scenario where they get beaten. It's going to take the ground shifting out from under them.
Here, you dropped 3 zeroes: 6T.
If anything, I would point to Firebase and GCP as the tools that have driven the most innovation over the last few years, and AWS is looking more and more like a utility with a very big service cost (bandwidth) that can absolutely be disrupted.
But WM has been extremely competitive for us. AMZ went from same day to 2 day for us around COVID and never came back.
WM standard delivery is 2 days and way more reliable. Moreover, if they have items in the store, they'll just bring it to you...in an hour or so. Food, clothes, games, fishing poles, medicine, you name it. That's a huuuge advantage that AMZ just doesn't have in most places.
And sadly to say, WM generally has more reputable products for widget X than Amazon, which are often just 10 rebranded knockoffs of something.
I keep prime and appreciate Amazon, but to say WM isn't competing is vastly underestimating the landscape. If anything, I see WM overtaking AMZ for most typical orders.
Sendgrid vs SES, Auth0 vs Cognito, SNS vs Twilio.
Amazon however has this logistics empire built over past decade. It would remain untouchable for a long time.
It's a pretty common theory that their retail division is just around the corner from reaping massive economies of scale. But they just had one of the biggest retail years ever had by a company in history and might have lost money overall.
I don't miss it at all. I do miss the amazon of 10 years ago though.
Why? What about it do you miss?
The "2 day guarantee" doesn't really exist anymore, so I have to ask - what am I paying for?
For me, I go without, and I only buy things with free shipping, so having Prime would not save me money; it would cost me money.
(I also buy less things when I do not have Prime, so that saves me additional money!)
Added bonus is I found myself impulsively ordering less useless crap since it requires more thought to order and isn't delivered immediately.
I buy all sorts of one day/same day items that I would need to go to a store for otherwise (virtually anything that isn’t fresh food that you might want same day like toothpaste or soap or bandages), so I could never give it up.
Though I do have a pharmacy in walking distance so it's not much effort for me.
Just earlier today, I was looking to buy some isopropyl alcohol spray. There was one that was listed as "Get by Sun Feb 6". Out of curiosity, I applied that filter.
Now that item had disappeared. And a much smaller list of items where none of them were actually available tomorrow, and in fact, most were a week slower than the first I found.
The faster delivery is a nice bonus, but I have prime for the live tennis content mainly.
(Personally I keep Prime mostly for Prime Video, and a few other perks. I typically only buy a few things from Amazon each month, so the free fast shipping is a bonus for me, not a must-have).
So the statement you challenged makes perfect sense.
Their point was you might have erroneously assumed you had to make a decision now.
"Paid members who haven't used their benefits are eligible for a full refund of the current membership period. We'll process the refund in three to five business days."
https://www.amazon.com/gp/help/customer/display.html?nodeId=...
I have received a pro-rated refund when I cancelled in the past.
Also last year was expensive for logistics, very expensive in part due to the supply chain bottlenecks and delays and using alternative shipping like flying more than ships etc. However prices for shipping on Amazon has not really gone up that much, the lack of profitability may reflect that as well.
Advertising, by its nature, derives it's value from the sale of other goods.
It should be concerning that more and more companies, major household names, make their money off of advertising. It fundamentally doesn't make sense.
How much of advertising revenue comes from companies that themselves ultimately don't make a profit? So much of our current economy is an illusion created by shuffling around huge amounts of investor capital to make it look like there is money flowing everywhere.
Turns out that advertising is inherently more scarce than consumer goods; while you can manufacture as many consumer goods as the market will absorb, you cannot just manufacture more human attention. Instead you must compete for the limited pool of attention that already exists, and established players like Google and Facebook control vast amounts of attention without much effort.
This supports a huge differential between the "cost" of serving an ad and its market value, whereas if you're charging $500 for a toaster somebody else will be selling them for $400 by the end of the month.
As for the huge sums of money: it's just a cost of doing business. As long as the manufacturers have still have nonzero profit margins, and as long as advertising delivers as much value as it costs, it's a stable equilibrium.
Damodaran keeps a table of industries by net margin:
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
You could say the same thing with about every other expense of running a business.
So, big advertisers like Google and FB make money off almost ANY company that becomes successful trough ads. The funny thing is: If there are competitors then google or FB is making even more money, because they are all bidding for the add-spot. And google is walking away with the money. And, yeah, some companies lose money to try to push the competitors out of market. Through ads.
e.g. Any television channel (e.g. BBC, CNN, ESPN, MSNBC, SiFi), any newspaper/magazine (NYT, Life, etc), all of radio, every storefront and its flyers (e.g. Safeway, Wallgreens, Costco).
These are all directly or indirectly advertising companies that have been household names for the last 100+ years.
The only difference now is (unlike for billboards), digital real-estate is very cheap and can be owned by a single conglomerate, rather than a decentralized group of capital holders.
1. To profit they'd have to slow down investments in improvements to logistics, and they didn't. It doesn't seem like the year to do it? 2. Increased labor costs.
You can't figure this stuff out from first principles; you have to look at what they're doing.
Advertising grew 32% year over year to $9.7 billion during the quarter, which puts them third after Google ($61.2 billion) and Facebook ($28.3 billion).
I think that the market is happy for three reasons:
1. Algorithms misreading the high earnings ($11.8B out of the $14.2B is just a Rivian accounting adjustment).
2. AWS experiencing 40% YoY growth (accelerating QoQ for a while, while both Azure and Google Cloud are decelerating).
3. Advertising doing well.
This is true.
Azure YoY Growth:
Q2: 51%
Q3: 50%
Q4: 46%
Google Cloud YoY growth:
Q2: 53%
Q3: 45%
Q4: 45%
AWS YoY Growth:
Q2: 37%
Q3: 39%
Q4: 40%
Analysts estimates are made by Wall Street predicting performance of the company without insider info (in theory), top analysts generally get access to companies they cover while company management are not supposed to disclose any material non public information in such meetings, even when following the law to letter lot of indirect information would become available, Matt Levine has written often on Regulation FD [1] . The point is estimates have some basis in fact and information as well.
[1] https://www.bloomberg.com/opinion/articles/2021-03-09/sec-go...
They are up half the entire value of Facebook in after hours trading.
They are up about the GDP of Finland in after hours trading.
Prime is really losing its stickiness for me:
The only things I get from Prime that are of value to me are:
1) 5% off all purchases using a Prime CC. - I can get 2% with other cards and have the freedom to pick and choose where I buy from.
2) Free shipping (that once was quick, but now it isn't and I have had no communication as to why and when it will return) - $139 pays for a lot of shipping - particularly if I am patient and aggregate orders.
Dropping Prime gives me the moral benefit of kicking a monopolizing data thief to the curb. Starting to sound like a no-brainer.
Even things marked as Prime are taking 1-2 weeks for me. (I'm ~1hr from a major city)
I'm probably ditching my Prime sub when it comes up for renewal.