Amazon.com

[Please note: This article was originally written in 1999, before the dot bust. It is hopelessly outdated, and frankly only still here because I continue to get search engine traffic through it.]

    I'm concerned about Amazon.com. Before I elaborate, a couple caveats: These are relatively unstudied observations not the result of great thought and research. Also, these are the views of an outsider occasionally glancing in. That said, onward.

    First, Amazon.com as a stock has almost always been grossly overpriced. The stock market is way to giddy about Internet stocks in general. The Internet is going to be just another part of life. As it grows increasingly so, the reality of price being commensurate with tangible value is going to catch up with these grossly overvalued high-fliers, the same way it did with the boom in "technology" stocks in the 60's. Massive, and somewhat permanent (as permanent as anything is on Wall St.), corrections must result. Amazon.com is right in line for this type of massive correction.

    Second, from a practical standpoint, the last two times I've gone to Amazon.com to check something out they have been closed!!! Unbelievably, they don't seem to realize how damaging this can be. All I have to do is click over to some other on-line book supplier, decide they are a better provider and there when I want them, and Amazon has permanently lost a customer. It is so vitally important that any Internet concern be open 24 hours, seven days a week, that this should be one of the prime concerns -- maybe the prime concern -- of any Internet venture. One time putting up a "Sorry we are temporarily closed, come back later" can be disaster. Twice is probably fatal. Three times is definitely fatal. You won't keep a customer who repeatedly sees this foolishness.
    This goes for start-ups as well as established companies. I can't count the number of times I have come upon someone's web address, gone to their site, and found it hadn't yet opened, the only greeting being a sign that "sometime in the future we will be here. Keep checking back!" Uh-uh. Forget it. All they will receive from me is my click out. I'll find someone else who supplies what I need and is there. Most times in this game you only get one chance to snag a visitor. Loose it and it is over for good. Some, like Amazon.com throw up a form to fill in with your e-mail address so you can be alerted when they open/re-open. Forget it. This is as worthless and destructive as not being at home when the visitor comes knocking.

    Lastly, I am very concerned by what I see as Amazon.com's over expansion. They have strayed too far from their principal business, which is, as I see it, selling media based information. CDs and software were a logical evolution from books. Toys and Auctions are not. Combine this with the facts that their price/earnings ratio is grossly out of proportion and that one of the major killers of all concerns is trying to expand too rapidly, and you have a recipe for major trouble. They shouldn't be expanding at all until their core business is sufficiently stable and profitable. These wild flights of expansion into areas completely unrelated to their core business should never happen at all. Period.

    There in a nutshell are my concerns about Amazon.com. This should be of concern not only to customers, associates and shareholders of Amazon.com, but to every single Internet business and shareholder. Amazon.com is so visible, so much a touchstone for the entire Internet community, that were it to fall it would leave a wide, impressive, and seriously cutting wake. The loss in psychic capital and goodwill would probably take quite a while to heal. That is something that should concern us all.


Los Angeles, CA
September 19th, 1999