Thoughts on Amazon after their quarter: competition is increasing.
Amazon is still a great long term story — maybe arguably the safest 10 year story in megacap tech — but after having a quasi monopoly on US/European ecommerce (especially in terms of incremental share) and a true monopoly in IaaS for many years, they are now facing serious competitors in each.
The combination of Jet.com/Walmart, VC funded consumer brands that rely on Instagram (and don’t sell on Amazon), strong vertical players like Wayfair and traditional retailers going from terrible to ok/bad with respect to ecommerce is impacting Amazon’s marketing efficiency, ability to price discriminate and growth in ecommerce. This competition has been building steadily over the last 2–3 years. Amazon’s inability to meaningfully impact Wayfair — despite trying really hard — was telling.
Azure has been quite competitive with AWS for the last 18–24 months and Google is slowly getting there. Much less incremental competition for AWS than for Amazon in ecommerce.
Net, Amazon is still a great story but it is operating in much more competitive markets than they were even 3 years ago. As an aside, no one cares — or should care — about their 2019 spending plans. Easy to look through and proven track record of being able to increase margins during their “check-ins.” Amazon is a very financially disciplined company.
However, slowing growth and increasing competition is another matter. WW paid unit growth of 14% is getting close to the growth rate of overall ecommerce and marks the 7th straight quarter of deceleration in this metric (down from 23% a year ago).
There is still much to do with 3P take rate optimization via advertising, we are early in IaaS and in 10 years Amazon is highly likely to still be the dominant IaaS player globally and dominate eCommerce outside of China. But the change in the competitive environment is significant.
*Originally published as a thread on Twitter (earlier this morning).