Amazon is an ecosystem of ecosystems that started in 1994 as an online bookshop. In the 25 years that followed, this was extended with almost every other product that can be shipped and delivered to your door; it was extended into a marketplace open for other sellers; it develops, streams and sells videos, games, music and books; provides logistics, marketing, payment and web services to companies; sells smart consumer products and a host of private label products, and now expands into health care and finance.
A recent report about Amazon’s method of tax avoidance had a hard time mapping the entire bundle of companies and subsidiaries that jointly make up Amazon, and finally could not complete the network model. The corporation wiki identifies 26 Amazon companies in the US alone.
In this blog I show a map of the empire Amazon has built. In the following blogs I will analyze the strategy that Amazon has consistently followed to build this empire and will show that Jeff Bezos’ estimate of how much value Amazon created in 2020 actually shows that Amazon extracts more value than it creates in its empire.
Next, I will analyze Amazon’s ant-competitive practices and make a map of the friction that it offloads on other stakeholders in its ecosystem. I will conclude with lessons learned about the structure of smart ecosystems and the need to include other considerations than frictionless buying and shareholder value in the governance of this ecosystem.
An overview with more details about business models and cash flows will be available as a White Paper after this series of blogs is published. The White Paper also contains all the links to the public information used to construct these models.
Amazon’s ecosystem of ecosystems
Amazon’s empire is an ecosystem of ecosystems that serves consumers, vendors, sellers, businesses, developers, influencers and freelancers. The following diagram represents this ecosystem as a number of layers, where each layer consists of several ecosystems built around a particular value proposition.
For each ecosystem I show the Amazon subsidiaries or product lines offered in that ecosystem, some of the partners with whom Amazon cooperates in this ecosystem, and some of its competitors. I may compete with actors with whom it also partners, and sometimes competes with its own subsidiaries.
Each layer in the diagram provides services to higher layers. I will explain them from the bottom up.
Basic services. The bottom layer provides services used by Amazon at higher layers. The Alexa speech recognition provides services used in several of Amazon’s product lines, such as the Echo and Ring. Kuiper systems is a planned network of satellites by which Amazon would make broadband globally available, thus expanding the population of potential customers of its web site. Amazon Operations and R&D operate and develop advanced technology to run its warehouse and logistics operations and to develop new products.
Commercial services. The next higher layer contains ecosystems that provide logistics services, marketing and advertising services, payment services and cloud computing services. These services were developed for Amazon itself first and were then offered to external customers later. Amazon Logistics operates a fleet of trucks, vans, airplanes, drones and delivery robots to deliver packages to your door. Amazon Logistics and Amazon Flex are subsidiaries for logistics partners and freelances to deliver packages for Amazon, respectively.
Amazon Marketing provides advertising services. Amazon Associates are online businesses who refer to items sold on Amazon, and Influencers plug items sold on Amazon to their followers.
Amazon Payment provides shop cards and other financial services, such as credit for small businesses and product insurance for consumers. Amazon Pay is also sold as payment technology to merchants who do not sell on Amazon.
Amazon Web Services provides a host of cloud computing and data storage services to the world. Many of these services are developed by Amazon, possibly in cooperation with partners. AWS also contains a marketplace for third party services offered on AWS.
Amazon products and content delivery. The next higher layer contains ecosystems that offer Amazon product lines and private labels, and a series of content-delivery ecosystems. Video delivery contains studios, producers, actors, producers, streaming delivery channels and more. The gaming ecosystem contains game studios, Luna (AWS platform for playing games), Twitch (game streaming), and an e-sports university. The music ecosystem contains Amazon Music plus artists, writers, producers and other stakeholders. Digital Photography review lives in the ecosystem of photographers and photography products. The Kindle has started a boom publishing ecosystem containing Amazon publishers, online comics books, audio books, a platform for self-publishing by educators, and a direct publishing platform for authors.
Sales channels. On top of this we have various channels, physical and online, through which consumers can buy stuff from Amazon or from sellers operating on Amazon Marketplace. This includes online shops bought by Amazon such as Zappos and Shopbop, and an app store for its android-like operating system Fire. Amazon FlexWork is an ecosystem where freelance workers can perform piece work for Amazon or others. Amazon Health is the latest extension, selling pharmacy products and providing online health care to customers.
Consumer value propositions
Another way to look at Amazon’s empire is to catalog the value propositions it offers to consumers and to businesses. The following diagram shows its value proposition for consumers.
Starting from the top and going clockwise, the diagram shows that Amazon offers about the largest range of products that can be transported physically or digitally to your home. It offers an online interior design service and has a marketplace for handymen who can assemble products you bought on Amazon for you. It offers private label products and connected home products and facilitates delivery by a variety of delivery and pick-up services. It also offers health care and financial services. Its large range of content delivery services is supported by devices such as the Kindle and Fire tablet, by which content can be delivered.
Business value propositions
The value propositions for businesses consist of services for retail and marketplaces (top half of the following diagram) and services for the operation of a business (bottom half).
Amazon offers channels and services for producing and distribution content, products and services, crowdsourcing platforms for putting out small jobs, a platform for auctioning returned and unsold goods, and a procurement platform for businesses.
To operate your business, it offers logistics services, financial services, marketing services, physical retail technology, and web services. Amazon One is a system by which customers can identify themselves by the palm of their hand when they enter a shop. Just-Walk-Out is the technology used in Amazon Go shops, where there is no checkout counter. The smart shelf is a shelf that weighs the number of products stacked on it and can reorder them before the shelf is empty.
The humble bookshop with not-so-humble ambitions grew to an empire of staggering size. Amazon is not just a shop nor just a marketplace. It uses many business models, traditional and modern, to generate revenue. In my next blog we will look closer at these business models.