A few days ago, Amazon released the results of their Q1 FY2021 and did not disappoint. You can find their results here. Below are some of my takeaways and charts for illustration purposes
A growing giant
This is the first quarter where Amazon’s average 4-quarter rolling net sales exceeded $100 billion. Think about the scale for a month. In other words, for the past 365 days, Amazon generated more than $1 billion per day on average. What’s more impressive is that their YoY growth has been on an upward trajectory for the past few quarters, hitting 44% in the recently reported one. That’s the kind of growth you often see at companies at a much smaller scale, not a company that is well on track to produce half a trillion dollars in sales a year.
I don’t know where their next growth will come from and that may be the scary thing about this behemoth
Among the three main segments, North America is the biggest in net sales, almost double the combined figures from AWS and International. Bewilderingly, it has been growing at a higher clip than AWS in the past four quarters, lacking behind International, whose YoY growth just hit an astounding 60% in this quarter. If you look at the segments’ size, their growth figures and growth trajectory, it’s not straightforward to say which one will drive Amazon’s growth in the future. If Amazon can crack the Grocery and Last-Mile code in the US, it will be huge for their North America numbers. In terms of International, there is still a lot more to gain. Take Vietnam as an example. My country’s retail market is huge and growing fast. Yet, there is no such equivalent of Amazon. There are indeed big players such as Shopee, Tiki or Lazada, but they are eCommerce players and the breadth of their offerings isn’t as extensive as what Amazon can offer. Plus, if you ever try the apps of these companies, you’ll chuckle and say to yourself: if somebody can offer a better shopping experience, there is a lot of money to be made here. Lastly, global companies are going through digital transformation, a trend that is accelerated by Covid. It’ll be a boon to AWS’ business.
There are bull cases to make for each of these segments. I honestly cannot tell where the next growth will come from. Not because there isn’t. But because there are more than one obvious answer. For good measure, all three are now profitable. International used to be the black sheep, but it has been profitable for the past four quarters.
Advertising and 3rd party are growing fast, but don’t sleep on physical stores
Among the business lines, 3rd party and advertising, both high-margin, were the fastest growing with the former growing at 64% YoY and the latter at 70% in this quarter. At $80 billion annual run-rate, 3rd party is highly impressive, growing at 64% YoY. Amazon doesn’t break down 3rd party for domestic and international markets, but it’s not strange to think that as Amazon gains foothold in more overseas markets, more merchants will want to get on the platform. Meanwhile, advertising almost reaches a run rate of $25 billion, growing 4x in the last 3 years. Impressive as it is, there is still plenty of room to grow, both domestically and internationally. As Amazon’s online stores attract millions of buyers, advertisers will be interested in promoting their products or services on a platform where the intention to buy is high.
Even though physical stores’ growth doesn’t look particularly great, don’t sleep on them. Physical stores were first reported by Amazon in 2017. They are relatively new and I consider them strategic investments from the company. Amazon will not be able to compete with Walmart in groceries’ scale and the network of stores as well as fulfillment centers across the country. Hence, they will likely use technology and efficiency in delivery as competitive advantages. Hard to pull off, cashierless stores will save Amazon on personnel costs and provide a differentiated shopping experience for customers. They may also play a role in Amazon’s network of middle and last mile delivery. Eventually, customers may still receive cheaper groceries from Walmart, but some may be more interested in a different shopping experience and expedited delivery from Amazon.
In the United States, we’re delivering out of our Whole Foods stores, and we’ve engaged — we’ll be allowed to pick up a greater expansion of pickup at Whole Foods stores. Amazon Fresh became a free Prime benefit, as you know, in the late part of 2019. And customers really adopted it and continue to see strong growth. So I think on the fresh stores, it’s a little too early. The stores themselves, we’re confident that the Just Walk Out technology that will be a boon, a benefit to customers.
Source: Amazon’s CFO from Q1 FY 2021 Earnings Call
The government’s revenue depends significantly on the tax receipts from citizens and corporations. So the revenue projection depends much on the assumptions of economic growth which seem too optimistic. It’s important to take into account the feasibility of these assumptions; which the media may not capture fully or an average citizen cares enough about
News websites generate revenue mostly through either subscriptions, contributions or ads. Some offer exclusive content via subscriptions such as Washington Post, some offer content for free such as cnbc, bbc and others operate as a hybrid, providing free access to most articles while holding out a select few for only subscribers.
To get readers to subscribe, you need to deliver not only great content, but also a pleasant user experience. TechCrunch has been particularly awful in this regard of late. As a frequent reader or at least I used to be, I am disappointed by their new approach. A short while ago, you could read TechCrunch with your adblock app on. Now, here is what you are greeted on the website
Unless you turn off your adblock or subscribe, you can’t even see what is available. Even Washington Post lets you see the homepage and only shows the paywall after you click on a specific article. But even after you turned off all ads blockers, the annoying message still shows up
Meanwhile, CNBC, which is another major business news outlet, takes a much more user-friendly approach with adblock
The design trick is aimed to implicitly persuade you to turn the blocker off, but you can certainly leave it on and continue reading CNBC articles.
Saigoneer, a news website that covers happenings in Vietnam, has a similar idea to CNBC, though the homepage is covered completely by this message. I turned ads blocker off a few times before I realized that clicking on the black bar will allow me to continue reading it freely.
Or news outlets can just follow what The Guardian does: offer content for free and ask nicely for contribution
Here is the success that The Guardian had from their approach
Today the Guardian has 650,000 regular paying members, 360,000 of which are recurring paying members and 290,000 pay for print papers and digital memberships, according to the publisher. In the last year, it received more than 364,000 single contributions from around 318,000 contributors. In the last three years, the title received 1 million paid donations — a mix of one-offs, recurring paying members, and print sales.
In short, I hope that whatever TechCrunch is trying to do has been working for them. Personally, I became frustrated with their paywall and since their free articles are available on other news channels anyway, I have frequented to other websites more and abandoned what used to be one of my favorite sites.