The Mean Streets of 2018

Trying something a little new here. A few years back (mid 2018-2019 to be precise), I wrote a column with Medium called “Out of Ink” which focused on the “future of media in an era of tech monopolies.” It was a good gig, with guaranteed payouts and a built-in audience, two luxuries I’ve yet to recapture. Naturally, I wrote about Amazon quite a bit because that’s what I do.

Periodically this year, I’ll be revisiting some of these pieces to see how they’ve held up. Hopefully, it will be a fun way to remember what the zeitgeist was pre-COVID and look back on a long forgotten world.

Yes, this is a bit of a copout from writing new stuff— I’ve promised to publish every week and I have a lot going on. But I think it’s an intersting idea. Drop me a note to let me know what you think. What follows below is the full repost of a piece called “Breaking Amazon’s Hype Machine” from November 9, 2018 with commentary in italics and bold.

In a marginally better anticlimax than most M. Night Shyamalan plot twists, reports indicate that Amazon has decided to split its HQ2 between Long Island City, New York, and Arlington, Virginia. Mercifully, Amazon’s grand quest to use the starry-eyed idealism of mid-market politicians as a tax-evasion bargaining chip against NYC Mayor Bill de Blasio and Virginia Gov. Ralph Northam is finally over. New York is getting 25,000 more sweaty bodies on the rush hour 7 train while Arlington will have lunchtime lines at Sweetgreen that stretch into the Pentagon parking lot.

Overall, the HQ2 hoopla was a brilliantly executed PR stunt that was created to keep Amazon constantly at the top of American consumers’ minds in a narrative that it squarely controls. HQ2 provided Amazon with millions of dollars of free earned media and a cover for everything from its warehouse workers peeing in bottles to a precipitously quiet 20 percent decline in its stock price. Along the way, it taught us a lot about the paradox of effectively reporting on and talking about Amazon.

As the world’s largest online retailer, the current No. 3 media company in the U.S., a dominant force in cloud computing, and the single-largest corporate influence on the U.S. economy, nearly everything that Amazon does or says is “news.” But staying focused on which of Amazon’s announcements are actually newsworthy and deserving of analysis while Amazon continues dropping flying drone warehouse red herrings is near impossible.

South Africa’s premier investigative journalism outfit calls itself AmaBhungane, Zulu for “dung beetles,” in a proud acknowledgment that the literal function of media is to sift through shit so that the rest of us don’t have to. Thus, the more shit you throw at journalists, the tougher the job becomes. And, arguably, no American entity outside of the White House creates more news than Amazon.

On the same day that Amazon’s double HQ2 was leaked (and one day before the most important midterm election of our lifetime), the company announced free shipping during the holidays, introduced a program to hire its own drivers, and said that it would no longer host booksellers from South Korea, Hungary, and other nations. Good luck trying to analyze any of those things in-depth for a story on deadline. Thinning newsrooms lack the resources to dig every signal, so they’re forced to publish a hell of a lot of unfiltered noise.

For example, the grapevine chatter last month that Amazon was “considering” opening 3,000 Go stores spurred weeks of speculation about Amazon’s impending invasion of brick-and-mortar retail stores from nearly every major American media outlet. But here’s the rub: Every company is “considering” doing anything at any given time. Faux announcements like this create an anti-competitive advantage for Amazon by taking real value out of companies. Whether or not Amazon explicitly intends to, the company blatantly manipulates the market simply by issuing press releases, and reporters are willing participants.

The risk here is that when Amazon sneezes, the entire retail sector catches tuberculosis. Stitch Fix’s stock slid 20 percent upon the announcement of Amazon Scout, a service that is initially focused on home design and that, in its current iteration, actually presents no discernible threat to Stitch Fix’s business model. As any Amazon action produces an equal and opposite reaction, covering unsubstantiated Amazon rumors is dangerous business.

There’s also a tendency in media to overestimate the magnitude of any statistic that has to do with Amazon. A figure like 3,000 convenience stores sounds like a paradigm-shifting amount until you consider that 7-Eleven has 11,000 stores in Thailand alone. Consistently, Amazon’s market capitalization is erroneously conflated with GDP (the correct framework would be to compare Amazon’s revenue with GDP), creating an archive of incorrect assertions that Amazon is more valuable than the aforementioned Thailand. Ultimately, this contributes to a self-fulfilling prophecy. Because Amazon is so big, any tactical action it takes is immediately declared to be game-changing. The flood of (often superficial) media coverage then takes off, essentially providing a windfall of free marketing for the everything store.

As many of Amazon’s big-tech compatriots come under increased scrutiny, Amazon has a key trump card that keeps the public sentiment largely in its favor. CEO Jeff Bezos is a brilliant writer and a maestro of a storyteller, capable of seducing the tech media with his prose. You can learn more about the fundamentals of business by reading a single Amazon letter to shareholders than you do in most MBA programs. As a result, these letters are religiously quoted verbatim by reporters, allowing Bezos to directly define how his company is portrayed in the media.

Combine the scale of news created by Amazon, the dearth of reporters covering retail markets, and a CEO who is the biggest walking sound bite since Yogi Berra, and you have a company whose control of its public perception is unprecedented. And as a company that can bend the global economy to its will, Amazon should be subject to far more in-depth investigation and scrutiny. The grand strategy that Bezos chooses to pursue will largely set the agenda on Wall Street and Main Street and may well impose more tangible effects on many Americans than what happens at the polls.

Going beyond the scattershot headlines, here are the five Amazon stories that are really worth following, each with existential consequences for the U.S. economy and society.

1. Amazon Versus Google in Product Searches 

At its core, Amazon is simply a search engine with a gargantuan fulfillment center attached to it. While the exact number varies depending on the survey, nearly every major U.S. media outlet has gone on record stating that 50 to 55 percent of product searches begin on Amazon. The subtext is that Amazon, amid its myriad other competitive advantages, has displaced Google as the world’s most valuable search engine.

However, the studies that support Amazon’s dominance in product searches omit a key detail: Not all product searches are created equal. Amazon currently owns transactional searches but has struggled to displace Google when consumers are still researching what they want to buy. (But don’t expect Amazon to live with that status quo for much longer.)

In understanding who will win the future of commerce, no single metric is more important than the genesis of product search. In Forbes, former Target executive Chris Walton says that product searches will be the “leading indicators that will predict who will thrive in the new era of retail. First product search trends, not quarterly store or digital sales performance, over time, will better highlight true staying power.”

Longer term, Google has an existential decision to make: Should it continue to be the conduit for other retailers to compete against Amazon, or should it invest heavily in transforming its business to become an e-commerce fulfillment engine of its own? While there are strong arguments for each, Google so far has focused on the former, a win for Fortune 500 retailers and small e-commerce shops alike. But with billions in cash on hand, Google is just an Instacart or Shopify acquisition away from rapidly altering the paradigm of e-commerce and taking on Amazon more aggressively.

More than any other head-to-head clash among tech titans, the battle for product search supremacy will have far-reaching implications across how Americans spend their money. Buckle up for the great search wars to come.

This reads like something out of a bygone era. When I wrote this, Shein was unkown in the US, Bytedance was just beginning to buy ads promoting TikTok and Temu didn’t exist. Ultimately, Google and Amazon never really became a direct heavyweight fight. Google never went near deeply touching eCommerce fulfillment and ultiamtely its fate was never tied to commerce.

Interestingly enough, TikTok is one of the largest beneficiaries of this decision— with one less American tech titan in the mix, TikTok has taken on the Herculean task of tackling fulfillment with TikTok Shop, a far juicier geopolitical narrative than Google coming after Amazon.

2. Amazon Versus Typing 

The reason Apple became the first company with a trillion-dollar valuation is painstakingly simple; they owned the millennium’s first trillion-dollar innovation. And Amazon is best positioned to own the next.

Reports that only 2 percent of customers had made a purchase via Alexa have caused the market to sleep on the pending revolution in how we interact with our devices. At its essence, voice is a more natural medium for humans than typing, particularly on a five-inch interface, which is a learned action. The iPhone essentially has reprogrammed human behavior, driving trillions of dollars in market shifts in the process. Voice can take us back to a more natural state and cause similarly seismic shifts.

While it’s hardly the aesthetic or tactile experience that many love about shopping, voice commands could set a new standard for convenience.

The caveat is that unlike Apple and the iPhone, Amazon doesn’t have to wait for the traditional adoption curve; it can force the issue by subtly inserting voice technology into our daily lives. Amazon is beginning to embed Alexa into everyday devices, starting with the prodigal microwave. While many consumers have chosen not to invite Alexa into their homes, they may now do so unknowingly when they use Amazon to buy a simple household appliance. Across the U.S., 13 million microwaves are sold every year—a bounty of opportunity for Big Brother.

Think again about product searches. In 10 years, the dominant medium for them will be instructing your Alexa or Google Home, “Buy me the best headphones for running.” In response, your device will output a highly curated result full of expert recommendations, consumer reviews, and the most competitive price. While it’s hardly the aesthetic or tactile experience that many love about shopping, voice commands could set a new standard for convenience. Without the visual interface to shop around and compare prices, the voice medium is inherently susceptible to dominance by one platform.

Whether that platform is one that directly sells you goods (Amazon) or directs you to other merchants (Google) will determine the overall competitiveness of the retail ecosystem of the 2020s.

Woof. As you laugh at me here, its important to remember this was a pretty vanilla and hardly contrairan take five years ago. Since then, Amazon has cut hundreds of Alexa jobs as voice faded in the AI boom.

I suppose this one should have been obvious— long before they discovered the metaverse, McKinsey had a raging hard-on for voice technology. We should all be thankful voice led shopping never really panned out— it’s a dreary and joyless experience and ultimately no more convenient than the status quo.

3. Amazon Versus the Great American Brand 

By the end of the year, Amazon will have brought in $10 billion in annual advertising revenue. For context, the (thriving) New York Times makes about $200 million per year off digital ads, meaning that the retailer makes 50 times as much money selling ads as our nation’s premier newspaper.

But with its advertising business, Amazon is collecting something far more valuable than just immediate cash payoff: data. The moment brands choose to sell on the Amazon marketplace, they begin handing Amazon the blueprint for how to put them out of business. Listing products on Amazon leads to a plethora of information on exactly what sells, and paying Amazon to sponsor a given product tosses kerosene on the data inferno.

By being obsessively customer-centric for two decades, Amazon can now sacrifice UX for new buckets of money because it’s too powerful to stop.

For example, Levi’s is one of many iconic brands aggressively ramping up its spending on Amazon. But will Americans still value Levi’s 150 years of brand equity when Amazon launches its own label of blue jeans that also make your butt look great and cost half the price? The $64,000 question is how Amazon will choose to use all this data. Will they try to move us toward a brandless society, building hundreds of thousands of AmazonBasics and Amazon Essentials? Or will Amazon decide that its long-term best interest is not to displace too many of the merchants that sell products on its platform?

Despite the deluge of merchandising data it is collecting, Amazon’s ardent embrace of advertising looks a bit murky amid its overall grand strategy. It’s the classic platform play—once you control consumer attention, monetize it by any means possible. Put another way, by being obsessively customer-centric for two decades, Amazon can now sacrifice UX for new buckets of money because it’s too powerful to stop.

About 17 percent of search results presented to the user on Amazon are sponsored by the brand, allowing the company to directly monetize one in six products shown to shoppers on its website. For comparison, roughly 1 to 2 percent of search results on Target, Walmart, and other large multi-brand retailers are sponsored. While this strategy adds high-margin revenue for Amazon, it is billion-dollar wise and trillion-dollar foolish. Amazon made it this far by relentlessly focusing on customers and pursuing long-term customer-centricity over short-term profit opportunity. A feed in which one in five products is an ad is a direct rebuke of that ethos.

So this one is interesting. As a meta narrative, Amazon’s private label push and data mining its 3P brands was somewhat overhyped. Amazon Basics and Essentials are still a key part of the retailer’s strategy but less so than many would have imagined in late 2018.

Ironically, a big part of the reason for that is the meteoric growth of its ad business. Ads have grown from $10 to $50B and we’re still here asking the same questions about what the inflection point is when the harm to the customer experience outweights the reward. Hell, I wrote the same shit I said here in the newsletter two weeks ago in 2018 and didn’t even remember it! While tech moves fast, many of the big picture narratives in this space are stubbornly persistent and take years, even decades to play out.

4. Amazon Versus Online Journalism as We Know It 

In the next decade, Amazon will transform online media by displacing Facebook as the primary aggregator of content. Amazon already has such an affinity for content that in the early 2000s, the company was paying writers to create reviews of products it didn’t even carry yet, realizing that investing in quality content would make the website a destination. In a nutshell, an e-commerce company conceptually saw the power in hosting content online before media companies did.

In a similar vein, 65 percent of all affiliate links on outlets such as Wirecutter, CNET, Best Products, and BuzzFeed direct to Amazon. These are relationships that Amazon has cultivated since the genesis of these sites that effectively turn prestigious publishers into content marketers for our largest retailer. But Amazon won’t stop there. It’s only a matter of time before Amazon cuts out the middleman (Google) and decides to host publisher content about products directly on its platform. Doing so would make Amazon’s search experience far more compelling while also providing additional revenue for commerce publishers. Some publications will hold out on tying their fate to another large technology platform, but the vast majority will welcome the additional distribution.

And if Amazon succeeds at hosting commerce content on its platform, why not take a crack at hosting all publisher content on Amazon? While its traffic is dwarfed by Facebook, Amazon receives more monthly visits than the New York Times, the Wall Street Journal, and CNN combined. Right now, a few companies’ algorithms pick and choose exactly what consumers see, and they’re frankly doing an awful job of it. Why shouldn’t Bezos think he can do better? Five years ago, he bought a venerable newspaper that had just laid off more than 40 reporters. This week, that same paper announced 13 new reporting roles, including perhaps the most ironic job in the U.S.

Pivoting to subscriptions is the name of the game in media, and Amazon is already running a very successful subscription business.

From a content-serving perspective, Amazon has already built the most sophisticated recommendation algorithms for commerce—IP that can be repurposed for content personalization. First teased by Nicholas Negroponte in the mid-1980s, the personalized newspaper is an idea that bubbles up as a possible savior of journalism every five years or so only to crash spectacularly. But despite its repeated failures in practice, the concept has unrealized commercial appeal if done correctly. Bytedance, a company best known for building a news aggregator and content personalization engine, is valued at $75 billion, making it the most valuable startup in the world.

From a monetization perspective, pivoting to subscriptions is the name of the game in media, and Amazon is already running a successful subscription business. If anyone can convince you to pay for news, it is probably Amazon. Or it could choose to make any local newspaper free for Prime members, absorbing the losses as a pure philanthropic service to democracy. Making $1 million in profit every hour affords a lot of creative flexibility. Imagine it’s 2025, and folding local news into Amazon Prime has become the lifeline that bailed out hundreds of daily newspapers.

If this all sounds hyperbolic and apocalyptic, it is. But benevolent billionaires may prove to be the best of so many bad options for supporting local and investigative journalism. No billionaire is better equipped to pick up the mantle than the man who redefined publishing, saved the Washington Post, and has generally mastered any business built around the art of the written word.

This was something of a nothingburger but is indicative of a certain period in time. In 2018, Amazon has just rolled out Onsite Associates, subscription-based media was thriving amidst mass layoffs of ad supported publications and the Washington Post was a banner success story in media.

Fast forward five years and Onsite Associates is dead, Substack is bleeding writers largely due to their domgatic hatred of ads and The Washington Post lost $100M in 2023. Media is hard and Amazon intelligently, only wants the parts that make money.

5. Amazon Versus the Ghosts of Rough Rider 

It’s not every day that a paper somebody wrote in law school earns them cult-hero status. Yet, that’s precisely what happened when Lina Khan published “Amazon’s Antitrust Paradox” in the Yale Law Journal, earning her a profile in the New York Times and sending off a wave of salon chatter about the peril of modern monopolies.

However, despite the rise of “hipster antitrust,” there is still no real political groundswell that Bezos should lose sleep over. Believing that Amazon should be checked with antitrust has yet to cross from Silicon Valley intelligentsia to mainstream zeitgeist. For all the compelling arguments about Amazon’s market power, nobody has yet answered a simple question: How the hell do you break up a firm that most consumers love? Just this week, Amazon effectively made Santa Claus real by announcing free delivery for holiday shoppers. That this ultimately falls on the backs of mail and delivery people is of little concern to most shoppers.

In the most significant midterm election in decades, there isn’t a single political hopeful making antitrust a core tenet of their platform. Rather than creating political pressure from both sides, the ideological alignment between Donald Trump and liberals on this has created an uneasy gridlock that makes it hard to fathom any meaningful action being taken against Amazon under the current administration.

In time, this will change. When Sears ruled the retail world, the entire Sears workforce reaped the bounty of its success, greatly bolstering the middle class. The Amazon era, however, has more enriched an exclusive club of executives and large shareholders. I may be insanely naïve, but I think the political scene will normalize a bit after 2020, and someone (likely unknown to the American public at the moment) will rise on the left to combine modern progressivism with old-school Democratic flair. Imagine the personification of Bruce Springsteen’s Wrecking Ball album combining shameless support for unions with marked disdain for uber-wealth. Breaking up big tech on behalf of workers—more so than for consumers—would be an anchor point of this platform.

There are signs that Amazon can no longer control its own shadow. Last month, the retailer increased its minimum wage to $15, a move widely regarded as a net benefit to society. But it comes with massive externalities and unanswered questions. What happens to the fabric of a city when it’s suddenly more lucrative to be an Amazon warehouse worker than a paramedic? Expect questions like this to enter the mainstream as Amazon swallows more and more of the country’s enterprise and becomes one of the defining political stories of the next decade.

While Lina Khan’s star continued to rise, we’re still two years away from the start of an FTC trial in the US and Amazon is a more powerful entity than they were when this was first penned. Joe Biden’s election could be viewed as the best our political scene could normalize in the wake of COVID and he certainly has a touch of old school, pro union Democratic flair. But the idea of serious calls to break up Amazon on behalf of labor were a bit far fetched.

So too was the idea of somebody new rising on the left — John Fetterman may have kinda fit the bill for what I was picturing here but its hard to imagine him making any sort of a larger national run.

Add all this up, and there really is only one Amazon story. Amazon is a company beyond the reach of the invisible hand, unthreatened by people who buy their ink by the barrel, and no longer held accountable to the public. Amazon is the consummate triumph of U.S. capitalism, ultimately bound to become the case study for the danger of the system’s unchecked excess.

This was an obnoxious last paragraph that read back a lot better to me at 26 than it does now at 31. Cool attempt at being profound bro.