Amazon’s Incredible Money-Losing Business Strategy, In One Chart

The Citizen's Guide to the Future
Oct. 25 2013 5:31 PM

Amazon’s Jeff Bezos Is Like King Midas in Reverse

Actually, Amazon basically doesn't make money at all.
Actually, Amazon basically doesn't make money at all.

Photo by Joe Klamar/AFP/GettyImages

It’s become a quarterly ritual: Amazon reports that it’s losing money, and its investors cheer and hand over more. Pundits shake their heads in wonder. And Amazon’s competitors tremble in existential terror.

My colleague Matt Yglesias once half-joked that the company amounts to “a charitable organization being run by elements of the investment community for the benefit of consumers.” Bezos denied this, insisting that the interests of Amazon customers and shareholders will align in the long run. One thing nearly everyone agrees on, though: Amazon’s ridiculously low margins cannot be good for its rivals in the retail sector, who aren’t blessed with the same license from investors to lose money quarter after quarter.

Advertisement

I don’t have a lot to add to what Yglesias has already said about the company, except to point out that yet another quarterly earnings report shows Amazon increasing its revenue while failing (or, more accurately, refusing) to make any profit whatsoever. This time it posted $17 billion in net sales, reported a net loss of $41 million, and saw its stock leap nearly 10 percent.

What I can add is this rather mind-boggling chart from the statistics portal Statista.com, which drives home Amazon’s uncanny ability to avoid making money in the clearest form I’ve ever seen. Jeff Bezos is like King Midas in reverse: All the gold he touches turns to something else.

Amazon revenue profits chart

Illustration courtesy of Statista.com

In all seriousness, it must take incredible skill to keep spending every dollar you take in, quarter after quarter, even as your revenues grow by leaps and bounds. This past quarter, the company managed to pull it off by blowing hundreds of millions on a techno-utopian campus, continuing to lose money on its terrible investment in LivingSocial, and hiring an incredible 12,800 new employees in just three months. Its headcount now exceeds that of Microsoft.

This coming quarter will pose perhaps the company’s biggest challenge yet, as Amazon is almost sure to see its revenue leap to a new all-time high over the holidays. But I, for one, have confidence that Bezos will find a way to spend every last dime. The man is a true master of not making money.

Future Tense is a partnership of SlateNew America, and Arizona State University.

Will Oremus is Slate's senior technology writer.

TODAY IN SLATE

History

Slate Plus Early Read: The Self-Made Man

The story of America’s most pliable, pernicious, irrepressible myth.

Rehtaeh Parsons Was the Most Famous Victim in Canada. Now, Journalists Can’t Even Say Her Name.

Mitt Romney May Be Weighing a 2016 Run. That Would Be a Big Mistake.

Amazing Photos From Hong Kong’s Umbrella Revolution

Transparent Is the Fall’s Only Great New Show

The XX Factor

Rehtaeh Parsons Was the Most Famous Victim in Canada

Now, journalists can't even say her name.

Doublex

Lena Dunham, the Book

More shtick than honesty in Not That Kind of Girl.

What a Juicy New Book About Diane Sawyer and Katie Couric Fails to Tell Us About the TV News Business

Does Your Child Have Sluggish Cognitive Tempo? Or Is That Just a Disorder Made Up to Scare You?

  News & Politics
Foreigners
Sept. 29 2014 10:00 PM “Everything Must Change in Italy” An interview with Italian Prime Minster Matteo Renzi.
  Business
Moneybox
Sept. 29 2014 7:01 PM We May Never Know If Larry Ellison Flew a Fighter Jet Under the Golden Gate Bridge
  Life
Dear Prudence
Sept. 29 2014 3:10 PM The Lonely Teetotaler Prudie counsels a letter writer who doesn’t drink alcohol—and is constantly harassed by others for it.
  Double X
The XX Factor
Sept. 29 2014 1:52 PM Do Not Fear California’s New Affirmative Consent Law
  Slate Plus
Slate Fare
Sept. 29 2014 8:45 AM Slate Isn’t Too Liberal, but … What readers said about the magazine’s bias and balance.
  Arts
Brow Beat
Sept. 29 2014 9:06 PM Paul Thomas Anderson’s Inherent Vice Looks Like a Comic Masterpiece
  Technology
Future Tense
Sept. 29 2014 11:56 PM Innovation Starvation, the Next Generation Humankind has lots of great ideas for the future. We need people to carry them out.
  Health & Science
Bad Astronomy
Sept. 29 2014 12:01 PM This Is Your MOM’s Mars
  Sports
Sports Nut
Sept. 28 2014 8:30 PM NFL Players Die Young. Or Maybe They Live Long Lives. Why it’s so hard to pin down the effects of football on players’ lives.