Dismissing concerns over Amazon.com’s profitability, Jeff Bezos, the online bookseller’s founder and CEO, told PW that the company’s growth was “beyond any realistic expectation,” and at this point he is more concerned with branding and marketing the bookselling site than with showing a profit.
In New York to meet with publishers, a relaxed and engaging Bezos visited PW’s offices December 12 and said that “we have internal projections about our break even point” but he declined to reveal them and said, surprisingly, that in the short run “our strategy is not to make money. In this critical formative period, it’s more important to spend significant money branding the site. We’ll be in the harvest mode in the future.” Amazon.com has reported $81.7 million in sales in the first nine months of 1997, with sales for the year likely to exceed $100 million. But its losses, $18.2 million for the same nine-month period, continue apace.
A significant part of its branding effort is the race (with B&N.com) to sign “Web aggregation” deals, pacts with heavily trafficked Web sites that channel users to the online bookseller. Amazon.com, Bezos said, has deals with six out of the 10 most heavily visited Web sites (Yahoo!, AOL.com, Netscape, GeoCities, Excite! And Alta Vista), as measured by PC meter, the Nielsen-like rating system for Web traffic. He pointed to what he called a growing gap between Amazon.com’s most recent PC Meter traffic rating and that of B&N.com. Bezos noted the uproar over B&N.com’s exclusive deal with the New York Times, and ruled out anything comparable for Amazon.com. Throughout the conversation, Bezos alternated between expansiveness and circumspection, citing the need to protect “our strategic advantage. We understand the Internet. It’s a hard earned advantage gained over time.”
He did reveal a few things. Amazon.com currently has 600 employees, divided between its Seattle headquarters and its new East Coast warehouse in Delaware. He said Amazon.com’s customers favor selection and convenience over discounts; that 56% of its customers are repeat buyers, and 26% of its sales are from foreign buyers. Indeed, he said the company is tentatively planning to open distribution centers outside of the U.S., although he would not reveal where. Like others, he agreed that because the “Net breaks the world into unusual segments,” he expects that international rights will shift from a geographical basis to a language one.
As for what publishers can do to sell their books online, he said, “Commentary is important in selling the book,” and he pointed to efforts to secure first chapters, tables of contents, book jackets and other material from publishers, emphasizing that Amazon.com does not charge a fee for displaying them.
Pointing to what he called the “mainstreaming” of Web commerce, Bezos declared, “This will be a Web Christmas. You used to be considered a fringe character if you bought anything over the Web, even just a year ago. Just compare media treatment then and now.”
He also recalled that during the early days of organizing Amazon.com, rather than meet at his home, he would negotiate deals at the café in his local Barnes & Noble store. “And I still buy books at B&N, Borders and Elliot Bay,” he said. “I probably shouldn’t admit this. But I don’t care. I love great bookstores.”
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