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Amazon.com's Sales and Losses Soar in 1998
Jim Milliot -- 2/1/99
Revenue growth outpaced the increase in annual losses; Bezos promises more investment
Amazon.com reported a net loss of $124.5 million for 1998, compared to last year's loss of $31 million. The loss in '98 included $50.2 million in costs related to acquisitions that Amazon made over the course of the year. The operating loss in the year was $112 million, compared to $32.6 million in 1997. Total sales for the year jumped 312.7%, to $610 million, and outpaced the 243% increase in operating losses. During the year, the number of Amazon customer accounts increased to more than 6.2 million, compared to 1.5 million at the end of 1997.

Total sales in '98 were helped by Amazon's expansion into music and video as well as the launch of sites in the U.K. and Germany. The so-called "expansion areas" accounted for approximately 25%, or $63 million, of the company's $253 million in revenues during the fourth quarter. Sales of music alone hit $33.1 million in the period. Also contributing to higher sales was an increase in Amazon's associates program, which now has more than 200,000 members.

Company president Jeff Bezos said the online retailer is committed to a major expansion plan for 1999 that will include a significant increase in its distribution infrastructure. The company has already announced plans to take over a warehouse in Nevada some time in the first half of the year (News, Jan. 18). Bezos said that, in 1999, Amazon expects to "invest even more aggressively than we have in the past." Increased investment will mean higher operating losses in the next few quarters, according to Amazon's chief financial officer, Joy Covey.

During 1998, the company spent $133 million on marketing and sales initiatives, approximately 22% of total revenues; in 1997, marketing and sales costs accounted for 27% of sales. Product development costs in the most recent year hit nearly $47 million, 7.7% of sales, compared to 9.5% of sales in 1997.
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