Amazon's Bezos Under Fire for Large Technology Investments in Projects That Sometimes Fall Short of Expectations

Amazon and Bezos, its founder and CEO, continue to come under fire for their hit and miss approach to business. For every profitable quarter, there is a quarter where earnings take a nose dive as the company continues to invest in technology and projects which use potential profits as research and development funding.

From its early days, Amazon has been an inventor of new ways to approach online business (it was one of the earliest pioneers in the space). For every successful Kindle e-reader that is successful, there is an acquisition like WebVan which was acquired and subsequently shutdown but later become consumed by the e-commerce company to survive in some form. Today, WebVan still exists with a population-dense strategy rather than trying to cover the U.S. which is sparsely populated in parts.

Delivery by Drone

Bezos caught on to the interest in deliveries being made by drones and has invested in the technology to bring this about. Currently held back by US regulatory restrictions, the founder still hopes that Amazon Prime Air may remain a viable delivery option for difficult to reach destinations in the future.

Primed for Delivery

Amazon Prime, the free delivery offering by the company has gone transatlantic with its membership offer being broadened outside the US market to other markets like the United Kingdom. The investment in Prime has been expensive for the company which essentially subsidizes consumers with free shipping, at their own expense, in order to maintain a loyal customer base.

The company is actually stepping up this venture with the launch of Amazon Now which aims to offer delivery within one hour of ordering. This is facilitated by courier companies in conjunction with Amazon in areas where warehouse facilities are nearby.

Kindle Success

The Kindle e-readers which are currently in their 7th iterations with the Kindle Voyage e-reader have made e-ink a viable alternative to IPS color displays. They claim that they are easier on the eyes, particularly when reading at night, and buyers swear by them.

For offshore customers the issue is not so clear however with problems accessing their accounts and maintaining their home location for the purposes of accessing books marketed in their home country (Amazon tends to want to change the location to America or Asia if you're out of your home country too long).

Smart phones have largely replaced the Kindle for many potential buyers however. When one can buy a tablet or an iPad, does it still make sense to buy a Kindle as well when the Kindle app works fine on smart phones. Many buyers feel like they don't need yet another digital device.

Fire Phone a Dud

The Fire Phone was a step beyond the series of Fire tablets that Amazon began releasing. While the often underpowered Fire tablets which run on a modified version of Android and a custom Android app store from Amazon too, have been a success due to the lower price point, the Fire Phone hasn't been a success. The company decided to drop the price of the units down to only a dollar or two a short time after releasing them. Hardly a good sign.

Fire TV Stick

The Fire TV Stick which is one of many streaming TV devices on the market has become so successful that the company cannot source enough completed batches of the product to fulfil current demand, according to the CEO. Intended to compete with the likes of Google Chromecast and Roku Streaming Stick, this Fire product is a hit for the company.

Playing the Long Game

According to Bezos, the development of the Fire Phone is a work in progress and too early to tell whether it was a success or not. To be sure Bezos plays the long game. The very long game in fact. He trumped preferential deals for the best consumers and customer loyalty as some of the most important metrics for the business.

The question remains, how long can Amazon continue investing its profits in hit and miss side ventures and discounting consumer pricing with the idea that they'll eventually make a decent profit? As some already learned with internet web sites, if you teach visitors that the content is free, then putting up a “pay wall” later becomes problematic. Bezos and Amazon may be happy to sell digital devices and make minimal profits if they expect to make money on the content sold for those devices later. Clearly not an Apple business play, but with the number of active customers that Amazon possesses (237 million+), it may be able to continue to offer great technology or product deals and get by on slim margins.

Henry Blodget, the former trader, interviewed Bezos recently and the Amazon founder's answers were quite illuminating.