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Microcap & Penny Stocks : TIGI : Building Innovative Marketing Relationships

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To: ztect who wrote (29)	1/28/2000 5:25:00 PM
From: ztect	Read Replies (1) of 177

(sa/ma) Amazon's Problems......... RE: InTernet Etailing b-models From: ztect Saturday, Apr 10, 1999 4:42 PM ET Reply # of 37627 Osaka....Ko nichi wa....Some good arguments...But I have to disagree to a degree... With many of your points.... Joe...You are IMO both correct and incorrect. Amazon advertising is used for both Attraction (getting them there) and RETENTION (reminding them to come back). Yes Amazon does retain customers through both customer satisfaction (personalizing through prior buys with recommendations) and convenience of service. Yes Amazon is currently in what is called "branding mode". Amazon wants people to think of books and their sites when they think of Internet commerce. Yes this is a way to both ATTRACT and RETAIN customers. However, Amazon is also currently spending tremendous amounts of money to become the recognized name leader by name alone. In doing so Amazon doesn't figure to make money necessarily from the selling of its goods, Amazon intends to make money from advertisers on its web site. Selling web space according to this "volume strategy" is the goal. The "volume" of eyeballs reaching a site makes the space more valuable to other merchants that want to piggy back off of Amazon's direct costs. Profits margins are minor especially from the costs of direct advertising, plus the costs of "positioning" on popular portals and search engines. Buy.com is actually taking this "volume" strategy one step further, and basing their business on selling at below cost to be the low cost provider because they believe they can make the money from advertising. Some problems with Amazon's strategy or the "volume" marketing approach. First problem is that the cost of web real estate has been decreasing due to the proliferation of e-commerce sites. Second , the Internet allows for quick access to the low cost provider regardless of name or brand recognition (Inktomi actually now has search engines for just providing the least cost site for a product). Plus positioning to be on top of a I-mall's site or top in a search engine's list doesn't get some one off line to an on line site. Now the premise that Amazon can therefore just "add a card" does look at any of the premises behind the volume strategy. Amazon can't offer more to a company or charity by providing them with a card. Amazon can't afford to since their money is heavily invested in a completely different approach (39% of revenues). Remember charities make the money from card sales not product sales, so what can Amazon offer other than to give a bigger split of card receipts. Plus, if Amazon approached the same leagues and corps that are already under inked agreements with TSIG, corporate lawyers and TSIG would be making a lot of money off of Amazon .... Little old thing called Intellectual property rights and infringement. Now that isn't to say that other e-commerce companies couldn't come out with a "card" of their own. So that is why TSIG needs to get as many agreements in place quickly. Though I would note that the "card" merely isn't a ploy, it is a strategy that is very different from the b-model of e-commerce sites for directing traffic off line to on line locations. Changing to a card means changing philosophy. Simply adding a card doesn't counteract or offset the hemorrhaging of money from the "volume strategy" . This "volume" model is being justifiably questioned by many people, since as demonstrated hitherto, the volume strategy may never be profitable. Sincerely, ztect (spelling not checked)

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