Very nice post, William...
It a lot better that just referring to AMZN as a POS. Now we have means to trade insights about our issues of disagreement.
<<<If I'm missing something, it's how Amazon will ever be able to generate earnings that justify the stock price. And strangely, the longs and those hyping the stock stay away from that subject,>>>
Easy. When AMZN has huge market share and economies of scale and when they have well-established relationships with customers, they will raise prices a little bit. There are already people selling books on the net at lower prices. So what. All that most customers want is good or decent prices. Most customers don't need the absolute best prices. The other major on-line sellers will decide to either match the price increases, or decide if the difference is big enough to enable them to keep lower and make a big advertising campaign over the difference.
<<<Second, the publishers can always ship direct via their own sites, and that has to be the lowest price, period....Look at what Amazon is - they are an order capturer. They step in as the middleman, and connect a buyer with a seller. They don't make anything. And nobody really needs them , because it is so easy to put a website together that does this.>>>
The problem with publishers selling direct on the net is that 1) each publisher has a rather limited selection and 2)most customers know the title or subject matter of the book they want, not the publisher.
Agreed it is easy to put a website together, but that it takes more than a website to succeed at on-line bookselling. How do you get the credibility to entice somebody to loan you $500M without wanting any payments for the next five years so you can fight a war of attrition and survive a five year siege? It takes economies of scale to offset the fixed cost portion of the overhead. It takes size and experience to be credible--most people won't buy from the lowest price at www.acess.com because the lowestcost seller could be fly-by-night operators and the customers don't want to give away their credit card numbers to just anybody.
This thing about the AMZN "brand" is often misunderstood. Clearly a book bought from BKS looks and reads the same as one from AMZN. If you want to be a major player in the online book selling market, you must be prepared to lose a few hundred million in advertising and low prices over the next few years to attract customers.
<<<Yes KP does have a large presence on the net, and in development of new concepts and companies. And in case you haven't noticed, many of these companies' revenues are simply the IPO money being recycled through one another in the form of advertising and cross-promo links. When the smoke clears, and people open their eyes, it will be easy to see that the wild, euphoric expectations are a pipe dream, and many of the stocks will crash>>>
I think these KP companies will perish or flourish in synchrony with the internet. I read somewhere some time ago, L John Doerr (the Kleiner Perkins high tech guru) saying "If possible, the internet has been underhyped". I see the net as being delivered by cable modem, and 20 or 50 times faster than 56K, in full audiovideo format, interfaced via speech in a few years. I think we are just seeing the tip of the iceberg in 1998. If you want to bet that the net will deliver less than expectations, economically, you will probably have to wait 10 years before that judgement is clear. Because for the next 5 years, expectations, rather than actual economic performance will be what drives bulls to invest in the internet. It is the next huge growth opportunity.
<<<is so obviously disconnected from any prudent assessment of what earnings (using conventional accounting) the entity will ever be able to put on the bottom line.>>>
AMZN will eventually be able to put staggering earnings on the bottom line if they continue the flawless execution of their business plan that has been demonstrated so far. Who'd have thought they could get the loan that they secured a couple months ago? Who'd have thought they could double the share price again inn two months (I figured it would take all of 1998 to get to this level). The higher the share price, the easier it is to float a secondary offering to raise more money.
As mentioned earlier, I am prepared for the price to drop 50% or double in the next year. I am happy to see the clarity, depth and breadth of your thinking about the stock. I suppose I have been mislead by some the passion and anger posted lately. Frankly I wish we had more discussion like your posting.
Best Regards,
Tom D |
