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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 222.55-4.4%Nov 18 3:59 PM EST
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To: Robert Duncan who wrote (9620)7/9/1998 10:56:00 AM
From: Rob S.  Read Replies (2) of 164684
 
I think Yahoo! will (has) developed some value due to brand identity and "customer loyalty" but that does not apply to but a small portion of potential customers. As the internet grows and developers and the average mom and pop book reader comes online, I don't think they will care nearly so much that they buy things from a "cool" name. The internet will be "nice but not my life". There will also increasingly be purchasing e-BOTS that go out and search the internet for the consumer. Say you go over to Amazon.com, OnSale, EggHead or other e-commerce product site and find a product that interests you. You then jump over or show a split page of the Yahoo! or some new start-up product search engine that will provide the ability to search on that product description. In Amazon's case you can use the book's ISBN # or the book title to do the search. The search would result in a list of several merchants, the book's price, and maybe shipping cost and other information such as security methods used. Simple and already starting to happen. Internet BOTS are already cropping up and others are being developed or enhanced to allow the search engine companies to go out and search vast internet sites to build a structured database of product offerings. In this process, Yahoo! (or other e-commerce BOT company) gains revenue from the ads they subject you to while the merchants duke it out over slimmer and slimmer margins for the same commodity item. This BOT capability is already being offered by a few companies what remains is for Yahoo! or other major search firms to incorporate it seemlessly into their capabilities and into Internet Explorer and Netscape Navigator.

Now some people will pay a premium for books and tapes at Amazon but the ease of competition, even without the use of BOTS, will make it increasingly hard for Amazon to compete effectively without offering steeper discounts. So where will the huge profits come from that will justify $6+ billions in valuation? Amazon is not in a position similar to Microsoft where they just set the price for their software and make the difference between their raw cost and dictated price. Microsoft does not have to compete against hundreds or thousands of other who offer "Hank and Hall's Windows 98+" software. Amazon only offers a generic product that they have no hand in manufacturing and no way of controlling what others charge.
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