Amazon.com, Inc. (AMZN) Message Board

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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 244.16

-2.0%

3:59 PM EST

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To: Rob S. who wrote (11463)	7/23/1998 10:42:00 AM
From: Ed Zhao	Read Replies (3) of 164684

<Flat earnings predicted>. I see another problem here (pure speculation): AMZN is giving away books @ 1c to new customers lately. I believe a large number of new customers took advantage of that, many of them may set up an account just for the "free" books. It would be reasonable to expect the average order size ($ ammount) from the new accounts and gross margin to decrease for the new customers if AMZN books 1c as revenue for each of "free" books ordered. However, my calculation from their reported data did not show such decrease in average order size at all: 4q 97 $48.6 1q 98 $46.6 2q 98 $48.8 Would that be possible that for every "free" book AMZN gave away, AMZN booked revenue at the regular sale price, and correspondingly add that amount to marketing cost. That is consistent to the large increase in the marketing cost. That accounting method can be justified by augue that marketing department paid the customer $27 each (customer acquisition cost) to buy the book ($27 revenues generated from the sell), unless GAAP specifically prevent that. I'd like to know if anyone aware when did the 1c book promotion started? XZ

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