* This service rates AMZN last amongst CDNow, N2K, CDWorld and CDUniverse in ease and quality of music sales--report updated today, July 2.
Copyright c 1998 Charter Media, Inc. All rights reserved.
Updated 02-Jul-98
briefing.com
Buying CDs On The Internet
"With this in mind, we decided to go buy some CDs. And see who does it best and easiest. For each CD, we looked for the following:
Price
Availability
Music Clips
Reviews
We also looked at how well the navigation systems took us to the right CD, and how easy it was to "checkout," including whether you were informed of the running total or not.
* The Results? A private company, CDUniverse, won our comparison test as the best place to buy CDs. The most widely known name, Amazon.com, had the worst system for buying CDs. What does this mean for investors? We are well aware that the best product does not always win in the marketplace. Good distribution of an inferior product usually beats poor distribution of a better product. But it's so easy on the Internet to switch suppliers, if you can just find out about them.
3. AMZN has a Coca-Cola-like Brand Name
* AMZN bull argument:
"I just want a Coke." Not caring if it costs 25 cents more. "Campbell's tomato soup." Not caring if it costs 50 cents more.
AMZN bear reply:
Do you really care if your Campbell's Tomato Soup comes from Albertsons or Ralphs?
Probably not. Similarly, I would contend that most people don't care
whether their latest Pynchon or Hawking or Gould or King comes from the hottest site on the internet or the newstand in an airport terminal. The "brand" in this case is the author; the publisher and retailer are incidental middlemen.
* Customer acquisition costs rise despite brand name.
* investor.msn.com
Jubak's Journal
Counting those Internet chickens
Confounded by Yahoo!, Amazon.com and Excite? Here's a way to analyze which high fliers are in trouble and who's really out front. By Jim Jubak
For example, Amazon reported that customer accounts rose in the company's second quarter to 3.1 million, an increase of 880,000. That's impressive growth, but any company can grow fast simply by throwing money at a market. Spend enough on advertising and marketing and promotion and anybody selling anything can add another customer. Of course, that only works until the money runs out.
What we want to know as investors is how Amazon is doing at creating lasting value -- a brand name. If the company is succeeding, it may be spending more in actual aggregate dollars to grow its customer base, but the cost of acquiring each new customer should be falling. A brand name brings in customers through word of mouth. That's free growth and drives the average cost of acquiring a customer down.
Indeed, Amazon did spend more on advertising and marketing in this most recent quarter than it did last quarter or in the second quarter of 1997. Marketing and sales expenses rose to $26.5 million, compared with $19.5 million in the first quarter of 1998 and just $7.8 million in the year-earlier quarter.
How much growth did Amazon.com get for its marketing money? In the most recent quarter, the company was able to add 880,000 customers for its $26.5 million, for a cost of about $30.11 a customer. In the first quarter of 1998, Amazon spent $19.5 million and added 750,000 customers.
That's $26 per customer.
Those numbers don't show any "brand effect" at Amazon yet. In fact, I'd say the numbers show that Amazon is still building a brand with consumers. I don't find a $4-per-customer rise in marketing and sales expenses alarming, however. Amazon is facing growing competition from other online booksellers and the company is moving into new areas such as selling music CDs online, where it has to play catch up with companies that have already built some identity with consumers. In its latest report, the company warned that marketing and sales expenses would be rising in future quarters because of that increased competition. In short, Amazon's numbers are about what I'd expect from a company still building a brand name against increasing competition.
of Internet companies that matters.) |
