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Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: cellhigh who wrote (30515)	12/19/1998 10:23:00 PM
From: Victor Lazlo	Read Replies (1) \| Respond to of 164684

<< so what your saying is..cnbc is wrong,and there really is institutional interest in this? your damn right... they dont seem to want to let this come down far enough for retail investors to get in. obviously theres something bigger going on here than we think.>> No, cellhigh, that is not what I am saying. Victor

To: cellhigh who wrote (30515)	12/20/1998 9:36:00 PM
From: Glenn D. Rudolph	Respond to of 164684

The Internet Capitalist SG Cowen Internet Research 2 The Week A Web Retailer * A Commerce Portal The power of a great idea usually grows with time; subtlety gives way to obviousness only slowly, as to not alarm. Such was the case with Amazon's “Shop The Web” non-announcement last week (AMZN suggested that they had spoken about it when they purchased Junglee, on which the technology for Shop The Web is based, but we sure don't recall it). Only after sleeping on the idea did we arrive at a point of alarm; alarm about how potentially important the Shop The Web concept is to Amazon, its shareholders, and the Web at large. If you're not aware, Shop The Web is the program by which Amazon partners with other online retailers to offer their links (and wares) on the Amazon.com site. It is Amazon's answer to the query (which we have received from every buy-sider we've spoken with about our Strong Buy rating on AMZN) that roughly follows the “what's the next category” line of questioning. Of course, this question is entirely germane, for several reasons: First, determining the next category should help investors determine the ultimate profitability of AMZN's P&L; surely jewelry is a higher margin retailing category than, say, PCs. If AMZN were to start selling PCs, then clearly this would tend to keep margins (all other things being equal) lower rather than higher. Second, certain categories will naturally be a larger market opportunity, which impacts our revenue expectations for AMZN. Third, and perhaps most importantly, figuring out the next retail categories Amazon is going to offer is important because we must gauge whether AMZN's skill set, brand power, and customer base are naturally “portable” to that category. A book buyer is a natural consumer of CDs and videos. Are they also a natural buyer of, say, sporting goods? The question deserves some scrutiny on the shareholders part. Now, however, with the introduction of Shop The Web, the answer to the query of “what's the next category?” is “what isn't the next category?” Because Shop The Web entails partnership links between Amazon's site and their retail partners' (that is, a consumer who is buying a book and wants a pair of khakis can click on the Gap link and be taken to thegap.com and purchase that good), Amazon now has potential exposure to any category it wants to participate in (assuming, of course, it can find the right partner to deal with, but more on that later). This, of course, potentially expands the market opportunity and revenue potential for Amazon to, say, whatever retail category makes it on the Web (and for our part, we think almost any retail category can employ the Web as an alternative, supplementary distribution channel). For the sake of argument, let's say that, in a few year's time, Amazon has 10 million customers. What would The Gap be willing to pay Amazon if Amazon could guarantee the Gap that 10% of Amazon's customer base will buy something with an average price of $15 once per quarter? (That math comes out to be roughly $60 million of annual revenue to The Gap.) Though we're not sure of the precise answer, we do know that it's likely to be some sizable sum, since The Gap spent something like $650 million in operating expenses last quarter (roughly 26% of revenue). If we assume that even 50% of those dollars (or 13% of revenue) were for acquiring foot traffic (and thus revenue), it seems reasonable to believe that The Gap would spend at least this much for “risk free” top line from AMZN (or, roughly, something around $10 million). Now include Eddie Bauer, Micro Warehouse and the rest of the gang in a Shop The Web agreement, and you get a sense of our top-line enthusiasm.