...NYTimes continued..
And from the minute the site went up, Bezos and his rapidly growing crew of programmers and designers and editors
kept tweaking it and making it even simpler and quicker and more "frictionless" while gradually folding in industry firsts,
like one-click shopping and one-click gift sending and wrapping. They made it so effortless that almost all it took (other
than money) to order a book for yourself or send one as a gift was the inclination to do so. In fact it became necessary
for them to post a flashing little reminder on screen informing customers that the transaction was over. "Thank you for
your one-click order!" it read. ("Yes, it was that easy.")
At the same time, Amazon's early inordinate responsiveness to customers gave them a heady sense of ownership in
this bold new experiment. When an elderly woman e-mailed to say that she loved the service but had to wait for her
nephew to come over and break through the packaging, Bezos had it redesigned in a way that was no less protective of
the goods, but required much less violence to open. At other times, like when they hunted down used and out-of-print
books, their enterprising efforts on behalf of their customers were closer to what one might hope for from the concierge
of a five-star hotel than from the clerk of a bookstore. "We may be the most customer-obsessed company to ever
occupy planet Earth," says Bezos, who at one point was the company's only customer-service rep. Of course all this
proactive groveling is expensive and part of the reason Amazon.com has been spending more than it makes, but
according to David Shaw, this was all part of the master plan. "Making money on books was almost irrelevant,
compared with establishing Amazon.com as the most trusted brand in this new space."
But at least as important to loyalists as the technological innovations, the reasonable prices and the follow-through was
the alternative communal spirit. It begins with the inspired name that Bezos came upon after briefly considering the
Dutch-based "aard" (too obscure) and the Disney-esque "cadabra" (too much like "cadaver"). Amazon suggests great
size, of course, and a compendious database -- not that all of us knew the big river carries more water than any other in
the world. But it's also overflowing with so much third-world, underdog, eco-conscious goodwill that every click on
Amazon.com feels like a vote for the rain forest. And even as its market valuation soared past that of Barnes & Noble
and Borders combined, the company has clung tenaciously to that image of a principled David pluckily battling its much
more powerful and supposedly less principled rivals.
In fact, in many ways, they purloined the tone of those beloved independent bookstores that everyone accuses Barnes &
Nobles and Borders of all but wiping off the face of the earth. They posted the same kinds of lists of in-house favorites
like "What We're Reading" and "Amazon.com Recommends" that you first saw on the crowded, small round tables at
those independents. As a company it consciously tried to give customers the impression, which had actually been the
case with those small bookstores, that this was much more a labor of love than a pursuit of wealth. As Ayre tells me: "If
you spend a lot of time on the site, I hope you get a sense of the quirky, independent, literate voice, and that behind it all
you're interacting with people, and that it's people who care about these things, not people who are trying to sell you
these things. My mantra has always been 'the perfect context for a purchase decision.' "
This co-op feel is further reinforced with "reader reviews," in which the site posts customers' reactions to books, both
negative and positive, in the hope they might be able to steer you toward a great new title or warn you off a dud. Among
the pragmatic reasons Bezos chose to make books his first online product are that there are far more of them in and out
of print than any physical bookstore could ever line up on its shelves and that, unlike his second choice, music, the
industry was not dominated by a cartel of half a dozen mega-distributors. But beyond that, books are so uncrass, or as
Bezos says, "They creak in that nice kind of way," and they let him spin retail like EST. "We've all had books that have
changed our lives," Bezos says, "and part of what we're doing at Amazon.com is trying to help you find and discover
that next one." In a more cynical climate, "reader reviews" might have been seen as a transparently self-serving way of
putting customers to work to boost sales, and customers might notice that they've never come across a listing with more
negative than positive reviews, certainly not for a book with any chance of being a best seller. But for Bezos and his
customers alike this was seen instead as a shining example of one of the Internet's greatest offerings, which Bezos calls
"community" and defines as "neighbors helping neighbors." "You know you live in a community if you can knock on a
neighbor's door and borrow a cup of sugar," Bezos adds. "If you can't do that then you don't really live in a community."
That's why the recent revelation by Doreen Carvajal, a Times reporter, that since June the
company has been selling spots to book publishers in its posted lists of favorites, like "New and
Notable" and "Destined for Greatness," along with special author profiles and extra e-mail support
for up to $10,000 a title, was seen by his customer-neighbors as such a betrayal. It turns out they
didn't live in a community after all, not even a virtual one. And of course the only publishers who
could come up with the money to pay for this preferred treatment were the Goliaths like Random
House and Simon & Schuster and Penguin Putnam.
After a flood of e-mail outrage, Bezos announced the next day that the company would be revising the program so that in
the future all paid spots would be clearly flagged to let customers know in what instances the glowing praise and special
placement had been bought. He offered to accept any returned book, regardless of its condition, that customers felt they
had been duped into buying. But even as Bezos rushes to try to limit the karmic damage, Amazon's first P.R.
catastrophe is drawing attention to the extremely tight corner the company has backed itself into, where it is likely to find
itself caught again and again: between the best interests of customers and the bottom line.
hough the Internet's commercial possibilities have been explored for years by a small number of computer
scientists, it wasn't until Marc Andreessen, the 22-year-old Netscape founder, helped invent a means of navigating
this vast network, called the Mosaic browser, that it became the focus of this latest stage in the high-tech gold rush.
Today, it's not the good coffee that has got Seattle jacked up but stock options, as one little start-up after another races
to execute its own way of using the unique attributes of the Internet to siphon off cash from the world's credit-card
holders.
"At first the quest was to write the Great American Novel," says Michael Schrage of the M.I.T. Media Lab, "and that was
replaced by the Great American Screenplay. Now everyone wants to write the Great American Business Model." In the
current entrepreneurial frenzy, business models are like high-concept movie treatments, and the big West Coast venture
capital firms like Kleiner Perkins Caufield & Byers, which was an early investor in Amazon.com and whose most
celebrated partner L. John Doerr sits on Amazon.com's board, are like studios.
But the problem with most Internet business models is that they are attempts to get around the fact that it is not yet clear
how to make money from the business. For example, Buy.com sells books and other goods at cost with the hope of
getting enough traffic to be able to earn a profit selling advertising. As for Amazon.com's business model, beyond the
basic idea of selling books on an ambitious scale over the Internet, there is nothing novel or ingenious. As Bezos says,
"It's not the ideas we're particularly proud of around here, it's the execution." For all the attractive aspects of Amazon's
plan, including the advantages of a central distribution model and those of a scale business (in which costs do not rise
proportionately with sales) and an excellent cash-flow situation because it gets paid by its customers long before the
company has to pay suppliers, none of those aspects are unique or ownable by Amazon.com. Even the
billion-dollar-a-year pace is apparently not enough to outrun the costs of advertising, technological upgrades and
overhead connected to expansion. All Amazon really has is a special relationship with customers, and with the
increasing pressure to finally justify its valuation and show a profit, that's the most valuable thing it has to sell.
Amazon has already come up with two lucrative ways of exploiting this hard-won goodwill, and no doubt is busy
hatching others. One is selling to publishers and others preferred access to customers. Another way is by earning a
commission for directing that army of trusting customers to other retailers, which could be the key to the whole
enterprise. This is the idea of "Shop the Web," although as the range of products expands willy-nilly essentially to
anything on the planet that can be sold for a profit, it's hard to see how the company is remaining faithful to its mission
stated on the site to "use the Internet to offer products that educate, inform and inspire." Then again, despite presenting
the face of an underdog, Amazon.com has always had the agenda of a would-be monopolist. "The idea," says Shaw,
"was always that someone would be allowed to make a profit as an intermediary. The key question is, Who will get to be
that middleman?"
But whatever minor crisis of conscience Bezos and his army of M.B.A.'s may have suffered before barreling down those
first two paths is nothing compared with the problem that is coming regarding the vast stockpile of intimate details
Amazon.com has collected on its millions of customers and users. According to Ayre, Amazon breaks down its traffic
into "visitors," "users" and "customers," with a "visitor" being anyone who checks out the site, a "user" anyone who gives
some information about themselves. Although the company applies a great deal of energy and skill into "converting"
visitors up the line, even if it gets only information out of you, it's potentially as good as money.
This record of customers' choices of reading material, which, unless the user declines, Bezos reserves the right to sell,
is of such value to marketers because nothing is more nakedly and efficiently revealing. If you're an overweight,
power-lusting, cross-dressing father of twins who can't putt, it will all pop right up on the screen; armed with those
nuggets, even the most ham-fisted marketer will have more than enough to make you jump and shout and rat out your
own mother.
bout a half-dozen years ago, Mark Bezos, having just graduated from Texas Christian University at Fort Worth,
came into town looking for a job in advertising, and his half-brother, older by six years and then still at D. E. Shaw,
put him up on his couch. Soon after his arrival, the two went out and bought a new Nintendo game called Ultima. "It was
one of those role-playing games," says Mark, "that takes forever to play because before you can advance to the next
level you have to build up an arsenal of weapons and cash." For the next week, Mark would spend his days performing
the "menial task of killing minor monsters" but hold off on "the good battles and real evil monsters and the decisions on
how to spend the money." When Jeff walked in the door at 10, the first thing he would ask was, "How far have you
gotten?" Then they'd hunker down for the next six hours and go to war.
"I know it sounds incredibly dorky," Mark says now about their nightly graveyard shift, "but actually it was a special time
for both of us." The two became so obsessed with their quest that Mark extended his stay, not until he had a job, but until
Ultima had been routed.
Since throwing the switch in July 1995, Bezos has maneuvered and promoted his company with such cunning and cheek
that it's as if he's still on that couch navigating the evil forces of the galaxy with a greasy slice in one hand and a clammy
joystick in the other. He showed his perfect command of entrepreneurial story structure even earlier with accounts of how
after stumbling on the startling fact that the Internet was growing 2,300 percent a year, he impulsively chucked his big job
on Wall Street and headed out West to make his mark on the tech frontier, his young bride, MacKenzie (maiden name
Tuttle, Hotchkiss, Princeton), driving their old Chevy Trail Blazer while Bezos furiously typed out the business plan on his
laptop and scared up "angels" on his cellular as if he were riffing the whole thing on the fly.
It turns out, however, that he flew to Texas and drove from there. David Shaw takes pains to point out that one of the
main things he was paying Bezos to do in his last couple of years with the company was to investigate the commercial
possibilities of the Internet, and that many of the important details for his new venture were worked out on his dime under
his supervision. Shaw says that when Bezos asked if he could run with this idea himself, Shaw obliged, but made it clear
to Bezos that he might at some point go into competition with him.
Nevertheless, the road trip plucked just the right chord, as did his self-depiction as a nerd, which turns out to be just
slightly fudged. Born to teen-age parents, Bezos was reared in large part by his maternal grandparents, and from the
ages of 4 to 16 spent every summer at their hot, dusty ranch in Cotulla, Tex., learning to brand, vaccinate and castrate
cattle and picking up mechanical savvy like rebuilding a John Deere grader. But he knows that social ineptitude and
tunnel vision is what we're looking for in our Internet entrepreneurs. It inspires confidence to know that rather than
piddling away their young adulthood, they were poring over equations and stealing a march on the future.
And although Bezos emphasizes his obsession with the customer and plays down his concern with rivals, the way he
toyed with Barnes & Noble was so instructive that any established brand getting bushwhacked by an Internet upstart is
now referred to as "getting Amazoned." He started with a bold print ad campaign that hailed Amazon.com as "Earth's
Biggest Bookstore" and used splashy graphs to support the claim that Amazon.com offered a much larger selection
than the country's biggest book retailer. Then he got mobile billboards to cruise around Barnes & Noble superstores
posing the question, "Can't find that book you wanted?" This was a bit misleading, considering that Amazon.com at that
point carried no books at all and was simply ordering them for customers, just as Barnes & Noble or any other bookstore
would if they didn't happen to have it in stock.
More important, he held up Barnes & Noble as the embodiment of the doomed past with all its supposed assets
reinterpreted as liabilities, and held up Amazon.com as the shining alternative. He did it so well that Amazon.com has
almost come to stand for the future itself and any new and improved way of doing things. That Bezos took a particular
delight in these gambits can be surmised by the fact that he often arranged to interview prospective hires in the
generous physical comfort of a Barnes & Noble's superstore.
The constant taunting egged Barnes & Noble into quickly putting up its own site, and when Barnesandnoble.com failed
at first to cut into Amazon.com's big lead, it reinforced the message Wall Street needed to hear: it's not just hype;
cyberspace is a whole new animal; none of the old retail skills apply. Then Barnesandnoble.com began to work out the
kinks and gained back some market share, running ads with headlines like "Who's Fooling Who?" and its own graphs
showing they offer almost twice as many titles. By then, Amazon.com had opened its music store, replaced "Earth's
Biggest Bookstore" with "Books, Music and More" and left Barnes & Noble wrapping its fingers around the neck of a
phantom. Bezos says, "A year from now I don't think Barnes & Noble will even think of us as a rival."
Even before this, Amazon.com brazenly poached a Wal-Mart vice president, Rick Dalzell, and a dozen other top
Wal-mart wonks. In addition to prompting a suit (still unsettled), it signaled that Amazon.com was not content with books
and music and other high-end niceties. It wanted a piece of everything. Before Christmas it added a gift section to its
menu, where customers could buy toys and games and Barbies and Sonys, and started testing "Shop the Web." And at
the very end of last month, after having raised $1.25 billion in a junk-bond offering in late January, Amazon.com bought
its share of Drugstore.com, a company that aims to sell everything from breath mints to Viagra, and went after the $150
billion U.S. pharmacy market, almost six times larger than that of books.
"There are a lot of differences between books and drugstores," Bezos says, "but there are a lot of similarities too.
Customers want selection, convenience, price and information." He says Amazon.com will share management tips with
the company and encourage Amazon's visitors to try the new pharmacy, which will itself be competing with at least half
a dozen Internet start-ups, including Planet Rx and Soma.com, which started selling medicine online Jan. 15. Bezos
declined to say if he has investments in other e-commerce companies, but says, "We may do more investments like
this."
It's this kind of almost routine doubling down every few months of his already massive bet and nervy expansion of the
scale of his ambitions that keeps the public and Wall Street on the edge of their seats, makes Bezos a moving target to
his rivals and buys him more time to turn a profit. And as he encourages us to imbue his company with the same
limitless potential that as a rule we only vouchsafe for ourselves, we have to keep revising upward and outward our best
guess of just what Bezos is really after. Does he want to be the reincarnation of Sam Walton? Does he want to be
Michael Eisner? Or does he want to be Richard Branson, who made Virgin stand for so much and so little that it can be
slapped on a $5,500 seat to London and a can of cola?
Bezos, who once told his younger brother that he "refuses to evaluate either-or equations," most likely wants to be all of
these and then some. Indeed, his every gesture, posture and feature, from his standard-issue wardrobe of khakis and
brown rubber-soled shoes to his homemade desk fashioned out of a door, seems calculated to belie the incendiary fact
that Bezos is one of the world's most ascendant capitalists, with apparently boundless ambitions.
Lately, this enormous reaching has provoked as much skepticism as enthusiasm on Wall Street. Around the time the
stock tumbled, in mid-January, Barton Biggs, a global strategist for Morgan Stanley Dean Witter, speaking about
Internet stocks in general, told Bloomberg News: "I promise you that, like all bubbles, this bubble will come to a very, very
bad end. The only trouble is that none of us know when." And Robert J. Barbera, chief economist at Hoenig & Company,
has said that while investors may have dreamed of Amazon killing Wal-Mart, that company has other ideas. "Do you
think that Wal-Mart will roll over and die? Don't you think there will be a Wal-Mart.com?" In fact, Wal-Mart has put up a big
site with a guarantee in case of credit-card fraud and a flat $3 charge for all shipping costs.
There is a growing suspicion that in the end it could still be the brick-and-mortar dinosaurs who reap the benefits from
the Internet trailblazers. Jose Rasco, also at Hoenig & Company, draws comparisons to ill-fated innovators like Atari, the
video-game pioneer later bested by Nintendo, and Commodore, which put out one of the earliest versions of the
personal computer, and even to Apple, which has had to stage a huge comeback recently just to secure its status as a
niche player. He also sees it as a bad sign that Amazon.com, which at one point was championing the advantages of
maintaining as little inventory as possible, has recently bought its own distributor in Reno, revealing its need for the same
kind of economies of scale as its old-fashioned competitors. "Now they're not exactly a virtual company or a real one,"
says Rasco, "but in a limbo somewhere between."
A more hopeful possible scenario is that Amazon.com will get bought. James McQuivey of Forrester Research says, "A
company like Disney could afford to spend $20 billion for Amazon," and with that possibility he has pushed the
company back out onto the horizon, where he can imagine a perfect partnership of information, entertainment and
customers.
But by constantly blowing out the dimensions and focus of the company, Bezos has a way of making even the most
recent projections by his skeptics and boosters seem out of date and beside the point. As Bezos, video-game style,
keeps taking on ever larger and more ornery opponents while reminding himself that "stress is an orthogonal
dimension," he seems to be reveling in the game like a man with all kinds of cards up his sleeve. As Graciela
Chichilnisky, a Columbia University economics professor who employed Bezos in her arcane financial services start-up
right after he graduated from Princeton, puts it: "In the knowledge sector the key issues are rate of innovation and depth
of penetration. He will anticipate the changes. I bet on Jeff Bezos' brain."
In fact, Bezos' claim that by the end of the year, Barnes & Noble would no longer consider him a rival almost seems true.
According to Nicole Vanderbilt, an Internet analyst for Jupiter Communications, Amazon.com's real rivals now aren't the
lumbering store-based retailers but the other heavily trafficked Internet portals and providers, from AOL to Yahoo!, and
now, after its acquisition of USA Networks, Lycos. "As impressive as Amazon's 6.2 million customers are," she says,
"AOL has the credit-card numbers of 16.2 million customers."
As he widens his scope, Bezos continues to put more and more of his emphasis on building the Amazon brand.
"Brands to a certain degree are like quick-drying cement," he has said. "When they're young, they're stretchable and
pliant, but over time they become more and more associated with a particular thing and harder to stretch."
Bezos has often spoken about how the Internet, where prices and services can be compared with a couple clicks,
"fundamentally shifts the balance of power from the merchant to the customer." Yet the race by all the big Internet players
to get huge fast is based on the opposite assumption: that customers will align themselves early on with one of a couple
of names and stay put out of sloth and habit. Bob Pittman, formerly of MTV and now of AOL, has expressed this cynical
notion. "Coca-Cola doesn't win the taste test and Microsoft is not the best operating system, but in America brands win."
But while Coke and Microsoft started with products and then wrapped them in brands, Amazon.com, which sells other
people's products, is almost entirely a creation of branding.
very morning, even before her husband leaves their modest loft and heads to his little office in his sensible Honda,
MacKenzie Bezos is at her laptop. While an undergraduate at Princeton, she served as Toni Morrison's research
assistant on "Jazz," and for most of the last five years has been researching and writing her own novel, whose
protagonist works for the state of California in Sacramento. According to Bezos, she has just finished a first draft.
While her husband has found a way of selling millions of books a year, largely by paring down the process of commerce
to the otherwise imperceptible exertion of one fingertip, MacKenzie sits at her desk rewriting sentence after sentence on
a single book that may never see print. "It's the hardest job in the world," says Bezos. "Nobody is pushing you. Nobody is
even counting on you to do it. And it's lonely. You have to be incredibly self-disciplined." And while Bezos has had to
persuade a couple thousand of employees, tens of thousands of shareholders and millions of visitors, users and
customers to come along with him for the ride, MacKenzie has just had to persuade herself. But regardless of whose
undertaking ends up being more successful or more worthwhile, both are storytellers, and both are spinning epics out of
thin air.
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