Econ of Ithaca

1. Jeff Bezos
The Next Internet Kingpin?

2. The Background: The Dot
Com Bubble
• Amazon founded in a time when companies’ stock
prices shot up simply by adding “.com” or “e-” to their
name.
• Philosophy of
the day: “Get big
or get lost”: company
ledgers took huge losses
in pricey advertising.
http://www.housingmarketnews.net/images/bubble-history/dot-com-bubble.jpg
• Most companies crashed during the burst; Amazon
didn’t.

3. Foundation of Amazon
• Bezos created
Amazon’s business
plan on a cross-
country trip.
• Like other dot-com
companies, Amazon
fully expected to
operate at a loss for
the first few years.
http://web.mit.edu/wi/logos/amazon.jpg

4. How did Amazon survive the
Bubble Burst?
• No agreed-upon one reason for survival, but several
factors may have helped:
o 1999 patent of “1-click shopping”
 Previously, online shopping done in “shopping cart” model,
where items were abandoned in carts.
 1 Click shopping eliminated “abandoning” and buyer confusion
 Patent lawsuit temporarily forced Barnes-And-Noble, who
was using a similar system, out of business at Christmas
holiday rush
o Customer Service: “The competition is watching us, and
we’re watching the customers.”
 One of the first to encrypt credit card numbers
 Built distribution centers with money most companies used to
advertise
 Amazon had a reputation left standing after bubble burst
crashed advertising capital.

5. Moving On: The New
Innovations
Making Startups Easier than Ever
• Elastic Compute Cloud:
o Sells otherwise expensive
server power
o Very economic: Amazon
normally only uses 10% of
potential server power (other
90% reserved for spikes)
• Fulfillment:
o Sells unused warehouse space
so startup capital is saved from
buying private warehouses
o Automates everything: As soon
as buyer orders are sent,
http://www.thepicky.com/images/2009/04/cloud-computing.gif warehouse automatically ships

6. New Innovations cont.
Task Distribution Management
• Amazon Mechanical
Turk:
o Some tasks are just
better done by humans
instead of computers
(image recognition, etc.)
o People post these tasks
on AMT and other people
complete these tasks,
sometimes for money. The Original Mechanical Turk: A chess
o Rewards really not that playing “machine” secretly operated by a
large: ~10 cents hidden person inside.
It’s how Amazon’s Mechanical
Turk produces human-like results;
because work is done by unseen humans
(the users)!
http://images.salon.com/tech/feature/2006/07/24/turks/story.jpg

7. The Fight to lead the Web 2.0
• Web 2.0 is about platforming: providing the basic
layer for website-building.
• Google has been leading this, but:
• ECC, AMT, Fulfillment have attracted big
customers: Microsoft, Linden Labs, etc.
• So the Big Question is:
Will Amazon be the New
Microsoft?

8. Works Cited
• Bezos, Jeff (1964-). Hutchinson Unabridged Encyclopedia. Helicon
Publishing. 2005. eLibrary. ProQuest LLC. ITHACA HIGH SCHOOL.
28 Sep 2009. http://elibrary.bigchalk.com
• Chris Woodyard and Lorrie Grant. “E-Tailers Dash to Wild, Wild
Web.” USA Today Jan. 13, 1999: 1B-2B. SIRS Researcher. Web. 28
September, 2009.
• Henry Petroski. “Shopping by Design.” American Scientist Vol. 93, No.
6 Nov./Dec. 2005: 491-495. SIRS Researcher. Web. 28 September,
2009.
• “Jeff Bezos’ Risky Bet” (Cover Story, Nov. 13, 2006). Business Week.
20 Nov 2006. 22. eLibrary. ProQuest LLC. ITHACA HIGH SCHOOL.
28 Sep 2009. http://elibrary.bigchalk.com.