Thursday, December 06, 2007

Entrepeneur CEO Jeff Bezos Continues to Grow Amazon!

As many of you know, I've been very positive about Amazon over the last few months especially in comparison to eBay for 3P sellers. Today, MarketWatch has a great article on the man behind Amazon, Jeff Bezos and provides some insight into how the company is run.

After reading the article, it is clear that the differences between eBay and Amazon are even greater than many of us imagined.

""Shareholders should not expect to make any money on 'Harry Potter 7' -- I will tell you that right now," the Inc. chief executive told the gathering, which took place in June near the company's Seattle headquarters.

That his declaration carried a prideful tone rather than one of foreboding illustrates a key Bezos character trait, one that has seduced customers and -- at times -- frustrated the investment community. The 43-year-old founder of Amazon stubbornly keeps his sights on the oft-stated goal of building "Earth's most customer-centric company," with seemingly little regard for turning a profit in the short term."

I've been following eBay for nearly 8 years and that is not a statement Meg Whitman would ever make publicly. Profit has always been the driving force behind eBay's actions. eBay lives and dies buy its ROI (that's kind of catchy) But that approach means that you don't invest in customer-centric initiatives until it is required of you to "keep the train on the track"

These two companies have drastically different management styles. Amazon is run by an entrepreneur while eBay is run by a professional manager. Amazon invests in their growth while eBay manages their bottom line. Amazon makes decisions for the long-term, eBay makes decisions for the quarter.

Interestingly they both live by the data. With eBay, metrics guide most decisions and with Amazon it is much the same.

"Bezos' love of figures is hardwired. He cut his teeth with Wall Street players such as Banker's Trust and D.E. Shaw, the latter of which was founded by a former computer-science professor from Columbia University who developed high-tech quantitative trading systems. Bezos is known to prefer decisions based on data, often reminding his management team that, in the decision-making process, the right data can put the most junior person in a company on par with top executives."

When Amazon opened its doors to 3P sellers in 2001 many investors, employees and pundits thought they were crazy to allow others to compete directly with their own products.

"In some cases, the prices of competing merchants undercut Amazon's prices on the same items, resulting, unsurprisingly, in lost sales.

The notion, according to Bezos, was that such information would create an overwhelmingly positive experience for customers, whose future purchases could make up for the near-term hit.

"This was a very controversial decision inside Amazon," Bezos said when quizzed by a shareholder on the practice at the annual meeting. "But from a companywide point of view, our view has always been to say, 'Let's be simpleminded about these kinds of cannibalization decisions and cut through the complex thinking by just [asking] what is better for the customer.'

"And," he continued, "if we side with the consumer on that kind of decision, over time it will force the right kind of behaviors on ourselves."

Because of this devotion to serving the consumer, Amazon has become a viable marketplace for 3P merchants. While it is difficult, if not impossible, for these merchants to brand themselves on the Amazon platform, at the end of the day, selling more product takes away some of that pain.

Amazon deals with Wall Street differently than eBay as well.

"We felt that if you're really were serious about [building a business], the question was how we should do things in the short term," Covey said. "One is you put customers first. The other is not to get trapped in short-term interest of Wall Street. Jeff thought all that through from the very beginning."

Alberg agreed. "Jeff doesn't pay much attention to the stock price and [to] what analysts say is valuable. In his mind, what's really important is how much cash the company generates. He holds to that."

While in the early days, Meg used to say we don't pay attention to the share price, their actions over the last 2 years reveal a different story.

Amazon, under Bezos is continuously testing the boundaries. eBay, under Whitman is managing the bottom line. The difference between the entrepreneur and the manager.

Just my 5 cents!

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