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Amazon the Great

The tech titan is showing its superiority by grabbing more market share in a wider array of businesses than its rivals.

  • Dan Weil

Plenty of ink has been spilled over the stock market gains driven by Google’s parent, Alphabet, Amazon.com, Apple, and Facebook for the past year. But a strong case can be made that Amazon is the superior technology titan.

The e-commerce company has successfully entered a wider array of businesses than the other three, putting itself on a path to dominate search, hardware, and cloud computing, according to Scott Galloway, professor of marketing at New York University’s Stern School of Business and author of the new book The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google.

“There’s this focus on core competence,” he says in an interview. “Most companies that outperform do one thing well. Amazon has blown up that philosophy.”

Google would seem to be a clear winner in the online search category, with a 64 percent share of the U.S. market, says Galloway. But when it comes to the more lucrative area of product search, Amazon’s 55 percent market share in September 2016 outshined Google and other search engines, which held a combined 28 percent, according to business technology firm BloomReach. Retailers had the remaining market share.

And while Apple’s biggest success is in hardware, Galloway says, the strongest new device on the market is Amazon’s voice-activated Echo speaker, which can play music and search the internet. Research firm Gartner estimates that screenless devices will represent 30 percent of web browsing by 2020. 

“Where Amazon bumps up against Google on search and Apple on hardware, it’s winning,” Galloway says.

Meanwhile, Amazon Web Services, the company’s cloud business, has gained traction. Amazon had a 34 percent share of the cloud-services market in the second quarter, far ahead of Microsoft Corp. at 11 percent, IBM at 8 percent, and Google at 5 percent, according to Synergy Research Group.

“Amazon is a major surprise” in the sector, says Mike Kwatinetz, general partner at venture capital firm Azure Capital Partners. “Amazon needed a great cloud product just to support themselves. They deserve unbelievable credit for execution.”

Then there’s Amazon’s $13.7 billion acquisition of Whole Foods Market, a natural and organic foods supermarket. The deal, which closed in late August, will probably turn Amazon into the fastest-growing brick-and-mortar retailer, according to Galloway. It shows how the company, led by Chief Executive Officer Jeff Bezos, can enter new areas of business and shake up the competition.

“Amazon is the one with the most plates, spinning at 1 million revolutions per minute,” says Galloway. “Amazon can hurt others by just thinking of hurting them. Jeff Bezos can take away 10 to 30 percent of any company’s value in 90 days with press releases.”

While Facebook CEO Mark Zuckerberg has created a prominent social networking platform, his company arguably doesn’t match Amazon’s strength in building multiple platforms: e-commerce, cloud, and voice service — Amazon’s Alexa responds to consumers’ commands via products such as its Echo speakers.

Perhaps Amazon’s most important advantage, Galloway and Kwatinetz say, is that unlike the other three tech titans, the company is unburdened by expectations of profit from its stock and bondholders. “Facebook, Apple, and Google have taught investors to expect 20 to 24 cents back on every dollar,” Galloway says. “Amazon never got investors hooked on the crack pipe of profits.”

That allows Amazon to spend more on research and development than its competitors, and to more easily absorb failures like its Fire Phone — a smartphone that flopped with consumers. Spokespeople for Amazon, Facebook, Apple, and Google didn’t immediately return emails seeking comment.

Failing is inevitable in the tech business. “If you don’t swing and miss, you aren’t swinging at enough pitches,” says A. Douglas Melamed, a law school professor at Stanford University. For Amazon to fall from the top, experts say it would take some clever entrepreneurship or government intervention.

“Is there a company that’s not noticeable until it hits a certain size, and then it’s hard to slow them down?” says Kwatinetz. Amazon, which on October 23 had a market value of about $465 billion, would likely try to buy such a company, he says.

Amazon could also lose its top position through government regulation, as the online shopping giant’s disruption of the retail market is destroying jobs and the company has paid relatively little in taxes. “How does a society continue to function if a company can become the fourth most valuable and pay almost no meaningful corporate income tax?” Galloway says.

While Amazon may come to be seen as a bad corporate citizen in need of restraint, Melamed sees Amazon as mostly a force for good. “What’s really going on is that people are using Amazon as a symbol of a different problem — the uneven distribution of wealth and its concentration in a few hands,” he says. “That’s the real issue. I hope policy makers focus on that instead of focusing on Amazon as a symbol or scapegoat.”