Amazon is an e-commerce behemoth with a market cap of $1.4 trillion, making it one of the most valuable publicly traded companies in the world. But it didn’t start off that way.
It started out as a modest online bookstore out of a small garage in 1994. Its founder, Jeff Bezos, originally planned to name the company “Cadabra.” His lawyers, however, thought it sounded like “cadaver” and convinced him to change the name to Amazon, after the world’s longest river.
Despite its humble roots, Bezos always wanted Amazon to be “an everything store.” It’s since become that and more. By the early 2000s, Amazon had moved beyond books, videos, and music, to selling clothing, electronics, toys, and kitchenware. Today, the world’s largest e-commerce store sells more than 12 million products.
While online sales still account for roughly half of Amazon’s revenue, Amazon has continued to diversify its business lines through strategic initiatives and acquisitions. In fact, the Amazon of today looks nothing like it did in 1994.
Where Does Amazon Make Its Money?
In 2021, Amazon generated $469.8 billion in revenue, that’s $893,877 per minute. It also brought in $33.4 billion in profit.
But where exactly does Amazon make its money?
Amazon is the undisputed e-commerce leader that has more sales than the 14 biggest U.S. retailers combined. Unsurprisingly, majority of its revenue comes from online store sales at Amazon.com. Its second largest revenue stream is from third-party seller services. According to the Q4 2021 earnings report, US-based third-party sellers had record-breaking sales over the period, selling an average of 11,500 products per minute between Black Friday and Christmas Day.
There are many other business units that help juice Amazon’s bottom line.
Amazon also owns the world’s largest cloud platform: Amazon Web Services (AWS). As the third largest contributor to the company’s revenue, AWS had significant growth over the recent months onboarding well-known enterprises such as Meta, Nasdaq, and Goldman Sachs.
In addition to selling products and cloud services, Amazon has a number of interconnected business divisions that spans multiple industries, including online advertising and digital payments, making its complementary products indispensable for the global consumer.
Case in point, through various acquisitions, Amazon devices can listen, watch, and clean up after you. On August 5, Amazon announced it was acquiring iRobot, the name behind the robotic vacuum Roomba, for $1.7 billion in cash. Also, in 2021, it introduced Astro, a household robot and virtual assistant designed for home security monitoring.
In early 2018 Amazon snapped up Ring, the smart doorbell company for $1 billion, giving the company a leg up on its smart-home tech services. Before that, Amazon acquired Blink, the smart camera and doorbell startup for around $90 million.
The company believes that selling interconnected electronic devices, including the Kindle e-reader, Fire tablets, Fire TV, Alexa, Echo, Cloud Cam, and other devices will help spark more shopping on Amazon.com.
Amazon Prime, meanwhile, is a paid subscription service that gives its members free express delivery on most items sold by Amazon. It has over 200 million Prime members. Through Prime, members also get access to its popular video on-demand streaming and rental service, Prime Video.
Why Did Amazon Move into the Grocery Space?
Its diversified holdings have also expanded into the healthcare and grocery sectors. It took Wall Street for a loop when it purchased Whole Foods Market in 2017 for $13.7 billion. The move gave Amazon instant access to more than 500 locations in North America and the United Kingdom. It also gave Amazon a competitive edge against Walmart, the largest grocery retailer in the U.S.
Two weeks before the Whole Foods acquisition, Amazon bought primary care provider One Medical for $3.9 billion. This was seen as a major expansion on its company’s healthcare ambitions and it gave Amazon a physical network of healthcare offices in addition to its online pharmacy and Amazon Care, a virtual and in-home urgent care service.
What Other Businesses Does Amazon Own?
There are also dozens of Amazon-owned businesses that most people aren’t aware of, including Zappos (footwear), Kiva Systems (robotics), PillPack (online pharmacy), Twitch Interactive (livestreaming video), AbeBooks (world’s largest online used/rare bookstore), Fabric.com (online fabric store), Goodreads (literary review site), IMDb (Internet Movie Database), and MGM Holdings Inc (production and distribution of film and TV content).
Furthermore, Amazon provides advertising and subscription services, computing, storage, database, analytics, and machine learning, as well as fulfillment, publishing, and digital content subscriptions.
In 2001, Jeff Bezos sketched a flywheel on a piece of paper; it would become the company’s key marketing strategy. The Amazon flywheel is designed to enhance the customers experience which in turn attracts more customers, drives greater product selection, and lowers the costs of products and innovation.
And that’s exactly what Amazon has done over the years—expand its operations to include complementary businesses that drive consumers to the Amazon ecosystem. With its size, scale, and advantages, this tech giant’s disruptive ambitions should continue to revolutionize the way we live.
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