Few companies have the brand
equity and profitability that Yahoo does, especially for an
entity that doesn’t exist in the real world, so to speak. In
all of the webdome, only a handful come close – Google,
eBay, AOL, PayPal, and Amazon being the ones that come to
mind. I have long been a fan of Google and eBay, who
purchased PayPal. They have proven beyond a doubt their
ability to succeed. AOL is a story in and of itself. The
fifth company on that list, Amazon, is also considered a
success. BusinessWeek magazine, for instance, considers
Amazon’s founder Jeff Bezos to be one of the greatest
innovators of the last 75 years. At 40, Jeff Bezos heads a
company whose brand is in the top 100 of worldwide
companies. Ranked 66th, it places just behind
eBay and Yahoo who are ranked 60 and 61 respectively. These
are impressive feats considering companies such as Motorola,
Porsche, Hertz, Starbucks, and Heineken all rank behind the
three internet giants.
Looking at Amazon through the
lens of internet advertising, it deserves credit for
embracing the power of affiliate marketing. Amazon has
long been considered a pioneer in online direct marketing
and continues to run one of the most successful and
well-liked programs. To provide some historical context on
their involvement in the internet advertising space, in
February 2000, at a time when most companies were just
starting, Amazon even received a patent on the technology
behind running an affiliate program. They applied for it in
1997 which itself shows their level of commitment to the
industry and confirms their pioneering status. Of the
powerful internet brands, only eBay compares with respect to
their understanding and ability to leverage affiliate
advertising.
Many companies in our space
followed in Bezos’ footsteps, in that like him they
succeeded based on timing, strategy, and marketing. Where
those in online direct marketing space have differed and
where, in many respects, the online direct marketers deserve
more credit is in their ability to do what Amazon has not.
Those in the online direct marketing space make money, and
they do it fast. In its first ten years of being in
business, Amazon.com lost $3 billion dollars. It took more
than five years for the business to have its first
profitable quarter, and it will take countless more before
the company becomes truly profitable. Yahoo, Google, and
eBay on the other hand are all profitable, having earned
more than one billion dollars in net profits after tax.
Strategic marketing expert Al
Reis believes that Amazon, while the best known brand for
retail online, has actually made several key mistakes.
Amazon CEO Jeff Bezos says that he wants “to create
something that transcends his own company,” doing what Sony
did by helping make Japan known for quality. Ultimately, it
comes down to answering what it is that we really want to
do. What business are we really in and how many lines of
business should we have? Amazon is now profitable and has a
great brand, so it might seem like there is no reason for
them not to go into other businesses (which they already
have). Sony, the company referenced by Bezos, is probably
the world’s most recognized electronics brand, known in our
industry most for its gaming systems used in incentive
promotion campaigns. If one was to emulate a company, would
Sony be the one to choose? Looking at other incentive
promotion offers, one might want to pick Nintendo. Although
they have a single product and made 1/13 the revenue of Sony
over the past decade, they made more in cumulative profit.
As we look into 2005 and
wonder how we might make this year as good as the year just
past, it might seem like diversifying is the way to go.
Looking at other companies that have faced similar market
opportunities and competitive challenges, the answer might
just wind up being counter to what we think. The trend for
2005 will be understanding the key levers that helped
successful companies succeed. These companies, when they
wanted to grow, they went narrow. They focused. When they
wanted to go into a new business line, they either created
the category, or in the case of GAP, they created a new
company, Old Navy, rather than Discount Gap. What will you
do to stay ahead? This year will have more competition than
any year thus far.
Jay Weintraub
