Amazon: The Largest Market Growth Company In The World

In the past year, it has been global capital.

Even the most powerful companies are difficult to argue even if they are ranked first.

In the whole 2015, the market value of Amazon Co increased by more than 110 billion US dollars, and the total scale reached US $350 billion. This huge figure has surpassed the two oldest stock stocks in the US stock, Hilbert Hathaway, ExxonMobil and stock god Buffett, ranking the fifth largest market capitalization companies in the US.

It is approaching apple, Google and Microsoft, the three largest technology giants, and Facebook.

Not long ago, Amazon has just released its second quarter financial report in fiscal 2016.

The latest report shows that Amazon's net profit in the second quarter of 2016 was US $857 million, a huge increase compared with the net profit of US $92 million in the same period last year. Net sales amounted to US $30 billion 400 million, up 31% from last year's US $23 billion 200 million.

Amazon's earnings per share and net sales in the second quarter exceeded Wall Street analysts' expectations.

Unlike the relatively low valuation of US technology companies, Amazon has almost reached the level of "market dream rate" between China and the A share market, reaching 190 times at the end of 2015, compared with Facebook's P / E ratio of 60 times, while Apple's P / E ratio is only 12.3 times.

This fully demonstrates the great confidence of market investors, and believes that it can maintain a very strong profitability in the future.

At present, Wall Street generally expects more than $800 for Amazon's target stock price. JP Morgan's target price for Amazon shares is US $915, and even one analyst directly set Amazon's stock price target at US $1000.

The analyst's point of view is the same as Amazon founder Jeff Bezos: "we are optimistic about the short-term, medium and long term, and the rate of profit rise in the next two years may be far beyond the previous two years."

Improvement of profitability

Internet companies are always associated with "burn money". The more they burn, the more chance they will have to form a deep moat on scale and business, and ultimately form a stronger profitability.

For a long time before, Amason was one of the most "good at deficit" companies in technology enterprises. Although the online retail business has brought huge cash flow to Amason, however, Amason has not been able to make profits because of a large amount of logistics infrastructure investment and new business input.

With the growing maturity of AWS (Amazon cloud services) and Prime (Amazon affiliate), the two largest profit centers, the loss situation has been qualitatively changed. These additional services based on massive merchants and users have opened up a wide profit channel for Amazon.

No Amazon is huge and influential.

These two trump card businesses are hard to establish.

Ten years ago, AWS was just a service department of Amazon for its independent merchants on Amazon.com to own their own network storage space. But Bezos was surprised to find that this product not only had great demand inside the platform, but also had great demand for various kinds of enterprises, especially start-ups.

A quick start means greater market initiative.

In the ten years since its establishment, AWS has been leading in the field of cloud infrastructure, and has "rolled" a series of strong competitors, including the "three giants", including Microsoft, IBM and Google.

In the 2016 year of the US cloud service market share, Amazon AWS ranked first in the market share of 31%, while the sum of three of Microsoft, Google and IBM accounted for 22%, while the other 5 to 24 cloud service providers occupied 27% market share.

In this new and vast market, AWS has been riding the dust.

Cloud service is a market that once questioned "one of the three largest Internet bubbles in the world" in the 21 world, but now the market is growing at the rate of 30% per year in the United States. Such a huge market like China and India is also in its infancy.

Today, AWS is the first choice for all Internet start-ups in the United States, and this service has entered the market of China and India, exploiting the wider market with cloud advantages. In 2016, the global revenue of the business has exceeded 10 billion dollars.

AndyJassy, chief executive of AWS, said, "in the autumn of 2003, the company came to the conclusion that (cloud services) is an undeveloped green space, and that all components needed to run the Internet operating system have not yet been established, which gives us a fresh look."

But he also admitted that no one in the Amazon group had expected that AWS would grow so strong today.

Prime: deep binding user value

Compared with China's booming e-commerce market, the US has not been able to develop e-commerce rapidly because of its better offline distribution channels and lower commodity prices. According to the Census Bureau data released by the United States, e-commerce sales accounted for only 7.4% of the total retail sales in 2016.

In 2006, the ratio was only 2.8%.

Although the total online retailing is still not very high at present, it is obviously in a rapid growth process over the past ten years.

In the process of growth, Amazon played the most important role.

In the loss year after year, Bezos and his company built the largest and the most complete Internet based commodity circulation network system in the United States and even in the world. In theory, as long as any commodity is connected to the network, it can be delivered to the end consumers in the fastest and safest way.

From the Internet based sales and logistics channels to the terminal mass consumers, this huge Internet based channel network has great attraction for commodity providers.

At the end of commodity supply, Amazon has formed a perfect self strengthening mechanism.

However, at the expense side, the growth of users is not as fast and rich as the supply side. The most important reason is that the offline channel of the United States has been very perfect, giving users a very good consumption experience.

On the other hand, online sales, if you use the traditional express channels like the US Post, will often wait for a long time and experience poorly.

While UPS, Amazon self run and other logistics systems have better user experience, they often need higher freight rates, which are not cheap in the US.

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In order to solve this contradiction, Bezos decided to set up a Prime membership system. If the user pays $79 a year (up to 99 US dollars later), he will be able to use more efficient logistics system within a year.

This way of raising user experience through packaged charges has been an unprecedented success.

According to the survey report, the proportion of Prime members in Amazon consumers is more than half.

It is estimated that by the end of June, the number of Prime members in the US has reached 63 million, accounting for 52% of the total number of consumers in the US.

According to this data, Amazon's Prime membership in the US increased by 19 million compared with a year ago.

The growth of membership is very important for Amazon. This not only means more members' income, but also means that under the more convenient shopping experience, Amazon can harvest more user orders and greatly increase sales scale.

Growth enterprises with the largest market value in the world

Amazon relies on the electricity supplier to lay the foundation of the enterprise, not only has a large number of users gathered by the retail business of the electricity supplier, but also has the ecosystem formed by many businesses on this basis.

The market that these businesses are in is a kind of subversion to the original industrial structure of the society.

Through disruptive innovation, we can get through the whole industry chain of related businesses and present them to consumers and customers in the form of final products.

Under the mode of the whole industry chain + terminal product, users do not have to worry about the operation mode and operation details of the system, including reading service, cloud storage service, streaming media service, logistics system service, etc., all of them can be handed over to Amazon for overall control. What users need to do is to pay related expenses, and this cost also has a very high price performance ratio.

Amazon has broken through the traditional mode in various industries, and has created a brand new and relatively independent market space. Within these spaces, Amazon has a strong monopoly effect. It is not only the provider of goods and services, but also the maker of market rules.

Most of these businesses have high market space due to their innovative formats.

For example, e-commerce accounts for less than 10% of retail sales in the United States, and less than 4% of households using smart TV and streaming media services. The USP and other inefficient logistics systems still occupy a huge market space in the United States. Cloud services are a large market that is enough to recreate a human society, and the entire market is still in the stage of shortage.

From any point of view, Amazon is hard to define as a mature enterprise, and its business lines are in the new market in the process of rapid growth.

Even in such a state, Amazon has gained more than US $350 billion of its market value.

In other words, a commercial infrastructure that has just been completed and oriented towards the future has been priced at $350 billion. If this framework is accepted by more and more people and injected with new nutrition and organism, a future commercial organization that may exceed everyone's cognition and has never been born is likely to be born in the hands of Bezos.

If so far, people still take Amazon as an electric business enterprise, and compete with traditional retail organizations such as WAL-MART, and compare their market value with interest. It is obviously the neglect of the value and power of Amazon's entire ecosystem.

Although there are still some distance from apple, Google and Microsoft's three major technology giants, Amazon has far ahead of the three growth speed and commercial potential.

Eventually surpassing apple to realize the market value of trillions of dollars, perhaps this is the great future it set for Amazon.