Jeff Bezos Owns the Web in More Ways Than You Think | WIRED
Industry observers see Amazon's entry into the tablet sweepstakes as further evidence that Jeff Bezos may well be the premier technologist in America.
Photo: Nigel P styling by Alvin Stillwell/Celestine A grooming by Erin Skipley/Ajentse
“What I’m about to show you,” Jeff Bezos says, “is the culmination of the many things we’ve been doing for 15 years.”
The CEO of Amazon.com, in regulation blue oxford shirt and jeans, is sitting in a conference room at his company’s spiffy new headquarters just north of downtown Seattle. It is mid-September, exactly one week before he will introduce a new line of Kindles to the world. He has already shown me two of them&one with a touchscreen, the other costing just $79&but that’s not what’s truly exciting him. It is a third gadget, the long-awaited Amazon tablet called the Kindle Fire, that represents his company’s most ambitious leap into the hearts, minds, and wallets of millions of consumers.
Bezos runs through the features that will soon set the tech world ablaze&the $199 price tag, the easy-to-hold size, the seamless access to Amazon’s rich and growing collection of digital media. When the Fire is introduced, analysts will declare it the strongest competitor yet to the iPad. Yet the Fire is not just a rival gadget, but something essentially different. The iPad is the flagship of the post-PC era&in which the desktop is replaced by lean, portable, gesture-driven tablets. As people will learn when Amazon ships it today, November 14, the Fire is an emblem of a post-web world, in which our devices are simply a means for us to directly connect with the goodies in someone’s data center.
“We are culturally pioneers. We like to disrupt even our own business. Other companies have different cultures and sometimes don’t like to do that. Our job is to bring those industries along.”
While users of the iPad and the Fire will engage in many of the same activities&watching movies, reading books, playing Angry Birds&the philosophy behind the two tablets could not be more different. Apple is fundamentally a hardware company&91 percent of its revenue comes from sales of its coveted machines, compared to just 6 percent from iTunes. The iPad’s design, marketing, and product launches all emphasize the special character of the device itself, which the company views as a successor to the PC&complete with video-chat capabilities and word-processing software. Amazon, on the other hand, is a content-focused company&almost half of its revenue comes from sales of media like books, music, TV shows, and movies&and the fire-sale-priced Fire is designed to be primarily a passport to the large amount of that content that’s available digitally. The gadget comes preloaded with customers’ Amazon account information, and anyone who signs up for Amazon Prime, the company’s $79-a-year shipping service, will be able to access more than 12,000 (and counting) movies and TV shows on the Fire at no extra charge.
by Steven Levy (37.9 MB .mp3)
Indeed, Bezos doesn’t consider the Fire a mere device, preferring to call it a “media service.” While he takes pride in the Fire, he really sees it as an advanced mobile portal to Amazon’s cloud universe. That’s how Amazon has always treated the Kindle: New models simply offer improved ways of buying and reading the content. Replacing the hardware is no more complicated or emotionally involved than changing a flashlight battery.
(That’s why, in a sense, some of the iPad comparisons and cavils you may read today in the hands-on reviews of Fire are somewhat irrelevant in light of this larger issue.
Yes, the Fire lacks the industrial-design pyrotechnics that make fanboys foam at the mouth like the iPad does. But who cares? Like a lizard shedding its skin, next year there will be another Fire and in three years the original will look as antiquated as the bizarre-looking Kindle 1 appears today.
When you pay $199 for Fire, you’re not buying a gadget—you’re filing citizen papers for the digital duchy of Amazonia.)
The iPad emphasizes downloads&customers who buy music, TV shows, or movies through iTunes must download them to their machine. (Even users of its new iCloud service must download their music to listen to it&at least for now.) This keeps iPads tethered to the paradigm of local storage, putting a premium on machines with more memory (which cost hundreds of dollars more). Amazon, by contrast, emphasizes streaming. Fire users can store up to 20 GB of music for free on the company’s servers (or an unlimited amount of music bought from Amazon). They can then stream it freely, along with more than 100,000 videos. That’s probably why the Fire’s virtual hard drive is just 8 GB, half the size of the smallest iPad.
The glory of the iPad, as well as the iPhone, is
Apple’s proprietary iOS is one of the main selling points, and the company regularly adds new features&most recently Siri, the voice-activated personal assistant. The Fire is built on Google’s competing Android OS, but a simplified version of it. (Fire users will have access to a heavily curated subset of the 250,000 Android apps.) Bezos seems to believe that people should care less about what their OS can do and just be able to stream the damn movie. (It’s a similar philosophy to Google’s Chrome OS, but tied to a proprietary piece of hardware and Amazon’s universe of media services.)
The Fire does have one compelling new piece of software: a faster browser called Silk. But even that is a servant of Amazon’s cloud vision. Over the past eight years, the company has capitalized on its data center expertise to build a vast cloud computing platform, which hosts web operations for some of the world’s largest Internet companies&even competitors like Netflix. (The support of such a massive infrastructure is really what differentiates the Fire from the seemingly similar $249 Nook tablet&Barnes and Noble has nothing like Amazon’s cloud behind it, limiting the Nook’s ability to deliver a varied range of services.) When surfing the Internet, the Silk browser harnesses those cloud servers to do much of the processing. “We call it a split browser, because it’s half in the cloud and half on the Fire,” Bezos says. It’s a hack that aims to make web pages download much faster. But it also has grand ramifications: It points to an era in which the device is so secondary that even computation takes place in the cloud.
The release of the Fire showcases how forward-thinking Bezos has been. After 15 years near the top of the tech heap, he doesn’t have the same outsize profile of other Internet innovators. (Nobody has made a TV biopic or Academy Award-winning drama about his rise to power, for instance.) But that may be changing. People are slowly beginning to realize just how much of the Web is powered by Amazon’s cloud services. And industry observers see Amazon’s entry into the tablet sweepstakes as further evidence that Bezos may well be the premier technologist in America, a figure who casts as big a shadow as legends like Bill Gates and the late Steve Jobs.
Nigel Parry
In a series of interviews in Seattle and New York, Bezos sat down with Wired to share his thoughts on the cloud, commerce, management, and outer space.
Steven Levy: The Fire seems like more than merely another iPad competitor.
Jeff Bezos: Yeah. What we really built is a fully integrated media service. Hardware is a crucial ingredient in the service, but it’s only a piece of it.
Levy: Price is a piece of it, too, and yours costs just $199.
Bezos: We think it’s a unique approach in the marketplace&premium products at nonpremium prices. We’re a company very accustomed to operating at low margins. We grew up that way. We’ve never had the luxury of high margins, there’s no reason to get used to it now.
Levy: How has Amazon been able to reinvent itself so consistently over the past 15 years?
Bezos: As a company, one of our greatest cultural strengths is accepting the fact that if you’re going to invent, you’re going to disrupt. A lot of entrenched interests are not going to like it. Some of them will be genuinely concerned about the new way, and some of them will have a vested self-interest in preserving the old way. But in both cases, they’re going to create a lot of noise, and it’s very easy for employees to be distracted by that. It could be criticism of something that we actually believe in. It could also be too much praise about something that we’re not doing as well as the outside world says we’re doing it. We’re going to stay heads-down and work on the business.
Levy: Eric Schmidt has said that there are four horsemen of technology now: Google, Apple, Facebook, and you. Do you view Amazon in those terms?
Bezos: Lists like that are fine and interesting, but if I were making that list I would have a hard time not having Microsoft on it. They’ve done a lot of innovative things, some of which get overshadowed by their big existing businesses. You look at something like Kinect, it’s pretty cool.
Levy: As they’ll be the first to tell you.
Bezos: As they should. It’s genuine. But one question to ask when you see a list like that is, who would have been on it 10 years ago? That will keep you humble. Go back to 1980. Who would you have predicted to be among the four horsemen of the personal computer era?
Competing Visions
The Kindle Fire isn’t just a rival to the iPad. It represents an alternate model of computing: It’s Apple’s post-PC vs. Amazon’s post-web.
Apple: Post-PC
Amazon: Post-Web
Device-centric
Cloud-centric
Own the OS
Forget the OS
Specialized apps
Specialized browser
Hardware is king
Content is king
Downloaded media
Streamed media
Levy: IBM.
Bezos: Right. And Intel, maybe. But you might’ve had Commodore, too, or Atari. There are always shiny things. A company shouldn’t get addicted to being shiny, because shiny doesn’t last. You really want something that’s much deeper-keeled. You want your customers to value your service. And there are companies that haven’t gone through tough times, so they’re not really tested.
Levy: Amazon has had those tough times&it took years before you made a profit, and your stock fell dramatically as the first tech bubble popped. Are there things that you’ve done smarter because you went through that crucible?
Bezos: If you go back to 1999, it’s hard to remember how effervescent the bubble was. People who really didn’t have any passion for technology or the Internet were giving up their careers as doctors and mining Internet gold. And when the bubble popped, a meaningful fraction of our people left. They realized they didn’t really want to be doing this. Some of them got laid off, some of them left of their own accord. Those were not happy days. This super-valuable person you really liked leaves. So your skin gets thicker. Not just me, but all of the executives who stayed.
Levy: To the consternation of publishers, Amazon is now publishing its own books. What are you doing differently?
Bezos: For one thing, pricing. For your typical consumer book&I’m not talking about textbooks or anything specialized&$9.99 is really the highest price that’s reasonable for customers to pay.
Levy: Some publishers don’t agree with you.
Bezos: As a company, we are culturally pioneers, and we like to disrupt even our own business. Other companies have different cultures and sometimes don’t like to do that. Our job is to bring those industries along. The music industry should be a great cautionary tale: Don’t let that happen to you. Get ahead of it. I think with books, we have gotten ahead of it, as have some very forward-leaning publishers. But some of them are really leaning backward, and that’s going to hurt their business. They’ll find that other publishers are going to do very well in that vacuum.
Levy: What else are you doing differently than other publishers?
Bezos: We believe that some of the royalty streams being paid for ebooks are not high enough. That’s why, in our Kindle Direct Publishing program, if you price your book between $2.99 and $9.99, we give you 70 percent of the revenue.
Levy: What plans does Amazon have to produce content in other media?
Bezos: Well, we have studios.amazon.com. It’s a completely new way of making movies. [Amazon crowdsources the production of a “test movie” until it reaches the point where a real studio takes over. Warner Bros. Pictures has a first-look deal with Amazon.] Some would say our approach is unworkable&we disagree.
How Amazon Powers the Internet
It began as a way for Amazon’s engineers to work together efficiently. Now Amazon Web Services hosts some of the most popular sites on the web and is responsible for a significant amount of the world’s online traffic. Here’s a look at some of the companies that rely on Amazon’s cloud computing platform.
What it uses Amazon Web Services for
Foursquare
3 million check-ins a day
Harvard Medical School
Vast database for developing genome-analysis models
NASA Jet Propulsion Lab
Processing of hi-res satellite images to help guide its robots
Video streaming service that accounts for 25% of US Internet traffic
Newsweek/The Daily Beast
1 million pageviews every hour
More than 1 petabyte of streaming video a month
Storage for billions of photos and videos 1
US Department of Agriculture
Geographic information system for food-stamp recipients
Virgin Atlantic
Crowdsourced travel review service
Data storage for its 22 million-plus reviews
Levy: Let’s talk about web services. Amazon Web Services is dominant in hosting&one observer says that you are the Coke of the field, and there’s no Pepsi. How did an ecommerce site wind up in the position where it’s hosting web powerhouses like Foursquare, NASA, Netflix, and The New York Times?
Bezos: Approximately nine years ago we were wasting a lot of time internally because, to do their jobs, our applications engineers had to have daily detailed conversations with our networking infrastructure engineers. Instead of having this fine-grained coordination about every detail, we wanted the data-center guys to give the apps guys a set of dependable tools, a reliable infrastructure that they could build products on top of.
The problem was obvious. We didn’t have that infrastructure. So we started building it for our own internal use. Then we realized, “Whoa, everybody who wants to build web-scale applications is going to need this.” We figured with a little bit of extra work we could make it available to everybody. We’re going to make it anyway&let’s sell it.
Levy: What was the internal argument against it?
Bezos: Stick to the knitting.
Levy: I’m going to guess that you don’t find that argument convincing.
Bezos: No. The common question that gets asked in business is, why? That’s a good question, but an equally valid question is, why not? This is a good idea, we have a lot of skills and assets to do this well, we’re already going to do it for ourselves&why not sell it, too?
Levy: Young startups all tell me that even if Google offers them free hosting, they still want to use Amazon. Why do you think that is?
Bezos: We were determined to build the best services but to price them at a level that customers couldn’t match, even if they were willing to use inferior products. Tech companies always have high margins, except for Amazon. We’re the only tech company with low margins.
Levy: How did you do it?
Bezos: We really obsess over small defects. That’s what drives up costs. Because the most expensive thing you can do is make a mistake. We can afford to focus on smaller and smaller defects and eliminate them at their root. That reduces cost, because things just work.
Levy: Target recently left Amazon Services to build its own web infrastructure. Three weeks after launch, a popular promotion took down the site. Did you get some satisfaction from that?
Bezos: No. Do you know how long we served Target? It was 10 years. We worked our butts off to serve them extraordinarily well. Some people misunderstood&”Why are you aiding and abetting a competitor?” But they were great partners. We worked hard for two years to help them migrate to the new system. It was the ultimate in friendly divorces. We wanted to see their transition go smoothly. So, no.
Levy: They could’ve used a few more servers, though.
Bezos: Well, maybe they should’ve built their new thing on top of AWS. [Laughs.]
Levy: You’ve leveraged Amazon Web Services by making use of it in your new Silk browser. Why?
Bezos: One of the things that makes mobile web browsing slow is the fact that the average website pulls content from 13 different places on the Internet. On a mobile device, even with a good Wi-Fi connection, each round trip is typically 100 milliseconds or more. Some of that can be done in parallel, but you typically have a whole bunch, as many as eight or more round trips that each take 100 milliseconds. That adds up. We’ve broken apart this process. If you can be clever enough to move the computation onto our cloud platform, you get these huge computational resources. Our cloud services are really fast. What takes 100 milliseconds on Wi-Fi takes less than 5 milliseconds on Amazon’s Elastic Compute Cloud. So by moving some of the computation onto that cloud, we can accelerate a lot of what makes mobile web browsing slow.
Levy: Was it difficult to turn yourself from a retail company into a consumer electronics company?
Bezos: It’s not as different as you might think. A lot of our original approaches and techniques carried over very well. For example, we’ve always focused on reducing the time between order and delivery. In hardware, it’s the same principle. An example is the time between when we take delivery on a processor to when it’s being used in a device by a customer. That’s waste. Why would we own a processor that’s supposed to go into a Kindle Fire that’s not actually in a customer’s hands? That’s inventory management.
Levy: By the way, how many Kindles have you sold?
[Bezos gives a long, loud example of his famous laugh.]
Levy: You don’t even answer!
Bezos: I know you don’t expect me to.
Levy: For years you’ve been touting e-ink as superior to a backlit device for reading. But the Fire is backlit. Why should Kindle users switch?
Bezos: They should buy both. When you’re reading long-form, there’s no comparison. You want the e-ink. But you can’t watch a movie with that. And you can’t play Android games. And so on.
Levy: And you now are selling a new version of the basic Kindle for $79. At this point, why not give it away&offer a deal where if people buy a certain amount of books, they get a free Kindle?
Bezos: It’s an interesting marketing idea, and we should think about it over time. But $79 is low enough that it’s not a big deal for many people.
Levy: Speaking of pricing, I wanted to ask about your decision to include streaming video as part of Amazon Prime. Why not charge separately for that? It’s a completely different service, isn’t it?
Bezos: There are two ways to build a successful company. One is to work very, very hard to convince customers to pay high margins. The other is to work very, very hard to be able to afford to offer customers low margins. They both work. We’re firmly in the second camp. It’s difficult&you have to eliminate defects and be very efficient. But it’s also a point of view. We’d rather have a very large customer base and low margins than a smaller customer base and higher margins.
Levy: Right now, the more recent movies and TV shows, the ones you call premium, aren’t included in the Prime membership. You have to buy or rent them separately. Wouldn’t it be better to offer an all-you-can-eat package that includes premium films, even if you have to charge a bit more?
Bezos: I’m a big fan of all-you-can-eat plans, because they’re simpler for customers. We work together with a bunch of different parties&the studios, content owners&and they get a say in how we offer their content, too. But my view is, if you can simplify it for consumers, that’s the way to do it.
Media Powerhouse
Amazon has stealthily become a major player in the competitive content business, with a major footprint in every medium. Meanwhile, its web services division owns one-fifth of the cloud computing market.
Note: Except for cloud services, figures refer to ecommerce market only. Books, music, and video include physical media and digital downloads, not subscriptions. Source: Credit Suisse.
Levy: You’ve built some social features into Amazon, but it’s not a huge part of what you do. What’s Amazon’s role in the social arena?
Bezos: It’s an open question. I think what we’re wondering is, if we have a list of 500 of your friends, how can we use that to improve ecommerce? We have some ideas. We’ve actually already done some experiments but haven’t found anything that we think is exciting yet.
Levy: But your rivals treat social interaction as an essential component of life online.
Bezos: For better or worse, it is really not a part of our culture to look at things defensively. We rarely say, “Oh my God, we’ve got to do something about that existential threat.” Maybe one day we’ll become extinct because of that deficiency in our nature. I don’t know. We look at things through a different lens. We say, “Oh, here’s this incredible phenomenon called social networking. How can we be inspired by that to make our business better?” I hope we find something.
Levy: Two years ago, you bought Zappos. Was that an attempt to absorb their so-called culture of happiness and customer service?
Bezos: No, no, no. We like their unique culture, but we don’t want that culture at Amazon. We like our culture, too. Our version of a perfect customer experience is one in which our customer doesn’t want to talk to us. Every time a customer contacts us, we see it as a defect. I’ve been saying for many, many years, people should talk to their friends, not their merchants. And so we use all of our customer service information to find the root cause of any customer contact. What went wrong? Why did that person have to call? Why aren’t they spending that time talking to their family instead of talking to us? How do we fix it? Zappos takes a completely different approach. You call them and ask them for a pizza, and they’ll get out the Yellow Pages for you.
Levy: So where’s the synergy?
Bezos: It’s on the back end. Amazon has a huge shoe business. Zappos has a huge shoe business. Zappos may have the size-8 customer, and we have the size-8 shoe. Having one set of fulfillment services for these two very different front ends, you get to satisfy more customers more often, because you’re more likely to have their size and style and color and so on.
“We work very, very hard to be able to afford to offer customers low margins. We’d rather have a very large customer base and low margins than a smaller customer base and higher margins.”
Levy: Let me change the subject to your fight against paying state sales taxes. Why have you been so aggressive?
Bezos: Our view on this is very clear and consistent. More than half of our worldwide business is in places where we collect sales tax or its equivalent. There are five states where we collect sales tax. We do great in those states. That’s not what this is about. We want federal legislation. That’s what we’ve been working on. And I think we can get that done this year.
Levy: Some years ago, there was some controversy when Amazon got a patent for its 1-Click shopping. Now, technology patents are so widespread that they’re seen as a real hindrance to creativity and innovation. Has your thinking changed?
Bezos: For many years, I have thought that software patents should either be eliminated or dramatically shortened. It’s impossible to measure the toll they’ve had on the software industry, but on balance, it has been negative.
Levy: But without software patents, you wouldn’t have exclusive rights to 1-Click shopping.
Bezos: If that were the price of having a dramatic reduction in software patents, it would be great.
Levy: You have a separate company called Blue Origin that hopes to send customers into outer space. Why is that important to you?
Bezos: It is a serious effort. When I was 5 years old, I watched Neil Armstrong step onto the moon. It made me passionate about science, physics, math, exploration.
Levy: Will you walk on the moon someday?
Bezos: Me? Are you saying would I if I could?
Levy: I bet you’d like to, but do you think you will?
Bezos: Boy. I’ve been asked to make tough predictions before. That one’s very tough. But that’s not what this is about. If I wanted to buy tourist trips to fly to the International Space Station and Soyuz and those things, there’s nothing wrong with that. But that’s $35 million. I want to lower the cost of access to space.
Levy: How do you do that?
Bezos: I like to say, “Maintain a firm grasp of the obvious at all times.” For Amazon, that’s selection, speed of delivery, lower prices. Well, for Blue Origin it’s cost and safety. If you really want to make it so that anybody can go into space, you have to increase the safety and decrease the cost. That’s Blue Origin’s mission. I’m super passionate about it.
Levy: Do you feel that it’s a bit disconnected to start a space-exploration company in this economically grim time?
Bezos: No. We employ a lot of aerospace engineers. They have families, their kids go to college. We buy a lot of materials. Somebody made those materials, right?
Levy: You’ve also given $42 million to the Long Now Foundation for the development of a giant clock designed to last for 10,000 years. Does that project relate at all to what you’re doing at Amazon?
Bezos: It does fit into my view. Our first shareholder letter, in 1997, was entitled, “It’s all about the long term.” If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. We’re willing to plant seeds, let them grow&and we’re very stubborn. We say we’re stubborn on vision and flexible on details.
In some cases, things are inevitable. The hard part is that you don’t know how long it might take, but you know it will happen if you’re patient enough. Ebooks had to happen. Infrastructure web services had to happen. So you can do these things with conviction if you are long-term-oriented and patient.
Levy: Speaking of longevity, you’re still relatively young, but you’ve been at this for a long time. A lot of the other big tech CEOs from your generation aren’t around anymore.
Bezos: Don’t worry, they’ll make more.
Levy: But you’ll miss Steve Jobs, I assume.
Bezos: Steve was a teacher to anyone paying attention, and he’s gone way too soon.
Levy: What’s the right shelf life for a CEO?
Bezos: It’s variable. I like invention. For me, it feels like the rate of change on the Internet today is even greater than it was in 1995. It’s hard for me to imagine a more exciting arena in which to invent. And so it’s pretty easy to wake up excited.
Senior writer Steven Levy () also wrote about Steve Jobs.
Note 1. Corrected [5 p.m./Nov. 30. 2011]: SmugMug uses AWS to store billions of photos and videos, not 70 million photos as previously reported.
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