Cannibals in Amazon?

At first, Amazon’s launch of A9 and their recently announced investment in 43things surely struck me as a stark contrast to their retail efforts. Why invest in opportunities that don’t naturally build on your core business? But I soon realized that maybe Amazon’s core business really isn’t about retailing at all. Amazon’s strategy early on was to leverage user-generated reviews as a key way to build not only a database, but a ‘community of practice’ focused on publishing its evaluations of products for sale. Why introduce reviews that you really can’t control the content of (if you do, where’s the value in the review) and could ultimately hurt your ability to sell the product in stock? For the same reason that you would launch a search engine and invest in a blogging/tagging company: because the central value, the true assets, of any Internet-based business aren’t the products that you have to sell, but the loyal audiences, the dedicated customers, you are able to create for your brand. Look at eBay, Google, Yahoo — three very different Internet businesses, but all titans in market capitalization and revenue. Why? Because of their ability to attract and retain loyal customers. So does this mean that we should expect to see more coming from Amazon unrelated to the realm of retail? I wouldn’t be surprised.

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