Amazon.com - the platform

Has Amazon lost its way by diversifying?

Has Amazon lost its way by diversifying?

A few weeks ago, I characterised the most recent phase of the Internet era - where the dotcom became the defining feature of its landscape - as starting roughly in the mid-1990s. Among the many landmark events of that time, none was more significant than the foundation of Amazon.com, in July 1995.

Since then, Amazon has rarely been out of the headlines in the Internet world. Its ambitions, its apparently ever-rising share price and constant stream of innovations made it the real bellwether of the e-commerce world.

Against that steep ascent its current fall is all the more striking. But it remains a powerful force in the online world, not to mention a key Net icon. This makes its actions during the current dotcom downturn particularly interesting, since more than most, Amazon needs to re-invent itself in the light of the new order.

One of the key elements of Amazon.com's previous strategy was a constant broadening of its base. More and more stores were opened under the Amazon.com banner, including some (like garden furniture) so far removed from the company's main business, that they looked like bad ideas even during the headiest days of the dotcom delirium.

Despite this, Amazon has continued to add new sections, but now they are noticeably closer to its core business of book-selling. These include an e- documents store, and one for magazines.

Amazon has continued to innovate: it has added the simple means for making donations to charities; and made available images of sample pages from books

More importantly for its economic health, perhaps, Amazon has extended its practice of forging alliances. Some of these are fairly small-scale affairs, and amount to a branding exercise within the main Amazon.com site. Others, like the $100m (£71m) investment from AOL, with a related link-up in Europe seem to portend something much bigger. Now that AOL has acquired with Time-Warner as much content as it could ever need, the obvious missing piece of the online puzzle is a top-class e-commerce system for exploiting both that content and its huge global user base.

Amazon.com could certainly provide that expertise. Indeed, the most significant moves in recent months have involved the company taking over other people's e-commerce operations. First there was Borders, and then Waterstone's.

Visiting the respective sites (at www.borders.com/ and www.waterstones.co.uk/) is a rather disorienting experience, since the effect is of viewing Amazon pages with a little extra branding and content.

This loss of the main brand, or indeed any sense that you are visiting a site belonging to another company, means that Amazon's current approach to handling e-commerce for third parties is unlikely to flourish. But what is really significant about this move is that it sees Amazon building on what is perhaps its key achievement and competitive strength - its online selling engine. If it can get the front-end details sorted out, it may finally have a profit-making winner in selling not books or birdbaths, but its own highly-tuned e-commerce platform.

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