Tech Brew Ride Home - The State of Amazon With Jason Del Rey

Episode Date: August 3, 2019

The Vox/Recode family has a new podcast, Land of the Giants. And so we’re going to talk to Jason Del Rey, the voice behind the first season of this podcast, which focuses on Amazon. But look, I’ve wanted to get someone on to talk turkey with me about Amazon for a while now, because they're at this weird place where… maybe they’re the most powerful tech company in the land? What does that mean, for them AND for us? Jason Del Rey was the perfect person to ask. Sponsor: Vistaprint.com/ride Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to another weekend bonus episode of the tech meme right home. I'm Brian McCullough. The Vox slash Recode Family has a new podcast, Land of the Giants. And it looks at all of the giants of the tech industry and how they got that way. Today we're going to talk to Jason Del Rey, the voice behind the first season of this podcast, which focuses on Amazon.

But look, I've wanted to get someone on the show to talk Turkey to me about Amazon for a while now. because they're at this weird place where maybe they're the most powerful tech company in the land at the moment. And what does that mean for them or for us? Jason Delray is the perfect person to ask. By the way, my thanks to the Vox team for generously hosting this recording in their studios. So Amazon's basically been your beat for like you were saying six years. Yeah. like commerce generally right but pretty much Amazon there's enough story to cover there well yeah

I mean I I I like to say I cover sort of e-commerce and future retail broadly but over the years for obvious reasons Amazon has taken up more and more of my both output and mind for better or worse so I said I have been meaning to have you come on for a while now because I've wanted to talk to someone that follows Amazon closely because I have this sense it just feels to me not following them closely that they're different all the sudden like it's not Amazon's clearly always been an aggressive company yeah ask anyone that competes with them in retail but it feels different like they're almost in a move fast and break things sort of sense there's like an arrogance and like they're not afraid of controversial things so I'm thinking um

things like they're willing to pick fights with like the Googles of the world. They're willing to do the facial recognition stuff and not back down from it. The ring stuff with with the police and stuff like that. So, you know, not asking the name names or anything, but like, is there some sort of like a cohort of new executives that have come in or something? Like, has there been a generational turnover at Amazon recently? You know, short answer is no. Like, you know, one of the reasons they've probably been as successful as they are, or they will say, is that the leadership at the top of the company is insanely consistent. I mean, you look at the top executives under Jeff Bezos, and for the most part, and it's usually the SVP title, or now they have, some of them have CEO of CEO, CEO, Joe, Tidal. So Jeff Wilkie is CEO of Consumer.

Andy Jassy, CEO of AWS. These people, and for the most part, white men have been at the company. for 15, 20 years. So the short answer to that part is no. Do you agree with my assessment that they feel different recently? I would say someone who's covered them, like, been like really in the weeds on them. I just think they've gotten bigger and so it feels that way. I don't sense the same thing.

But part of the reason I wanted to do the podcast that I'm. I'm doing, which we can talk, we'll talk about, is that, and this is not supposed to be an unnatural plug, is that I won't even name it, is that if you actually go back and like study the history of the company, it explains a lot of what you're seeing today. And so they've always been, there's, of course, many changes over time, but they've always sort of had this confidence bordering on arrogance that can manifest itself in at times some off-putting ways. So HQ2 being one of them. That's another perfect example.

It's like what I'm sensing is that they're willing to throw elbows all the sudden. And maybe they always were, and you're right, I just wasn't paying attention. But it's also like maybe it is that, I don't know, Amazon, I always had a warm, fuzzy feeling for. And now they're one of the companies that, as we're going to talk about with the podcast, that you start to think, I'm a little scared of them. Yeah. As a citizen, I'm scared of them. Yeah.

So, you know, one point I forgot to make on the executive is, and I don't know if he is either to get credit or blame for what you think you've noticed about the company is the person who runs communications and policy at the company is a guy named Jay Carney. former journalist Time Magazine then was Obama's essentially Obama's press secretary. I forget if that was his exact title, but he was facing the press every day in the White House and then was hired to lead comms and policy at Amazon. He's been there now. I think it'll be four years. I think it's around four years. And so I don't know this to be sure, but some of what you're saying may come from his style. So that's sort of my best guess. But I haven't, I think this is largely the same Amazon internally that I've sort of reported on over the last six years. Well, I am going to name the name.

It's Land of the Giants. And so this is going to be a multi-part series that you guys are doing. Yeah. So the idea is it's a franchise with several seasons. Each season will highlight and examine one of the Fang companies. So Facebook, Apple, Amazon, Netflix, and Google. This is season one. Yeah, so the franchise or the series called Land of the Giants.

This season is called The Rise of Amazon. Why Amazon first? That's a very good idea. That's a very good question, I should say. So I'll try to make this backstory quick. The next story, you know, there may have been several conversations going on inside box media at the same time. But Peter Kafka, my colleague, who is a great media reporter, he said to me one day, hey, we're looking to do more podcasts. We've had a lot of success.

You should do something about Amazon. And I think that sort of coincided with other people in the company had this idea of doing one on all the fang companies. And so they knew they already had someone internally with expertise. I was very interested. And so that's sort of the best answer I could give on why Amazon first. And obviously, I mean, you know, even more so today than when we started talking about this a year ago, there was so much focus not only in D.C., but I think in sort of the media and I think more and more in customer lives on the power of Amazon.

and so it just felt like a good place to start. And as of right now, I think we're only two episodes in, three counting the intro, but so there's what four or five more coming. Yeah. So just want to poke at a couple things that, some things that you have already talked about on the show, but other things that I'm sure are coming. So everyone, or at least normal people, consumers think of Amazon. It's the everything store.

That's the genius of the company. but there's two other things that are genius ideas that would have been amazing if they were the only things that they had come up with. The first one you have talked about being Prime. And today I'm going to do a story about Apple's earnings and how it's all about services and subscriptions now. And so that's essentially the moat for keeping the customers locked into your system. And that was always the idea with Prime is Bezos said I want to put a moat around my best customers. Correct. So it's insane how, you know, everybody's about subscription revenue right?

Like how early they were to that idea. Yeah. And, you know, a big part of it, I think, was instinct. You know, something I don't get into really in the first episode, which is sort of telling the origin story of Prime and then fast forwarding to how. it locks consumers in, the psychology of it, is it was instinct. I think there was some influence from like the Costco model back then. But I talked to some early executives who said there was instinct, this could be a big thing. But we really didn't know at the time.

Like it seemed like faster shipping was better. It seemed like we knew there was some friction to like, you know, figuring out your shipping for each order. and we were even back then into... Well, also the equation of, if it's just simpler for me to get in the car and go buy it at a store, how do we make it frictionless enough that you're like, you know what, screw it, I'll just order it.

Because it'll be here tomorrow. Absolutely. And you've seen what they've tried to do over time, which is now announced that Prime is going to be mostly next day. Well, they call it one day. Sometimes that's next day. Sometimes it's a little more than that. And then Prime Now in big cities,

which is, you know, one or two-hour delivery, which they cannot and are not making money on, but it's just sort of expanding that mode. So, yeah, I mean, how many years later, Prime 2005, 14 years later, I mean, to me, it's probably the biggest reason they are who they are today. And this was mentioned on the episode, but I had heard this before, too, that Prime really wasn't a hit until they started doing the video ads. Ones. Right.

Which is odd to think about because we all think, oh, well, no one really watches Prime Video, but it turns out. Yeah. And so I don't know if it was, you know, if it was actually that people loved it so much or was this meant, I think it's the psychology of it. Like, wait, I'm getting this thing too. Right. And, you know, I have a written oral history of Amazon Prime too where I talk to many more people than you hear on the episode. And one of the video executives said, you know, are thinking at the time or Jeff's thinking at the time. was we knew we couldn't get great content back then.

Like we couldn't spend what Netflix was spending. And so Jeff basically said, how much could customers complain if they're getting it, quote, for free? And so, yes, that was a big moment. And that was one of the biggest moments. And then we know over the last few years, last five years, they've been adding all sorts of things to prime, which I still think most people think of as secondary. but when you look, if you think about everything you're getting,

the psychology of it is, wow, I'm getting a deal. And Bezos even says, you know, customers should feel irresponsible, not to be a prime member. Now, there's a flip side to that irresponsibility, which is, I think I just made up a word, which is prime customers. Price compare much less than non-prime customers to. Amazon often has very good pricing, but sometimes, especially on the quote, long tail of items, they don't have the best price.

And so Prime sort of just eliminates the thinking to shopping, which maybe is not always the best thing for your wallet. Right. The other genius idea is obviously AWS. Again, as someone that has been a close observer of them for years, how has AWS taking off like a freaking rocket? at Moonshot. Has that changed Amazon at all in terms of how the overall company executes? I think it, I mean, so AWS ties into a lot of ideas and some of which I explore in the series, one of which is to think about, you know, there'll be an episode about Amazon's history with Wall Street and sort of being able, over time to convince Wall Street that will be profitable eventually.

when we want to on our terms. Yeah, listen, the market share you know, people forget now, but Amazon went public, like right at the very beginning of the internet,

consumer internet, I should say. And so they were, their messaging was a lot about, like, not only the future of Amazon, but the future of the internet. And so there's all this green space for us to grow.

But what that relationship allowed them to do was invest in something like AWS that a Walmart, you know, you can make the argument, a Walmart or Target or Barnes & Noble because they were already walked into a certain expectation from Wall Street of profits. Maybe they'd never had the foresight to create those things, but definitely wouldn't

have had the capital to burn cash on this crazy new idea. And so that's sort of the back, that's sort of how I think about why they were able to in one way. Wall Street was a big piece of that. And then what it's allowed them to do, it's a fast-growing, super profitable business. key prices low on the retail side of the business, investing crazy new ideas like Alexa. I think all of those tentacles probably have some connection with the success of AWS. Now, I don't know if that's what you were asking, but that's sort of how I think about it holistically for the company.

You intuit that it sort of like freed them up in the sense that like it's the inverse of Google. Google's had this cash cow for all these years. And then it's always been trying to invent this other thing that can be a second business that's as good. So, you know, retail is a fine business, but, you know, this cloud stuff is just throwing off cash and insane margins and stuff like that. So, like, they've done the inverse of Google, they've done what Google could never do. Like, why didn't Google come up? Why wasn't it not Microsoft? The fact that it was Amazon is the part that's kind of crazy.

Yeah, and, you know, Andy Jaskey runs AWS, spoke at our last code conference. Kara Swisher interviewed him. And he said something like, we were so nervous when we launched AWS about it. leaking because we assume Microsoft would be out with something, you know, nine months later, and it ended up taking them. I don't know what the timeline was, something like seven years. So we had like a seven year head start. But this conversation actually makes me think, you know, you talking earlier about Amazon seeming like a little more arrogant, little like break things, move fast break things. I do wonder if the success of AWS and the cash that it's thrown off,

it probably has allowed them to think even bigger than they maybe would have without this giant profitable business that's totally separate from the core. And so, you know, this is one small example, but I was having a conversation with my wife last night. I said, so my wife's not in tech or media. And like, I look at her as like a normal consumer and not like an early adopter in the media world like I am. And, uh, we were talking about this new service fashion service Amazon's trying to do, which essentially is a stitch fix clone. And she said to me, what, like, why is Amazon, like, why do they try to do everything? Like, why are they trying to do it?

They're not good at fashion. Like, what gives them the right to, like, go after fashion? And I said, they just more and more feel like, if you're not growing in sort of every possible way, you're dying. And so I've gone a little off from AWS, but I think the success of AWS and the profitability specifically of that business has reinforced the idea internally that they should basically be trying anything they can where they think they have differentiation and a good idea. I feel like I'm not even asking you questions. We're more sort of like poking around at Amazon here. So in that vein, the home stuff. Like, I just did a story yesterday about there might be a TikTok phone.

Like, everybody, once you have success, you're like, well, we need our platform. We need, you know. And so obviously, Amazon famously flopped with the fire phone. Yep. To what degree is it just that, oh, the home, that's our platform? No one else is there. We're going to, on the one hand, you can see that it makes sense for what they're already doing, where it's like everything as a service, where we're the app.

or the service that you will manage your household with. But then it seems like, and you talked about this on one of the episodes, they're going deeper where it's like we're also going to be inside your home. Yeah. And all the data that entails and things like that. Yeah, your home is going to live on the Amazon platform, essentially, or the OXA platform as it is. Yeah, it's really interesting. I think based on some previous reporting,

I've done, I think no matter what they say publicly, I think the idea did start with commerce and the belief that voice commerce was going to be a thing, and so we want to experiment in this space. I can't tell you exactly what made them believe that. I don't know if it was observing Siri and other voice services and just having good intuition about what consumers would want. But that's where it started. I think it's clear today. I mean, so part of the reason I did an episode about, you know, trying to ask the question, like, what does Amazon really want from our home and interviewing the head of the smart home at Amazon is trying to get some insight into like what the end game for them is. Right.

And I think I think they truly believe if we know more and more about the way you live, we will. create new things that make you happy and, you know, make your life easier, as they would say. And so in that episode specifically, I got a lot of talk like that out of their vice president of the smart home, which in one hand is frustrating, but part of the reason I want to do a podcast series, narrative podcast about them was if you can hear from their executives and then I have the ability to decode what they're actually saying. We may have a better idea about where, like, how they think and where they're going next than we otherwise would have, if I don't have sort of the, if I can't play sort of translator. And so that's a, this is a long way of saying,

I think they truly just think they are an innovation company and the more data they have about everything going on in our lives, the more opportunities for new creation. they'll have. Well, Tim Wu's book, The Attention Merchants, and the idea that, like, TV and radio were the first time that, like, marketers could get inside your home. The home was always, like, advertising and things like that was all public in the public realm. But then they could never penetrate inside your home. And, like, I'm not saying that Amazon is just doing this for commerce, but then you do see,

Like you describe and like lots of other people have talked about like Amazon getting into health insurance and things like this, you can see the ways, again, if I know everything about your household, you know, not just when the Cheerios is low, but when you're, you've caught a cold. Yeah. You know, when you have a new baby, like all that stuff. Like this is finally getting inside the home and having all of the data about your household. Yeah. Yeah, what's interesting to me is on one hand, you know, Google may still know more about us than, you know, if you're a regular or a Google user than almost anyone based on, I mean, I will not repeat all the things I type into Google on a daily basis. But there's some like really personal shit in there. But the point you made as the one example where where it's stuff you may not, no one may not,

the stuff that you wouldn't type into a search engine or into Amazon, like maybe you're just starting to get a cold, right? And Alexa can sense that. And it's not just them ambiently sensing your voice. It is if they control the smart lights, right? well, gee, Jason's gone to sleep at 7 p.m. every night for the last two weeks. He must be depressed. Do you know what I mean? Yeah. Or like how you've been away. They've been on vacation in Europe for a month. Like they would know that kind of stuff. Right. And in one hand, like I could see some people hearing that and be like, like really? Like that's like, yeah, they could know that. But you think they really want to focus there? I think there are people inside that company thinking about all these things. So I think I think you're right on. And I think to a lot. of people, if they trust that that's a reality and people are thinking about that type of stuff

inside this company, could and maybe should be worrisome. Yeah, I mean, you know, what this podcast is stressed to me, and maybe it's obvious now to the general public, he's like their ambition is really limitless. They, you know, this is a phrase that's probably out there already, but, you know, they were at the everything store and they really think they can and have the right to. to be the everything company. And that just throws off all sorts of questions for society or economy. And we try to tackle a lot of them in this series.

Two more things real quick before I let you go that we've been talking about on the show recently. What's your take on whether or not the Whole Foods acquisition has been successful for them? Successful maybe is the wrong thing because maybe it's just about learning the grocery business. Yeah, I think so I'm going to take a little bit of a cop out, which is, I think it's too early to tell still. I think this is sort of like you'll judge this deal on like a five to 10 year horizon. I think it's successful in that it's been great branding for Prime.

And really anything in retail they want in some way. It's big, big bets to connect back to prime and value for their prime customers. That is still who they care almost entirely about. I think maybe, you know, there's not much real data out there on this, but I think they may be overestimated how much sort of new traffic they would drive with this versus current whole food customers who already prime customers and maybe will spend more now because they get because they get the prime deal. But I think they also, like a huge part of this was, you know, grocery delivery. And, you know, they don't make those economics public. But I think

they just believe that they have to have to succeed in grocery delivery if they're going to at least be the everything store. And so having all these, you know, stores which are really partly distribution centers close to customers, I think they just, they saw something they had to do. So short answer is I think it's, I think it's still relatively too early to tell. Long answer is everything I just said. And one more piece is, you know, we saw what happened to their market cap when they announced the acquisition, their market cap essentially went up higher than what they spent on the deal. And so it's hard to look at it and say it's a failure.

Then the other thing is, you know, the word of the day is antitrust stuff. And it's weird because the other companies, there are specific things you can point to. And in Amazon's case, aside from the disadvantaging other retailers on the Amazon platform. Yeah. It feels like the charge against Amazon is just you're too big. You do too much. And like, that's kind of too broad an argument to make. Like, you can specifically charge Facebook and Google with that's an infraction against this or whatever. But can, is Amazon ever really going to be in danger with antitrust just from the argument of you're too big?

So I'll get to that. But the first thing you said, which was other than like, so the other than is what we're going to explore in episode six of this. series. Excellent. And I, my feeling is they are, they're a bit concerned about like the spotlight on competition on the Amazon platform. You know, if you talk to people around the company back last fall, there were people saying things like, we're just lucky we're not, we're happy we're not Google or Facebook, right?

And I think they probably still feel that way. But I think there is risk to momentum. behind more and more sellers speaking out about some of the fee structures, some of the, you know, they already had to overturn one of their pricing policies in the last few months, which essentially said you can't sell off of Amazon for less than you sell on Amazon, right? And there are people who argue there's still ways they're sort of suppressing sellers who try to do that. So I think I don't know for sure what laws will be broken, but I think there's going to be

increased scrutiny there and try and try not to give away too much of our episode. But I think that's one thing. The other thing I've heard that some people inside of Amazon are concerned about is this idea that the bundling of all these services into Prime is somehow anti-competitive because Amazon does not have to necessarily charge market rate for a given service or necessarily make money from Prime specifically. And so I wrote a piece maybe a month or two ago about questions that FTC had been asking competitors of Amazon or topic areas. And one of them was the idea of prime bundling and whether it was unfairly undercutting competitors.

So I think, listen, I don't know what's going to happen. But I think there's going to be a lot of digging still to come. And I think they are probably more nervous today than they were even six months ago. And Bezos is at least publicly putting on the good show of like, well, of course, we invite scrutiny, right? But yeah, I mean, listen, the third party platform is a huge money source for them. Obviously, Prime is their secret sauce. So, yeah. The thing that has struck me as I talk to more and more sellers, and I've talked to big brands too,

but especially, you know, people doing hundreds of thousands of dollars, a couple million dollars a year is the feeling like, yeah, the market share number. say e-marketer now says 38% of e-commerce in the U.S. Amazon is used to be 50. Who knows what like where the real number is. It's a big chunk. The sellers who say like I literally could not have a light like I have to sell on Amazon. There is not a choice not to sell on Amazon. You could say okay well you're still you're still choosing and if you don't like it you know get into a different business but the idea of we can't we can't live without them, but we really, really are struggling with them is just a storyline that's very fascinating to me and one I think that's going to get increased sort of spotlight over the coming year.

Well, Land of the Giants, sounds like we've got some episodes coming up that I'm certainly looking forward to. Thanks, Jason. Thanks so much.