Jeff Bezos - Growing Amazon.com

GROWING AMAZON.COM

During Amazon's second year of operation, Bezos began to look for ways to increase the firm's growth. One of his first moves was to create the "associates" program in July of 1996. This program allowed individual Web site owners and operators to offer links to Amazon from their sites. The associates then received a commission any time a visitor clicked on those links and bought books. To help fund future acquisitions, Bezos secured $10 million in capital from Kleiner Perkins Caufield & Byer in exchange for a minority stake in Amazon and a seat on the board. Advertising efforts included banner bars on some of the most heavily trafficked Web sites, as well more traditional plugs in print sources likely to be perused by book lovers. By the end of 1996, Amazon employed 110 people and its book database had grown to include more than more than 1 million titles. According to Bezos, the breadth of its offerings was key to the site's success, along with the fact that most books were discounted between 10 to 30 percent.

In May of 1997, although it had not earned a profit, Amazon went public, listing its shares for $18 apiece on NASDAQ. In less than a year those shares were worth nearly $100, and Bezos was on his way to becoming a billionaire. Bezos planned to use some of the funds from the offering to enhance Amazon's distribution arm. In October, Amazon became the Internet's first retail operation with one million customers. To commemorate this milestone, Bezos himself personally delivered the site's one-millionth order to a customer's home in Japan. The firm's name recognition was bolstered further when Vice President Al Gore spent a day answering customer service calls. Bezos forged alliances with America Online Inc. and Yahoo Inc., both of which resulted in Amazon's promotion on these high-traffic sites. Growing 20 to 30 percent each month, sales at Amazon neared the $150 million mark, and book offerings grew to roughly 2.5 million. Amazon's success left traditional book retailers scrambling to retain customers. Many chains began staying open later, offering entertainment, hosting book clubs, selling coffee and pastries, and even opening up their own retail Web sites, which Barnes & Noble did in May of 1997. According to the September 1997 issue of Chain Store Age Executive, book retailing had been permanently altered. "Bezos redefined book and information merchandising and distribution. He has changed the way some customers shop and purchase books, and continues to challenge the definition of the traditional book store."

The associates program reached 30,000 members in 1998. Bezos then oversaw the launch of Amazon.com Advantage, a program designed to promote the sales of independent authors and publishers. In April, the firm expanded internationally and also diversified into online video sales when it acquired the United Kingdom's Internet Movie Database. Two months later, after Bezos decided to expand Amazon's product line with CDs, he unveiled Amazon Music, which offered more than 125,000 music titles online. International growth continued with the purchase of Bookpages Ltd., an online bookseller based in the United Kingdom, and ABC Telebook Inc., based in Germany. Both firms eventually were folded into international sites such as Amazon.co.uk and Amazon.co.de. In December of 1998, more than 1 million new customers shopped online at Amazon for holiday gifts. Customers exceeded 6.2 million, securing Amazon's position as the number three U.S. bookseller, behind Barnes & Noble and Borders.

In March of 1999, Amazon launched Amazon Auctions, an online auction house that allows businesses to market products to consumers and consumers to market products to each other. A month later, the site began allowing visitors to create and send free electronic greeting cards. In June, Amazon secured its 10 millionth customer. Expanding his site's offerings even further, Bezos created Amazon Toys and Amazon Electronics. He also launched Amazon zShops, which permitted manufacturers to offer products for sale on Amazon. Bezos conducted a $1.25 billion bond offering to fund an acquisition spree that included stakes in drugstore.com, HomeGrocer.com, Pets.com, Gear.com, and della.com. This move later proved costly as several of the smaller dot-com businesses went bankrupt and Amazon was left with nearly $2 billion in debt.

Eventually, Bezos divided Amazon's offerings into virtual stores that focused on merchandise like software, video games, gifts, and hardware. Customers also were able to sign up for a wish list service. By the end of 1999, Bezos had overseen nine acquisitions and the opening of seven new stores. Amazon had shipped 20 million items to 150 countries across the globe. Bezos was elected "Person of the Year" by Time magazine. According to United Press International, Bezos earned the award because his "vision of the online retailing universe was so complete, his Amazon.com site so elegant and appealing that it became from day one the point of reference for anyone who had anything to sell online."