In a way, incoming
com Chief Executive
Andy Jassy
would seem to have an easy job ahead. He’s inheriting a company that appears to be firing on all cylinders, after all.
With founder and CEO
literally blasting off this month, the $1.7 trillion dollar enterprise Mr. Bezos founded in his garage nearly 27 years ago falls to new hands for the first time. In a sense, Amazon is a bit of a laggard in that it will be the fourth of the five companies known colloquially as “big tech” to make the transition from founder control. And the first three—
Apple Inc.,
and Google-parent Alphabet Inc.—all managed to reach new levels of financial success under their subsequent leaders.
Annual revenue
Founder stepped down as CEO:
Founder stepped down as CEO:
Founder stepped down as CEO:
But the stakes at Amazon are even larger. Apple—currently the world’s most valuable company—had about one-quarter of Amazon’s current annual revenue when
Steve Jobs
resigned as CEO in 2011, just weeks ahead of his passing. As Mr. Bezos’s anointed successor, Mr. Jassy is taking over a company now generating more than $400 billion a year in revenue, while still averaging an annual growth rate of 30%. The Amazon Web Services cloud business that Mr. Jassy has run since its inception in 2006 has been a major part of that—especially when it comes to the bottom line. Amazon’s operating profits have surged more than fivefold in just three years.
Wall Street expects Amazon to surpass
to become the largest U.S. company by annual sales next year, according to consensus estimates from FactSet. Five years ago, the e-commerce pioneer was barely a quarter the size of the massive retailer. The cloud business that Mr. Jassy has built up within Amazon has also blown past most rivals. With revenue now over $48 billion, AWS now eclipses corporate software titans
Oracle Corp.
and
Analysts currently expect AWS’s revenue to roughly equal
IBM’s
next year.
Amazingly, e-commerce and corporate IT services don’t comprise all of Amazon’s businesses. The company now runs a major grocery chain, an online pharmacy business and also produces an estimated $24 billion a year in advertising revenue. Its media ambitions are also vast; Amazon now makes videogames, runs a music streaming service and produces blockbuster-sized movies and TV shows. Its pending acquisition of MGM would give it access to major Hollywood franchises such as James Bond.
All of these seemingly disparate businesses work together in what Mr. Bezos has frequently compared to a flywheel, meaning they feed off and fuel one another. Subscribers to Amazon’s Prime service get free shipping along with deals at the company’s Whole Foods stores and access to the video streaming service. More retail sales at Amazon attract more third-party merchants, many of whom also pay Amazon for order fulfillment and advertising services to boost their chances at making a sale. Amazon’s disparate businesses create some unusual relationships. Netlflix—the largest competitor to Amazon’s Prime Video service—uses AWS to run the “vast majority” of its computing needs, according to the company’s annual 10k filings.
In short, Mr. Jassy’s main job is to keep a well-oiled machine running. But Amazon’s very success in such a wide array of businesses also has created unique challenges. The Wall Street Journal has reported on some of the company’s more controversial business practices, such as the use of data from sellers to design and favor its own products and also compelling vendors and business partners to do more business across its ecosystem. Amazon’s focus on providing as much choice to customers as possible also has led to a surge of counterfeit and even unsafe items on its site, which in turn feeds into the growing problem of fake customer reviews.
More on Amazon’s Succession
Those issues have enlarged the target already painted on Amazon’s back. Washington has been looking to crack down on big tech, and Amazon might now present the easiest quarry. Its vast workforce, now numbering 1.27 million full and part-timers, is restive and feeding a constant stream of stories about a harsh working environment. Amazon’s staunch resistance to unionization has drawn the ire of the Biden administration after four years of being hounded by the Trump administration over issues like the rates it pays the U.S. Postal Service. Mr. Jassy has already had a direct taste of this; AWS lost out on a $10 billion cloud-computing contract with the Pentagon, for which the company has blamed “personal animus and political objectives” on the part of President Trump, who frequently criticized the coverage of the Washington Post that Mr. Bezos owns.
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Some of the forces arrayed against Amazon are even calling for a breakup. And while that looks a bit less likely in the wake of a federal judge’s recent dismissal of two antitrust cases against
it is a risk that can’t be dismissed outright. An actual breakup would leave Mr. Jassy with the serious challenge of reinventing a business designed to have all its parts serve the whole. The government also could rein in Amazon through less drastic means—for example by thwarting expansive moves like the deal to acquire MGM.
If Amazon does survive the political onslaught in something like its current form, Mr. Jassy still will face the challenge striking a delicate balance between keeping what has made Amazon so successful while also reining in some of its worst instincts. All of that will take place under Mr. Bezos’s eye. Assuming all goes as planned with his July 20 rocket ride, the 57-year-old billionaire will return to serve as Amazon’s chairman. And while the world’s richest person also will be splitting his time between Hollywood, space ventures, superyachts and philanthropy, Amazon has said Mr. Bezos plans to remain involved, especially on what it dubs “one way door” decisions that are difficult to undo.
Mr. Jassy’s 24 years at the company—mostly as a key Bezos lieutenant—suggest major near-term changes are unlikely. But the departure of a distinctive founder after such a run will still leave a mark. “Always Day One” is Jeff Bezos’s favorite mantra to keep Amazon spry for its age and size.
Andy Jassy won’t have the luxury of denying that it really is a new day.
Write to Dan Gallagher at dan.gallagher@wsj.com
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Appeared in the July 3, 2021, print edition as ‘A New Day Will Bring New Challenges.’