Amazon.com 2000 Annual Report Download - page 3

enough financing runway, Pets.com and living.com may have been able to acquire enough customers to achieve
the needed scale. But when the capital markets closed the door on financing Internet companies, these
companies simply had no choice but to close their doors. As painful as that was, the alternative—investing
more of our own capital in these companies to keep them afloat—would have been an even bigger mistake.
Future: Real Estate Doesn’t Obey Moore’s Law.
Let’s move to the future. Why should you be optimistic about the future of e-commerce and the future of
Amazon.com?
Industry growth and new customer adoption will be driven over the coming years by relentless
improvements in the customer experience of online shopping. These improvements in customer experience will
be driven by innovations made possible by dramatic increases in available bandwidth, disk space, and
processing power, all of which are getting cheap fast.
Price performance of processing power is doubling about every 18 months (Moore’s Law), price
performance of disk space is doubling about every 12 months, and price performance of bandwidth is doubling
about every 9 months. Given that last doubling rate, Amazon.com will be able to use 60 times as much
bandwidth per customer 5 years from now while holding our bandwidth cost per customer constant. Similarly,
price performance improvements in disk space and processing power will allow us to, for example, do ever
more and better real-time personalization of our Web site.
In the physical world, retailers will continue to use technology to reduce costs, but not to transform the
customer experience. We too will use technology to reduce costs, but the bigger effect will be using technology
to drive adoption and revenue. We still believe that some 15% of retail commerce may ultimately move online.
While there are no foregone conclusions, and we still have much to prove, Amazon.com today is a unique
asset. We have the brand, the customer relationships, the technology, the fulfillment infrastructure, the financial
strength, the people, and the determination to extend our leadership in this infant industry and to build an
important and lasting company. And we will do so by keeping the customer first.
The year 2001 will be an important one in our development. Like 2000, this year will be a year of focus
and execution. As a first step, we’ve set the goal of achieving a pro forma operating profit in the fourth quarter.
While we have a tremendous amount of work to do and there can be no guarantees, we have a plan to get
there, it’s our top priority, and every person in this company is committed to helping with that goal. I look
forward to reporting to you our progress in the coming year.
As I usually do, I’ve appended our 1997 letter, our first letter to shareholders. It gets more interesting
every year that goes by, in part because so little has changed. I especially draw your attention to the section
entitled ‘‘It’s All About the Long Term.’’
We at Amazon.com remain grateful to our customers for their business and trust, to each other for our
hard work, and to our shareholders for their support and encouragement. Many, many thanks.
Jeffrey P. Bezos
Founder and Chief Executive Officer
Amazon.com, Inc.