Connect with us

Technology

Breaking Down How Amazon Makes Money

Published

on

‘Tis the season for shopping.

For many of us, that means buying things online – and if you are like most internet denizens, you’ll be picking up at least one item this holiday season through the the world’s largest e-commerce giant, Amazon.

The company’s sales numbers are growing at a staggering pace. Last year, Amazon had $136 billion in sales, and the company is projected to finish at the $177 billion mark this year.

What are the exact sources of Amazon’s revenue, and how does it all break down?

How Amazon Makes Money

Today’s infographic comes to us from Sellbrite, and it dives into the company’s success, and how Amazon makes money:

Breaking Down How Amazon Makes Money

To the chagrin of many investors, Amazon has traditionally spent a lot to make a little.

In 2016, for example, the company brought in $136 billion in net sales, but it spent $131.8 billion on operating expenses. That gave the company an operating income of $4.2 billion.

However, that high-growth strategy seems to be paying off.

During the same period, e-commerce revenue jumped 25%, AWS revenue increased 55%, and net income skyrocketed 302%. The growth has continued through 2017 and it’s why Jeff Bezos is now the richest person in the world.

A Closer Look

Here’s how Amazon makes money, according to the company’s last annual report for 2016:

Revenue StreamNet Sales (2016)% of Total Revenue
Retail products$91.4B67.2%
Retail 3rd party sellers$23.0B16.9%
Amazon Web Services (AWS)$12.2B9.0%
Subscriptions (Amazon Prime, etc.)$6.4B4.7%
Other (ads, co-branded credit cards)$3.0B2.2%
Total Revenue$136.0B100.0%

Which areas of Amazon’s business are growing the fastest – and where is the company investing in the future?

Here are just a few directions in which the Jeff Bezos Empire is expanding:

Ads
In 2017, the size of Amazon’s advertising business (forecasted at $1.65 billion) has already surpassed those belonging to Twitter ($1.21 billion) and Snapchat ($642 million). Of course, Amazon is still a longshot from impacting the Google and Facebook ad oligopoly, but the two leaders would be wise to take the emerging threat seriously.

Why would Amazon ads work well? The company has a vast database of user info to allow for effective targeting, as well as high margins.

Prime Video
In 2017, Amazon is spending $4.5 billion on creating original content. It has fewer dollars allocated to content than Netflix, but it’s still more than double what HBO spends each year. By the way, Amazon Prime Video is now live in an impressive 200 countries.

International
With 65% of U.S. households having access to Amazon Prime subscriptions, a focus on international sales is the biggest lever that Amazon can pull for future growth. The company is eyeing obvious countries, but less obvious ones as well. In India for example, Amazon’s marketplace is the fastest-growing in the country.

B2B
Amazon is also leveraging its strong logistics platform to provide goods for small businesses, rather than just consumers.

Shipping and Logistics
Fulfillment by Amazon (FBA) is already a booming business that allows small businesses to tap into the scale of Amazon. Investing in shipping also betters the customer experience – a key objective for Amazon. However, it’s still possible that the company could take shipping and logistics a step further: domination in the $200 billion parcel shipping market would be a strategic and attainable prize.

With many other ways for the e-commerce giant to grow, it’ll be interesting to breakdown how Amazon makes money in 2018.

Click for Comments

Technology

The World’s Biggest Cloud Computing Service Providers

Cloud computing service providers generated $270 billion in revenues last year, concentrated among a few giants.

Published

on

This tree map shows the biggest cloud computing service providers globally by market share.

The World’s Biggest Cloud Computing Service Providers

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Today, the three largest cloud computing service providers command 66% of the global market.

Amazon, Microsoft, and Google have generated billions in revenues through their cloud infrastructure that provide the computing power companies need to store data. What’s more, most AI models are run on the cloud, creating a surge in computing demand for cloud providers.

The above graphic shows the largest cloud providers globally, based on data from Synergy Research Group.

Breaking Down the Cloud Market

Here are the world’s top cloud computing service providers based on enterprise revenues as of the fourth quarter of 2023:

ProviderCountryMarket Share Q4 2023
Amazon Web Services🇺🇸 U.S.31%
Microsoft Azure🇺🇸 U.S.24%
Google Cloud🇺🇸 U.S.11%
Alibaba Cloud🇨🇳 China4%
Salesforce🇺🇸 U.S.3%
IBM Cloud🇺🇸 U.S.2%
Oracle🇺🇸 U.S.2%
Tencent Cloud🇨🇳 China2%
Other🌐 Other21%

With 31% of the global market share, Amazon’s cloud division posted $24.2 billion in revenues over the quarter.

AWS is a major cash engine for the company, but growth slowed over 2023 as enterprises and startups cut back on tech spending. Annual sales growth compared to the same quarter last year grew by 13%—far below competitors Microsoft and Google, whose cloud divisions grew by 30% and 26%, respectively.

As we can see, U.S. firms make up the lion’s share of the market, while China’s Alibaba Cloud and Tencent Cloud together comprise 5% of the global share.

The AI Boom and the Cloud

Given that a significant chunk of AI models are run on the cloud, the industry may be positioned to see greater demand as momentum accelerates.

In fact, newer AI systems are as much as 10 to 100 times larger than older models. In line with this, major cloud providers are seeing high demand for cloud services to allow companies across financial to manufacturing sectors to run large language models on their platforms.

Today, 98% of companies globally rely on the cloud for at least one part of their business applications, which may present a market opportunity for the industry as advancements in AI continue to grow.

Continue Reading
NOVAGOLD. Pure Gold. Precious Opportunity.

Subscribe

Popular