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How Amazon Makes Its Money

Date Of Publication:2020-02-16 Click-Through Rate:374

Amazon is unique among giant US tech corporations. It's not just an e-commerce and shopping giant, a cloud provider, a device-maker, or a software-and-services platform—it's also a money-making leviathan with tentacles stretching into new industries and markets, which makes it tough to define.

The most accurate way to figure Amazon out is to follow the money. Statista compared Amazon's Q2 2018 and 2019 results to break down how the various segments of Amazon's business are growing. In every sector except physical stores such as Whole Foods (which remained flat), Amazon's revenue grew year over year.

Online-store revenue remains the foundation of Amazon's business, with $31.1 billion in net revenue in Q2 2019. It's also the company's slowest-growing segment, though it's up a very respectable 14 percent.

Aside from its online and physical store sales, Amazon also made $12 billion on third-party seller services in Q2 2019, up 23 percent from a year ago. These include commissions, shipping, fulfillment fees, and other seller services tangentially related to the corporation's online shopping empire. So while sales themselves may not be growing as substantially, Amazon's ecosystem-related revenue is still booming.


chart showing Amazon<em></em><em></em>'s leadership in cloud services

The fastest-growing sectors are the Amazon Web Services (AWS) cloud, and subscription services, including Amazon Prime, Amazon Music, and Prime Video. Prime memberships got another price hike last year from $99 to $119 annually, and it shows: Subscription revenue is up 37 percent year over year to $4.7 billion.

It's still comparatively small compared to Amazon's mammoth e-commerce revenue, but as with Apple, Amazon's prolonged investment in its services business is paying off.

The company spends billions each year financing new original films and series (as well as licensed content) through both Prime Video and its Amazon Studios arm. The escalating war for original streaming content is ramping up as Amazon competes with not only Netflix and Hulu but also Apple TV+, Disney+, HBO Max, and more. But if any company can afford the competition, it's Amazon.

Then there's AWS. According to recent estimates from Synergy Research Group, Amazon's cloud infrastructure market share sits at 33 percent as of Q2 2019. That's more than double its closest competitor, Microsoft Azure.

AWS revenue also jumped a whopping 37 percent year over year to $8.4 billion as Amazon serves as the cloud hosting and storage platform for an increasingly large percentage of the internet.

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