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Amazon.com, Inc. (AMZN) AWS Value to Reach $1.5 TRILLION by 2025

Amazon.com Inc (NASDAQ:AMZN)
Amazon.com, Inc. is taking advantage of the Internet’s reach in the most obvious way: to scale. Ahead of the annual meeting of shareholders that will be held on the 17th of this month, there is news of two very big milestones about the firm’s scale of business.
Amazon.com Inc (NASDAQ:AMZN)

Amazon.com, Inc. AWS Set to Reach $1.5 Tn by 2025

Social Capital’s CEO Chamath Palihapitiya sees bright years ahead for Amazon’s AWS cloud service in the long term. He has been bullish on Amazon since a long time. Talking at the Ira Sohn conference, he put a $3 tn valuation on Amazon’s stock within a decade from now. By segment, he valued Amazon’s retail division at $1 tn, Amazon Web Services at $1.5 tn, and assigned an additional $0.5 tn to the incremental value that the firm’s CEO Jeff Bezos brings to the table.

Palihapitiya defended his huge valuation of the firm’s retail business by noting that if investors assign Costco Wholesale Corporation’s current multiple, the business is worth around $1 tn alone. Meanwhile, the AWS segment should be considered as a tax on the Internet and innovation in the sense that the firm will corner the market and essentially hold a monopoly. ‘There are going to be unbelievable number of losers when AWS gets to scale’, he said.

In other words, he firmly believes that Amazon.com, Inc. is a multi-trillion dollar monopoly that is hiding in plain sight.

B2B Marketplace Hits $1 Bn

The firm sold $1 bn in goods on its new business-to-business marketplace begun last year, and customer purchases are growing about 20 per cent each month, suggesting the firm that changed the way people shop for household goods is starting to change the way offices stock up on paperclips.

Amazon Business sells tractor parts, latex gloves, file folders and millions of other goods that are needed in factories, hospitals, schools and offices. Businesses are moving the way they look out for supplies to online portals, from less-efficient methods such as browsing print catalogs, faxing orders and calling sales representatives, said Andy Hoar, an analyst at Forrester Research Inc. ‘Amazon has created a more efficient way for business buyers to get the lowest prices on what they need and find willing and able distributors’, Hoar said.

It shows the latest way Amazon converts existing assets into new lines of business, similar to how its cloud-computing division AWS was born out of the firm’s own data centres. Amazon Business inventory shares a lot with what is sold to consumers. Orders are packed and shipped from the same network of warehouses that are built to serve the consumer market.

Amazon.com, Inc. ‘s entry in the B2B market threatens Staples Inc. and Costco Wholesale Corp., as well as smaller specialty distributors. Online business-to-business spending is expected to reach $855 bn this year, or 9.9 per cent of the US $8.6 tn market, Forrester estimates. By 2020, 12.1 per cent of the US $9.39 tn business-to-business market will be online, as per the research firm.

More than 300,000 businesses have registered accounts in the first year of the program and thousands more are added each week, said Prentis Wilson, a vice president who oversees Amazon Business. Business accounts get bulk discounts on more than five mn items. The marketplace appeals to businesses that want a streamlined place for supplies rather than dealing with orders and bills from multiple vendors. ‘We manage the complexity for them’, said Wilson.

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