Entrepreneur Watch

Jeff Bezos: No Steve Jobs, but more instructive for entrepreneurs

A review from Canada of my book, "One Click: Jeff Bezos and the Rise of Amazon.com."

"Amid the flood of tributes to the late Apple co-founder Steve Jobs, it might seem like an unfortunate time to come out with a book about Jeff Bezos and his online retailing giant, Amazon.com. But in some ways, Bezos’s achievements are just as impressive, and perhaps more instructive for would-be entrepreneurs."

Why Jeff Bezos will become a powerhouse in the future of computing

People keep wondering if Jeff Bezos will be the new Steve Jobs.

He will not. Nobody has Jobs's flair for creating new products that we didn't even know we wanted until he offered them. Nobody designs hardware like Jobs, and we will all suffer for his loss. Even those of us who don't buy many Apple products have benefitted by all the knockoffs created by others, including the iPad-like Kindle Fire.

But Bezos is not about hardware. He's not even primarily about online retailing any more. He's primarily about cloud computing.

Steven Levy at Wired has the best article in the world about Jeff Bezos right now. Anyone who is interested in Bezos and the future of Amazon must read this article. Levy gets behind the facts and analyst speculations and into the heart of the Bezos story.

He points out that Bezos has caught on to the cloud computing paradigm as the future for all computing. Bezos has established the lead position in providing cloud computing services for consumers, and is now doing everything he can to pull further ahead and strengthen that lead.

While Jobs was all about creating the greatest hardware in the world, Bezos's hardware designs, including the Kindle Fire, are merely the delivery devices that will give us access to Amazon's real products: computing, media and other services delivered through the internet. The devices don't even have to be that powerful. The heavy computing is done in the cloud, on Amazon's computers, and delivered to us via that device in our hands, which will largely just need to play back what we've gathered from the Internet.

In many ways, this is a grander vision than even that of Steve Jobs. The future of computing is not so much in the hardware any more -- although it sure was nice to have those great hardware designs that Jobs came up with. The future of computing IS the internet, and Bezos is the one figuring out how bring the internet to our homes as a virtual supercomputer that seems to sit in the palm of our hands.

It's no longer about computers. It's about computing. A decade from now we may not even think of Amazon as an online retailer. Amazon will be the company that revolutionizes the use of the internet as the computing platform of choice. Perhaps more than any other company, Amazon now has the potential to become the world's leading computing company.

Are Google's Larry Page and Sergey Brin slimebags?

 

   I came across a new review of the paperback version of my book on Larry Page and Sergey Brin (The Google Guys: Inside the Brilliant Minds of Larry Page and Sergey Brin), from the Business Standard in India.

    Interestingly, it brings up one of the biggest criticisms I got about the book. I was too soft on them about privacy and other issues that show how evil they are.

    Great opinion, but in my opinion a paranoid one. Look, I address those issues in the book I just don't buy the argument that they're evil. I did a lot of reporting, and everyone -- I mean EVERYONE -- I could find who knows and/or worked with them said they're honest, idealistic, and really feel that internet search is too important to corrupt in an attempt to make an extra buck.

    In fact, that's why Google is successful. Gues what? If you actually focus on your customers, put them first, make them more important than advertisers, Wall Street analysts or stockholders, then you win in the market. Is this such a strange concept? Are people that cynical?

    What's disturbing to me is what I believe to be the reason for the criticism. People have come to believe that ALL corporate executives are evil and have no priorities other than making themselves rich. Unfortunately, that's largely true, but not universal.

    In 30 years of covering business, I have never come across anyone who seems to be as trustworthy as Larry and Sergey. And that's not just because I wrote a book about them. I also wrote a book about Jeff Bezos, and he doesn't come close to the idealism and honesty of Larry and Sergey.

    If you think Google is evil, tell me why. I'll debate it with you. But the fact that they collect data about you online does NOT make them evil. I've got news for you, there are thousands of organizations collecting data about you every day. Get over it. Google is the only one that promises not to sell your data to others. (No, it does not sell it to advertisers. Google matches up your interests or Web sites with the ads, and Google decides where the ads go based on the data, not the advertisers.)

   In fact, I'll go further and make you this offer: If you want to review the book -- on a blog, on Amazon, in an email to a friend, or just over the dinner table -- let me know and I'll send you a copy. Free. And I will not give, lend, sell or otherwise provide any information about you to anyone. Not even my wife.

    Your review doesn't have to be positive, just honest. But be forewarned, I may respond in the Comments section wherever you review it, if there is one. I love honest debate and appreciate any help in spreading the word.

 

Amazon's Kindle Fire: Trojan Horse and ... Microsoft Killer!

The Kindle Fire is out, and it's going to be the hottest Trojan Horse we've seen since .. the original Kindle. Jeff Bezos has started building computer hardware with one primary purpose in mind: to make Amazon a software company. An unusual approach, but one that will ultimately succeed.

Sure the Kindle Fire will be the only significant competitor to Apple's iPad, but it is also showing that Microsoft is still stuck in the 20th Century. (Have you noticed that Microsoft really doesn't generate much buzz these days?) Microsoft just hasn't figured out the Internet software business.

Bezos started selling hardware (books, then other physical consumer products) because the market for selling software through the Internet wasn't there yet. Now he's favoring electronic books, music, video and cloud computing services because that's where his real future lies. It costs nothing to distribute software, as long as there's a device out there to receive it. Much cheaper than UPS.

The market is different now. The 21st Century calls for great devices that get their software--this time in the form of content and services--through the Internet. So he's borrowing strategies from both Microsoft and Apple to make sure the hardware and software infrastructure is there.

Apple-like Strategies

Steve Jobs loves making hardware hardware AND software, and likes to integrate them into great products. His hardware products are great showcases that create whole new categories of consumer electronics. He also gets the advantage of using the devices to sell his own software--music, books, video, etc. Jobs likes the high-margin strategy of building premium products and pushing old versions down the price ladder as he introduces new top-end products. 

Bezos likes building harware and software primarily because he wants to sell software. Similar to Jobs's strategy, he puts out exclusive devices that run his software so that he can sell more of that software. So he makes sure that his products, while not as great as Apple's, are still impressive enough to compete with Apple while other hardware makers fail. And part of their appeal is the very fact that he has a lot of software to sell, making the hardware more appealing.

Microsoft-like Strategies

But Bezos is also copying pieces of Microsoft's strategy: start at the low end of the hardware market in order to sell his software, and build up. Microsoft ensured that Windows would be the operating system for the masses by licensing Windows to all PC makers, creating price competition and ensuring low PC prices and high Windows volume. 

Bezos is aiming at the mass market with cheaper hardware that appeals to more that just the early adopters. The Kindle Fire doesn't have all the features of the iPad and is smaller, but is half the price. By creating his own hardware, he also gets Apple's advantage of selling devices that favor his own software. He'll sell you electronic books, movies, TV programs, and will throw in cloud computing services for free, just to make them more appealing. It's great that you can read a book on one device, then pick up where you left off on another device. That's because your books--and memory of what page you're on--is stored in the cloud, on Amazon's servers. The Kindle Fire will allow you to do the same thing with movies and TV shows.

But he wisely doesn't try to compete in the OS market for new devices. Increasingly, that's a war between Google and Apple (in this case, Google takes on Microsoft's old role.) Why should he? He gets the Android OS for free.

Microsoft just can't seem to compete with Apple, Amazon and Google in the Internet software business. It can't make inroads into the mobile phone and tablet markets. Sorry, Ballmer.

So look for Bezos to move deeper into the content and software services business. There have already been rumors that he would like to buy Hulu as well as Netflix's streaming movie service. He could have trouble keeping the rights to that content, but he's a tough-ass competitor, and if he (like Jobs) has the hardware to play it, the content producers will have to give in.

At least, once those content companies finally get the fact that the rules have changed in the 21st century.

We might also see Amazon making its own cell phones and other devices that will bring in service revenues. Technology is becoming a service business, and Amazon is becoming a technology retailer. It's got a great future there.

Thet's just hope that Jobs can remain active enough at Apple to ensure that Apple still has a great future as well.

 

Who Is Jeff Bezos?

A tax dodger? ... A ruthless competitor? ... An incredible CEO? ... A tough SOB? --- An extraordinary entrepreneur?

All of the above?

"One Click: Jeff Bezos and the Rise of Amazon.com"

Pre-order sales available:

Barnes & Noble  BOOKSAMILLION  INDIEBOUND  AMAZON.COM  800-CEO-READ

 

 

FTC kowtows to Google competitors, begins investigation of Google practices

First of all, you should know that I'm considered a Google apologist. I admit it, I like and respect Google. I have no relationship with the company, other than using Google ads on my blog, which has never brought me any income. I wrote a book about Google's founders and how the company got started. I was paid by the book publisher, not Google, and I used my own reporting plus the reporting and research of three other journalists, all of whom were paid by me. My opinions come from that reporting.

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THE FTC IS INVESTIGATING WHETHER GOOGLE BIASES ITS SEARCH RESULTS

The FTC decision to investigate Google is utter nonsense, a waste of time and money that distracts the FTC from investigating real abuses. Here's what Google has to say about it. (Not much useful. Google is bad at defending itself.)

The Wall Street Journal broke the story that the probe was going forward yesterday. It pointed out that the probe will look into whether Google "unfairly channels users to its own growing network of services at the expense of rivals." The European Commission is investigating the same thing.

In an article today, WSJ says the probe could be "as much of a watershed event for antitrust policy as the Justice Department's landmark lawsuit against Microsoft Corp. in the 1990s."

GOOGLE IS NOT MICROSOFT

I was a reporter at Business Week, then editor of Upside magazine during the 1990s. I followed the Microsoft case carefully and wrote about it. Microsoft was using a clearly anti-competitive practice: PC makers had to put Windows on EVERY ONE of their machines, or they would have to pay a higher price. This wasn't simple volume discounting. If you sold 100,000 PCs a year and put Windows on every one, you got the cheapest price. If you sold a million computers a year and put Windows on 900,000 of them with 100,000 of them using, say Linux, you did not get hte cheapest price. It kept competing operating systems out of the PC market.

There is no smoking gun for Google, merely complaints from competitors offered without evidence.

SO WHY IS THE FTC INVESTIGATING?

The Journal article, like the New York Times, relies on an organization called FairSearch.org to articulate the complaints against Google. FairSearch.org exists only to raise these complaints against Google. It's sponsored by Google competitors who claim that Google doesn't put their result high enough in search results: Microsoft, Expedia, Kayak, Travelocity.

The comments from FairSearch.Org are as useless as the ones from Google. Quoted in the New York Times:

“Google engages in anticompetitive behavior across many vertical categories of search that harms consumers,” the organization said in a statement. “The result of Google’s anticompetitive practices is to curb innovation and investment in new technologies by other companies.”

What a bunch of boilerplate catch-phrases. Harm consumers. Anticompetitive practices. Curb innovation. Prevent investment in new technologies. Just the kinds of things you need to claim in order to get anti-trust organizations to investigate.

WHERE'S THE BEEF?

I looked into the "Fact sheet" at FairSearch.org. Nothing but bun.

Google has power: "On average, 34% of Google's traffic went to the No. 1 result." No kidding. That's true of any search results page. So Google is big. Being big, even being a monopoly, is NOT illegal, as long as you got your dominant market share legally.

It follows with more of the same: "Google dominates search and advertising." "This dominance adds up to power." Hold the presses! Important news if I've never heard any!

Search manipulation. "Google can program its algorithm to exclude, penalize, or promote specific sites or whole categories of sites." Notice that it says CAN, not DOES.

Oh, here's the evidence, according to FairSearch.org--In 1998 Google's founders wrote: : “[A] search engine could add a small factor to search results from friendly companies, and subtract a factor from results from competitors.  This type of bias is very difficult to detect but could still have a significant effect on the market.”

This quote came from a paper Larry and Sergey wrote while at Stanford (you should read it yourself.) But this was an argument about why such practices should NOT be done. Nobody remembers that when Google was just getting started, Larry and Sergey did not want it to be ad-supported. Why? Every search engine on the market biased their search results toward advertisers. Larry and Sergey described this as "insidious" in that paper.

Excerpts from that paper: "we expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of theconsumers." "search engine bias is particularly insidious."

These were all arguments about WHY Larry and Sergey did not want an ad-supported search engine. When Google was released, it was the ONLY search engine that did not use this bias. It worked. Google gave better results. Eventually, Larry and Sergey decided that advertising was the only way to go, so they set their standards: Ads had to be useful and relevant to users, not annoying and distracting, and advertisers would never influence search results.

HAVE LARRY AND SERGEY CHANGED THEIR STRIPES?

Sure, the question now is, have they become corrupted over time? Isn't it inevitable?

As a journalist, I say unequivocably that it is not inevitable (your opinion may vary.) This practice has long been held by every respectable newspaper in the world. Advertising never influences editorial. At Business Week, the reporters were not even allowed to talk to the ad reps. Every news organization, including the New York Times and the Wall Street Journal, knows that if advertisers influence editorial, readers will notice, you will lose credibility, and people will stop paying you for your news.

Larry and Sergey know the same thing. Bias the search results and people will realize they're not getting the best results any more.

MY OWN TEST OF BIAS

Let's put it to the test. On FairSearch.org's site, they quote a MapQuest executive: 

"When people are doing searches for maps or directions for the city of New York, Google Maps comes up as the first search result in the organic (not the paid ads) listings."

Go to Google's home page and type in the word MAP. The result I got was that Google finished the word with "quest" (It also offered to finish the word as "maps" "maplestory" "map my run" "maps.yahoo.com"

The results, in order:

1. Mapquest Maps - Driving Directions - Map

2. Directions - MapQuest.com Features

3. Yahoo! Maps, Driving Directions, and Traffic

4. MapQuest 4 Mobile for iPhone, iPod touch, and iPad on the iTunes...

The rest of the results on the homepage are for MapQuest, including the news section.

Finally, at the bottom, after 13 search results, you get "Pages similar to www.mapquest.com" with these results:

1. Google Maps

2. Maps & Directions (MSN's mapblast.com)

3. Rand McNally

4. MapsOnUs.com

So why the claim of bias agains MapQuestt? Because most people type "maps" instead of "map." When you do that, the results are:

1.Google Maps

2. Yahoo! Maps

3. Mapquest Maps

4. Bing Maps

5. Maps - National Geographic

...and so on. Why the difference? First of all, Only Google and Yahoo were smart enough to start their URLs with the word "maps" -- maps.google.com, maps.yahoo.com. So when you type 'maps' those are the best fits. MapQuest is www.mapquest.com.

This gives no evidence of bias. It could be that on the 'maps' search Google biases its own results over Yahoo, or it could be cecause more people use Google Maps and more people link to it. You need more evidence than that to find Google guilty of bias.

UTTER NONSENSE

There are many other examples. Type a stock ticker symbol into Google (YHOO or GOOG, for example). You get a top line that lists the major finance sites for info about that stock. There is a bias: Google Finance is farthest to the left, followed by Yahoo Finance, MSN Money, Daily Finance, CNN Money, Reuters. But they're all on the same line. The first actual search result is Yahoo Finance.

I just don't see the evidence here. Check out the FairSearch.org fact sheet for yourself, and tell me if you see anything other than accusations and innuendo with no evidence.

So, fine, an investigation by the FTC and EU may help keep Google honest, if it isn't already. My gripe is that the whole thing unfairly biases people against Google in the press, which just reports the facts, not opinions like me.

But at least I back up my opinions with evidence.

Can you do better? I'd love to hear your evidence of bias. Come up with a good one and I'll buy you a copy of my book from Amazon. Or, if you prefer, my upcoming book on Jeff Bezos.

Notice how I snuck in those ads? Hey, I'm not above self-promotion. But this isn't a news or search site, it's my personal blog. And at least I'm honest about it.

 

 

 

 

 

 

 

Google Chromebook -- No iPad. Microsoft killer?

People have been waiting for Google to come out with an iPad competitor.

The Google Chromebook is not it.

Instead, Chromebook is the long-awaited competitor to the standard notebook PC. It's designed more as a Microsoft killer than as an Apple killer.

Chromebook addresses many of the shortcomings of a PC:

Big Windows operating systems take forever to load. Chromebook takes eight seconds.

Windows gets slower as you keep adding annoying updates and fixes. Google promises that its system will actually get faster as it automatically updates itself.

Windows faces millions of viruses. Google promises "many layers" of security so you never have to buy anti-virus programs. I'm sure the security systems will also automatically upgrade as well.

Still, you have to use Google apps. This is a computer designed to run in the cloud, where programs and documents are stored. I use mostly Google apps, so won't be much of a problem for me. EXCEPT: Google Docs is OK, but needs work. I have trouble with losing the formatting when I save docs as MS .doc files. I prefer OpenOffice from Oracle, a free program that has weaned me nicely from MS Office.

Larry Dignan at ZDNet has a first impression review. He loves the speed, doesn't like the rubbery case, print driver still in beta, and is not yet comfortable doing everything online.

Ed Baig at USA Today also has a review. Can't stream Netflix movies. (That's Netflix's fault. It doesn't support Chrome browser. I have to switch from the Chrome to IE to stream my Netflix. Either Microsoft is paying Netflix or the Google evangelists have to hit Netflix hard.)

These are just first impressions, because the device ain't done yet.

The big question is if cloud computing has reached the point yet where people are willing to live there instead of in their PC. To me, the biggest obstacle is the MS Office installed base. I need to exchange files in tracking mode with editors and keep the formatting exactly the same.

But if this does work, I believe it will be the next generation of computing. iPad is a different beast. The old DOS/Windows computers are an ancient, slow technology that needs to be replaced. I hope it works.

The devices will go on sale this summer.

 ADDENDUM: Oh, and one really great feature I forgot to mention. Since everything is stored in the cloud, including apps and files, you don't have to back anything up. If your computer is stolen or if you drop it and smash it to smithereens, you just get a new device, turn it on, and everything is still there, intact.

Why the antitrust case against Google is nonsense

Nathan Newman has an article in the Huffington Post titled "The Case for Antitrust Action Against Google."

It's largely nonsense.

Here's the real reason why regulators are trying to build a case:

1. People love underdogs and fear dominant companies.

2. Competitors will attack companies in court when they can't compete in the market any other way.

3. Companies that can't game Google's ranking system to raise their results will try to hobble its power and get back the ability to cheat the search algorithms.

Here are the complaints Newman raises:

He quotes a release from the Senate Antitrust Subcommittee that says that some e-commerce sites that compete with Google CLAIM they're treated unfairly in their rankings.

Nonsense. See my point 3 above. Google got its start by refusing to bias search results. Every search engine used to rank paid advertisers higher in search results until Google came along. In a meeting with Google in 2001, an AOL executive meeting with Google said Google was "stupid" for not doing the same. Sergey Brin walked out of the meeting and said, loud enough for people in the meeting to hear, "Someone get me a can of gasoline. I have to set myself on fire to get rid of the scum of these people."

(My own ad: This tale is reported in my book, "Inside Larry & Sergey's Brain" which will be retitled "The Google Guys" for the paperback version.)

Larry and Sergey have always felt that they are trying to do something great for the world, something too important to cheat. My constant example: type a stock ticker symbol (GOOG or MSFT) into Google or Yahoo, and the search engines know you're looking for stock info, so they give links to Yahoo Finance and Google Finance. Both search engines list Yahoo Finance first, because more people link to it than to Google Finance.

The main point is that Google's honest search results work. They give better results, which makes Google more popular, which makes more people use Google. Why mess up a system that works?

Competitors also complain that they are treated unfairly in their ability to buy search ads.

Also nonsense. Google gives preference to advertisers who have relevant ads. If you pay $500 for an ad linked to a keyword that is not relevant, the ad will drop below someone who pays $10 for a more relevant ad. The ranking is based on how many people actually click on the ad. Google only gets paid when people click on an ad. So why accept irrelevant ads from companies willing to pay a lot of money, when nobody clicks on them? Google's entire revenue stream is from advertising, so eliminating relevant ads would be just plain stupid.

Newman also quotes Michael S. Lee, R-UT, who says Google's dominance "creates myriad opportunities for anticompetitive behavior."

See point 1 above. Yes, any dominant company has ample opportunity to cheat. But it's a sad indictment of modern capitalism that people assume that the OPPORTUNITY to cheat means a company WILL do so. I have found Larry and Sergey to be two of the most honest and idealistic business executives I have met in my 30 years as a business reporter. I see no evidence that they cheat, or even want to.

Lee also thinks Google's dominant position reduces its incentive to provide the best privacy protection.

However, Google has always shown a stronger willingness to protect privacy than its competitors. People cits the "wi-spy scandal," as Newman calls it, when Google collected private info from wi-fi signals when it was taking pictures for Google Maps. The company said it was a mistake, stopped the practice, and never did anything with the data. It would like to delete the data, but all the anti-trust suits force it to keep it for evidence. I'm more skeptical of corporate claims than most, but I do not see what Google could possibly gain from something like this except losing the goodwill of its users. Nobody has ever shown any evidence of Google misusing private data. If you think Google does misuse your data, then go to Bing. I'm sure Microsoft is more reliable.

Newman says that when Microsoft was being investigated by anti-trusters, some people said it was just being attacked because it was a dominant company, implying that idiots like me must be just as stupid as the Microsoft apologists. I covered Microsoft for a decade, and used to have great respect for the company, but the evidence of manipulating the market became clear, and I said so. Google is not in the same category.

Newman then gives a lot of "what if?" scenarios without providing any evidence:

Newman says Google is "in the business of reselling aggregated data," so "if" it isillegally breeching privacy, that's an anti-trust violation. Huh? I'm just too stupid to follow his argument. Google is in the business of selling ads, not data. Why screw up the huge ad business to benefit some supposed minuscule business of selling data?

Newman says Google is "accused" of manipulating search results to punish competitors. See item 2 above. Newman cites the case of Foundem, a UK search site, which saw its site disappear from Google search rankings for three years. No evidence that Google unfairly manipulated its system to demote Foundem, just an accusation.  Google does manipulate search results in order to try and exclude sites that manage to game its system. Like when it demoted J.C. Penney for gaming the system so that it appeared first in search results for words like "dresses," "bedding," "area rugs," "furniture" and other items where JC Penney clearly does not lead. Punishing cheaters is not the same as punishing competitors. Any company that says Google is biased against it should provide some evidence that the company deserves to be higher in the results.

Google pulls up the sites that are most popular. That's why it wins. It's not a perfect system, because new sites that have not yet become popular are at a disadvantage. But that doesn't mean Google is cheating.

Newman says, without evidence, that it locks up the search syndication market with "exclusive" deals with PC makers, ISPs, software vendors and others. Really? That's one of Microsoft's own tactics. I can't say it doesn't happen, just that I've never seen the evidence. Show me the deals and I'll reconsider. My HP computer makes Internet Explorer and Bing the default programs. It even brings up a Bing search bar whenever I start up the computer, even though I've changed my default to Google. I have to close the Bing window every time. It makes me less likely to buy from HP again, because it's obviously making deals that are not in my best interest.

And finally, Newman says Google is accused of making it difficult for advertisers to port their data to competing ad platforms. I just wish he would show some evidence for this. His link on this topic just leads to another article that also makes the accusation without evidence. If the accusation is true, it should be possible to find someone who was not allowed to port their data, just as it was possible to find PC makers who said Microsoft charged them more if they didn't agree to use Windows exclusively.

So I don't get Newman's argument. He says the problems he listed means there should be anti-trust action against Google. "The question is why not force Google to act more competitively?" he writes.

I'm sorry, but without evidence that Google is unfair or uncompetitive, anti-trust suits are just pandering to companies that can't compete in the market. If competitors can force anti-trust investigations without evidence, it costs taxpayers and the accused company money, time and attention.

And that's what I would call unfair market hindrance.

 

Coming soon: paying taxes on your Amazon orders

Forbes "Taxing Matters" columnist Janet Novack wrote a column asking the musical question: "Are Amazon.com's Days Of Tax Free Selling Numbered?"

Maybe. There's no loaded flintlock (governments are way behind the times compared to tech companies) that says tax-free Amazon days are numbered, but Novack gives a great summary of the constant pounding the company is taking from tax-strapped, club-wielding states trying to collect. The lack of a definitive action is why her headline is a question, not a statement. (When I was at Business Week, the magazine over-used the strategy of hedging through questioning headlines, leading one wag to parody the Radio Shack ads with the unofficial BW slogan: 'You have questions, we have questions.')

But I digress. I don't see how Amazon can avoid the tax man, or the grim reaper, forever. Although it could hold them off for a while.

The issues:

In 1992, the U.S. Supreme Court ruled that companies that have a physical presence in a state have to collect sales tax from residents of that state.

Amazon says that its distribution centers in states like Texas don't count. Bezos closed the distribution center in Texas when the state sent him a bill for $269 million in back taxes. Texas says Amazon still owes it the money.

New York passed a law saying you had to collect taxes if you have "affiliates" sellers in the state. Amazon is challenging it, but now collects taxes from New York residents.

Rhode Island and North Carolina passed laws similar to New York's, and Amazon ended its relationships with affiliates there (not enough of them to justify the taxes it would have to pay, I guess.) Illinois is awaiting the governor's signature on a similar law, and Amazon has warned that it will end its affiliations there as well.

A few strange things about Novack's blog:

First, it's surprising to see the libertarian rag take a stance for more taxes (the opinions of our blogger do not necessarily reflect...).

She says that Bezos set up shop in Seattle rather than in Silicon Valley so he wouldn't have to pay California sales tax. I've heard lots of reasons why Bezos went to Seattle, such as its proximity to a book distribution center and the growing high-tech community there, but never anything about avoiding taxes.

She thinks Amazon could lose the PR war and the support of the public if it keeps threatening to pull out of states that pass 'Amazon tax' laws. Really? People in those states want an extra tax in order to save about 100 jobs? That's about how many they would lose if Amazon pulls distribution centers.

But it may happen anyway. The thing is, just because Amazon isn't requred to collect sales tax in some states, it doesn't mean you the customer doesn't have to pay the sales tax in your own state. It's just that nobody pays it and states find it too difficult to try to collect.

That means that, at some point, the Supreme Court, or individual states, may force online retailers to start collecting taxes for their sales to all states. Amazon certainly has enough computing power to collect all the sales tax data and automatically add it to shipments to each state.

It's not actually Amazon that has to pay the tax. It's you. Amazon will just collect and pay it on your behalf. It wants to use its no-sales-tax status to keep prices down.

So the question is, do the states and the courts have the political will to make it happen? If enough states pass Amazon tax laws, Bezos will find it hard to keep ending relationships with affiliates and closing distribution centers. It will have to ship products farther, and that's an extra expense it will have to pay.

I don't know. Amazon probably should collect taxes.

But it'll probably still be a while before it happens.

 

 

Get your free Kindle: June 2012

The current buzz is about the coming of the free Kindle. 

Well, don't get too excited yet.This isn't new speculation. It just seems to be gaining momentum because some bloggers have recently discovered the idea.

Just so you know, though, I think it's a great idea and a real possibility. I'm just finishing up a book about Jeff Bezos and Amazon, and this seems like just the kind of bold move he might make. He's not afraid to take chances.

But the current web of speculation:

I write about it today because Myles Tanzer, a blogger at the Village Voice, wrote about it today because Amy Gahran, a blogger at CNN.com, wrote about it yesterday because blogger Kevin Kelly wrote about it in February because Michael Arrington wrote about it a year ago and because blogger John Walkenbach wrote about it in 2009.

Hasn't happened yet. But that doesn't mean it won't.

The buzz started when Walkenbach graphed the declining price of the Kindle, and noticed it was pretty much on a straight-line decline. Straight lines eventually hit the X-axis, which means the price hits zero.

So the price should hit zero in about three months.

Kevin Kelly adjusted the graph with a new data point.

So the price should hit zero in about eight months.

I thought I'd try my own chart, with all the data: The cheapest Kindles at any given time and the dates they were announced. Here it is. 

Oops. Not quite a straight line. It seems that John and Kevin neglected to put in all the data points. Like the original price in 2007. Plus, the last data point wasn't available yet. I added a best-fit straight line (linear regression) to my data.

So the price should hit zero in about 15 months. Wanna bet?

I should note the other info from the previous bloggers that led them to believe this would happen. 

In August 2010, Kevin Kelly asked Bezos about those unusually straight trendlines. Bezos smiled and said, “Oh, you noticed that.” And then smiled again. Yeah, well, Bezos might say that just to yank his chain.

Michael Arrington quoted “a reliable source” that says Bezos wants to give a free Kindle to every Amazon Prime subscriber (Amazon customers who pay $79 a year to get unlimited free two-day shipping and one-day shipping for $3.99 per item.) Although, as a former real journalist, I have to say that no real journalist would report something like this with only one anonymous source.

Amy Gahran pointed out that the economics of e-book sales might justify a free Kindle. Market researcher Forrester estimates that people bought $1 billion worth of e-books in 2010, and that by 2015, it will grow to $3 billion annually. I bet it'll hit $3 billion by June 2012. Hey, I can guess as well as the next market researcher.

For now, the Kindle still leads the market for e-book readers at its current price. Research company ChangeWave estimates that the Kindle had the largest share of the market in early 2011, at 47 percent. Apple's iPad (which does much more than just read books and is more expensive) had a 32 percent share. The Sony Reader and the Barnes & Noble Nook were laggards, with just five percent and four percent of the market, respectively. However, Amazon had the market almost to itself until the iPad was intoduced, so it looks like it could use more price cuts.

E-books are clearly a huge part of Amazon's future. The question is whether the Kindle itself will be a part of that future. After all, Amazon also provides free applications that allow people to turn their computers and cell phones into e-readers in order to buy and download e-books from Amazon.

If Bezos wants to keep his share of the e-book market, maybe discounting the Kindle to $0 makes more sense than trying to discount the e-books themselves. He's been fighting the publishers to cut the prices, and losing. It's a delicate balance.

But I'm sure Bezos has a flow chart to figure out if it could work.

If it does, go for June 2012. At least I used real data.