Marcus: Let’s see. Amazon’s first couple of acquisitions included Planet All, essentially an online address book, and a software company called Junglee. The latter did a number of things, but what Amazon really wanted—the plum of the transaction—was an engine that would allow customers to come to the site and search the entire Web for merchandise. Now there are plenty of what are called shopping bots, but back then, there was nothing like (as it was called) Shop-The-Web.

For various reasons, people at the company didn’t think much of Planet All. Amazon paid some enormous amount of money for the operation, and it didn’t really seem like such a big deal. What happened, in fact, is that PDAs really hit the market about six months later, and wiped out the whole business. So here was an initiative that people perceived as a mistake from the beginning—and indeed, it never went anywhere.

On the other hand, we all thought Shop-The-Web would be either a big disaster or a giant success. Why? Because it was so counterintuitive: sending customers out of the store, to buy cheaper versions of the product you might be selling, struck most retailers as pure suicide. Jeff’s feeling was that it would bring traffic into the store, and that we would heighten customer ecstasy—which was a particular focus of his at that point. Well, they poured a lot of effort and time into it, and the surprising result was that nobody could care less. Nobody used it. It kept being moved to a smaller and more obscure part of the site—by the end, as I noted in the book, you practically needed another search engine to find it. And finally it just disappeared.

Blodget: Any others come to mind?

Marcus: Well, we all thought that auctions would be a big success. There was a perfectly sound rationale at the time. EBay was gaining on us at a frantic pace, and they could have easily launched a fixed-price operation. In other words, there was nothing to stop them from launching their own Amazon, so we’d better launch our own EBay and beat them to the punch. There were many arguments to support the idea. Yet it flamed out completely.

Blodget: As James notes in the book, apparently I thought it was going to be a big success as well.

Marcus: Again, with good reason. You have to recall that the company had this zeal for expansion: every three weeks they were announcing another deal, many of which I didn’t even mention in the book. Some of that stuff seemed insane. But by 1999, Amazon had very deep pockets for acquisitions, partially because the stock was priced so high and they could use it to pay for companies, but also because they had done these bond issues and raised hundreds of millions of dollars in cash.

Jeff wanted get into every market at once, before we were too identified as a bookseller. By 2000, in fact, Amazon seemed to be working very hard to conceal the fact that it was a bookseller. The company would buy four-color inserts in the newspapers, and there would be the garden hose, the asparagus pot, the salad spinner, but not a single book in sight. In the editorial department, we were very hurt. We weren’t the favorite child anymore. But Jeff really felt it was expand or die.

Blodget: It’s interesting to see how the model has evolved. You talk early on about Amazon’s initial efforts to rent space to other sellers. The first time around, that wasn’t so successful. But now it’s an incredibly profitable business for them.

Marcus: That’s right. The first time around, most of the partners went under. Then Amazon moved toward a different partnership model—the kind they have with Toys’R’Us—where Amazon basically runs the front end of the online store in exchange for a commission. And now they’ve moved back to renting space in the mall as well, to thousands of third-party sellers.

GO TO HOUSING WORKS INTERVIEW PAGE 1 2 3 4