Should Amazon Be Profitable?

I've been meaning to write a post about Amazon and its strategy to never make a profit in a given year, but Benedict Evans beat me to it in this great post and podcast from a couple of weeks ago. I recommend reading the post. After looking at Amazon closely, there are three things that really jump out at me:

1. Revenue has grown every year since 1996 and net income has remained flat, at near zero.

Amazon Growth

2. Every dollar in profit goes directly back into the business. They're investing most of the profit into capital expenditures such as new warehouses and Amazon Web Services but they're also using it to rapidly enter new verticals in e-commerce. There literally must be someone whose job is to make sure they don't make a profit in any given year.

3.  A lot of people are asking how long Amazon will continue reinvesting their profits instead of passing them onto investors (even a great innovator like Apple pays out a nice dividend). How long can Amazon keep investing in themselves? Benedict uses a Wal-Mart comparison. Currently, while Amazon is an enormous player in e-commerce, they still only make up around 1% of North American retail sales. So asking Amazon if they should continue to invest in their growth is a little like asking Wal-Mart if they should've kept investing in new stores back in the 1960s. The answer for Wal-Mart was yes in the 1960s and it's yes for Amazon in 2014.