Happy 60th Birthday Jeff Bezos! The second-richest person in the world with a net worth of $180 billion, today. Jeff Bezos, the founder, executive chairman, and former CEO of Amazon.com Inc., the fifth-largest company worldwide with a market capitalization of $1.6 trillion.
Bezos founded Amazon in 1994, initially as an online bookstore operating out of his garage in Seattle. However, after recognizing the potential of e-commerce, he later expanded the company’s offerings beyond books, entering into diverse product categories.
The early years were marked by challenges, including skepticism from some investors, who reportedly favored brick-and-mortar book-selling giant Barnes & Noble at the time. Undeterred, Bezos persisted and continued to introduce innovations like Amazon Prime, Kindle, and the Amazon Web Services (AWS) cloud computing platform.
While retail was always Bezos and Amazon’s main focus, his riskiest move was offering on-demand cloud computing worldwide. Despite investor concerns about diversifying during thin retail profits, Bezos persisted.
The AWS launch brought the company close to bankruptcy, leading to a 14% workforce reduction. However, the next year saw a remarkable rebound, with a $400 million profit announced. Today, AWS dominates the global cloud services market with a reported 32% share.
Wedbush analysts foresee Amazon achieving over $100 billion in AWS revenue by 2024, $100 billion in free cash flow by 2026, and $100 billion in advertising revenue by 2028.
Moreover, while today Amazon has become a global powerhouse, the company and its founder previously also faced criticism for their aggressive business practices but continued regardless to disrupt traditional retail models.
Not All Peaches And Cream — Bezos And Amazon Both Survived The Implosion Of The Dot-Com Bubble
The dot-com bubble was not an easy time for the billionaire or his e-commerce startup. The dot-com bubble was a speculative frenzy in the late 1990s, which witnessed an unprecedented rise in the valuation of internet-based companies.
Investors were captivated by the potential of the burgeoning online sector, leading to inflated stock prices. In this euphoric environment, Amazon, led by Bezos, went public on May 15, 1997, with an initial public offering (IPO) valuation of $18 per share.
Amazon quickly grew its customer base and smartly raised a lot of money, allowing it to offer a wide range of products. The value of the company skyrocketed, reaching over 50 times its IPO price in December 1999, according to CNBC.
However, as the bubble reached its zenith in the early 2000s, the market underwent a sharp correction, resulting in the collapse of numerous dot-com companies. The Nasdaq reached its highest point on March 10, 2000, at 5,132.52. Unfortunately, things took a turn for the worse, and the bubble burst, causing the overall value of the stock market to drop dramatically to around 1,100 by October 2002.
This downturn had a profound impact on Amazon, as its stock value plummeted from a high of $113 (split unadjusted) to just $6 in less than a year. But, despite the harsh implications of the dot-com bubble burst, Bezos employed strategic resilience to guide Amazon through the storm.
The e-commerce behemoth reportedly weathered the storm owing to “shrewd management and lucky last-minute infusion of capital right before the bubble burst,” the CNBC report noted.
While many dot-com companies vanished, as per CNN, Amazon not only survived but thrived, evolving into the e-commerce and technology giant we recognize today.
In a 2018 episode of “The David Rubenstein Show: Peer-to-Peer Conversations,” Bezos spoke about the internet bubble and highlighted the difference between stocks and the company. “The stock is not the company, and the company is not the stock.”
He also highlighted how Amazon’s internal business metrics, such as customer numbers and profit per unit, were consistently improving even after the stock price fell.
Bezos also mentioned that when the internet bubble burst and there was a financial downturn, Amazon had enough money saved up, so they didn’t need extra funding. This financial security helped the company keep growing even when the stock market was going through a rough time.
It is pertinent to note that Amazon started making a profit in the last quarter of 2001. In 2003, the company turned its first profit, with net profits going from $3 million for the fourth quarter of 2002 to $73 million for the fourth quarter of 2003, according to the Michigan Journal of Economics.
What If You Had Invested $1000 In Amazon When It Was Battling With Dot Com Bubble?
In the mid-1990s, a $1000 investment in a nascent online bookstore must have seemed risky, but if you, like Bezos’s siblings Mark and Christina, had decided to weather the storm with Bezos and Amazon, things would have resulted in impressive returns today.
If you invested the money in Amazon stock the session after Nasdaq hit a peak on March 10, 2000, when things started going downhill, but still stuck to it through all of those years, you would have now had $47,519 — that’s a more-than-handsome return of 4651.9%. In comparison, the S&P 500 gained just 242.6%, while the Nasdaq Composite added 196.5% during the same period.
The Invesco QQQ Trust, Series 1 ETF would have fetched a 267% return, while the SPDR S&P 500 ETF would have returned 244%.
If you had invested $1000 in Amazon when the company went public, today you would have gained $1,570,003.15, much more than an ETF tracking Nasdaq or S&P 500 stock.
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