More NewsLight at the End of the Tunnel

Light at the End of the Tunnel

In today's economy, when someone claims to see a light at the end of the tunnel, we might be skeptical. But Dana doesn't think Jeff Bezos is hallucinating -- Amazon might actually be on the track to profitability.

When I was a kid, “light at the end of the tunnel” was a favorite phrase of editorial writers. It referred to any government action aimed at ending the Vietnam War. The light, in that case, usually turned out to be an oncoming train.

The point is that we should remain skeptical when we hear that phrase today. When someone claims things have turned around, it could be wishful thinking. That can lead to a “bear trap,” a slight rise in prices aimed at drawing in investors, followed by another hard fall.

But this looks real. Amazon.com said the other day it will beat analyst estimates for its current quarter, and (more important) it could earn a real profit by the end of the year. In response, the stock price rose 30 percent to more than $10 per share. (If you bought Amazon at $100, this is cold comfort, but cold comfort is better than none at all.)

Why should you care? While recessions have real causes, they also have a psychological component. After a time, fear is replaced by helplessness. The grieving process replaces the building process, and if things don’t change pretty soon, you’re standing around wearing an apron in aisle four.

The only way to dispel helplessness is with hope. In business, the best way to create hope is with profit. Amazon finally seems to be headed toward profitability.

Now it’s true that Amazon has gone to some extraordinary, even controversial, lengths along the way.

Many affiliates feel hosed because the company has changed landing pages, adding merchandise but effectively cutting most payments to only 5 percent of the gross from 15 percent. (Here’s an example.)

The company changed its policy on privacy and essentially told consumers they have none. Amazon claims the right to sell not only clickstream data, but personally identifiable information as well — when it wants, how it wants, and to whom it wants.

“The World’s Biggest Bookstore” has cut out a lot of merchandise under a program Jeff Bezos called “Get the Crap Out.” Some distribution centers have been shuttered, and its old growth story (we will sell everything) has changed (we will sell for anyone).

Still, those actions have had an impact. The most important impact is that Amazon said it will end the quarter with $640 million in cash and end the year with $900 million.

The fact that someone has found a way to make money online (and, apparently, a lot of money) is important for everyone in online retailing and advertising. Much of the online world is collapsing around our ears, based on a helpless feeling that there is no reality to what we do.

But there is a reality to it. And if Amazon can be saved, who’s to say Webvan can’t be? (OK, let’s not get carried away…) Now if we can just find some profits among ad agencies, toolmakers, and content sites, we can get back to the old days. Or at least trade in that Krispy Kreme coffee for (an occasional) double latte.

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