Mary Meeker Speaks Out On Amazon

It looks like Mary Meeker, Wall Street's most influential tech analyst, is touting the first mover and other advantages driving Amazon.com's successes that I've been criticized for believing as a shareholder since 1998. Today she said,
"AMZN reported C1Q00 revenue of $574MM (up 95% Y/Y, down 15% Q/Q in a seasonally weak quarter), ahead of our estimate of $541MM. Gross profits were $128MM, with a gross margin of 22.3%, ahead of our 19.5% estimate. Operating loss was $99MM, better than our $105MM estimate, and significantly better than the $175MM loss in C4Q99. Operating EPS of $(0.35) was better than our estimate and the First Call mean of $(0.36). We believe that C4Q99 was AMZN's worst quarter in terms of operating loss, and the key thing to watch for going forward is improvement relative to that performance. That said, we are encouraged by the C1Q results -- operating loss declining $76MM Q/Q to $99MM -- although we do not believe AMZN is out of the woods yet. A key challenge for AMZN going forward will be reducing operating losses Q/Q as a percent of revenue and in absolute terms. Two customer lifetime value indicators improved nicely in C1Q. 1) Trailing 12-month sales per active customer (one who purchased during the past 12 months) was $121, up from $116 in C4Q99 and $107 in C1Q99. The success of AMZN's long term business model is highly dependent on increased wallet share, and we believe we're starting to see the first signs of this. 2) Customer acquisition costs (sales and marketing expenses, excluding fulfillment, divided by new customer adds) declined from $19 in C4Q99 to $13 in C1Q. Note that these costs are among the lowest of any major Internet commerce company and demonstrate the power of AMZN's brand and first-mover advantage. AMZN's position is one that few e-commerce companies will ever be able to achieve.