The company has had its missteps; those come with innovation. Amazon launched Destinations, Local, Wallet and Local Register products to little acclaim, for instance. All were short-lived ideas for which Amazon couldn’t gain customer traction.
Amazon, like most tech companies, embraces its failures.
“I’ve made billions of dollars of failures at Amazon.com,” Jeff Bezos said at the Business Insider Ignition conference in 2014. “Companies that don’t embrace failure and continue to experiment eventually get in the desperate position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence.”
HQ2 isn’t a financial disaster like the Fire Phone or an idea that flopped like the Destinations travel business. But Amazon set the stakes high for HQ2, with an international, multi-city audition process that gripped the business world.
“They made a big mistake here, but how they recover is an open question,” said Nathan Jensen, a professor of government at the University of Texas. “If they’re used to these failures, maybe that experience can help.”
Amazon has a long history of success without a lot of profitability.
It has routinely piled up huge losses over the course of its 24-year history, only to increase its dominant share of the online retail market. On death’s door during the dot-com bust, Amazon was one of the only fledgling tech companies to survive.
But investors don’t care. They’ve sent Amazon’s stock soaring in recent years. That confidence has given Amazon the capital and freedom it needs to take big risks — and absorb the losses when it fails.
Amazon’s biggest financial failure came in June 2014, when it launched its Fire Phone.
The company drummed up excitement and curiosity by airing commercials of people’s shocked, impressed reactions to its Fire Phone — without showing the TV audience the phone itself. Later that month, Amazon held a press conference in Seattle, at which Bezos unveiled the Fire Phone, triumphantly raising his right hand in victory.
Amazon didn’t reveal how many phones it sold, but it quickly discounted the phone to 99 cents, and it wrote down $170 million in unclaimed inventory in October of that year.
But Amazon learned its lesson, and eventually built its hardware business into an enormous success. Bezos has said the big mistake of the Fire Phone was creating a “me-too” device that tried to copy the iPhone. When it launched the Echo, Amazon did the opposite, giving customers a totally unique voice assistant product that made the company the market leader for home networking products.
New York HQ2
The HQ2 disaster is a different kind of misstep.
For one thing, it shows there are limits to Big Tech’s influence. Like Walmart a decade ago, Amazon couldn’t win over a loud segment of the public or key lawmakers, forcing it out of a market in which it so badly wanted a major physical presence.
“I don’t think it’s a failure for Amazon, but a sign of changing times where the idolatry of tech innovators — and their firms — has peaked,” said Scott Galloway, a marketing professor at NYU’s Stern Business School.
“Amazon is on its heels,” said Zephyr Teachout, a professor at Fordham Law School and a critic of Amazon’s HQ2 plans in New York who has also opposed one of its chief proponents, New York Governor Andrew Cuomo. “There are many reasons it pulled out, but one of them has to be that they were suddenly getting their entire business model scrutinized after years of mostly glowing coverage.”
“They treat sellers like Monsanto/Bayer treats farmers; workers like Walmart, and politicians like Foxconn,” Teachout said. “It’s a triple negative that will only grow as people learn more.”
It’s possible Amazon’s HQ2 180 won’t be viewed as a failure in the future. Amazon put relatively little money into the project, and it hasn’t broken ground on any businesses. The Fire Phone probably cost Amazon more money than HQ2 in the end.
But Amazon took one on the chin Thursday. It’s a financial success story now, but Amazon’s reputation has been damaged.