Dan Rose Profile picture
21 Aug, 12 tweets, 2 min read
In 2002 I was working in Amazon’s retail division. We were organized by department - books, CDs, electronics, etc - and a separate dept for products sold by 3rd parties. Then Bezos decided 3rd party should appear next to 1st party on the same product page. Here’s what happened:
Amzn launched 3rd party biz right after I joined summer 1999. Started w auctions, competing directly w eBay. Added fixed price when eBay acquired Half. Despite a ton of cross-promo, nobody visited the 3rd party store. eBay had buyer/seller network effects. Amzn couldn’t compete.
By 2002 most people thought we should shut down 3rd party biz. It wasn’t working, consumed a lot of resources, good people were on it, big distraction. At the same time, core retail biz had decelerated to single digit growth after we raised prices to stop bleeding cash.
Jeff refused to give up on 3rd party. After spending tons of money (including TV ads) and banging his head against it over and over again, a light bulb went off. Going against eBay with a separate 3rd party store was like bringing a knife to a gun fight.
eBay had an insurmountable lead in the market for people browsing and looking for deals. Amzn’s strength was people spear-fishing for products, low prices, dependendable service. The way to attack eBay was to move the battlefield to Amzn’s turf.
“You can be sure of succeeding in your attacks if you only attack places which are undefended. You can ensure the safety of your defense if you only hold positions that cannot be attacked.” -Sun Tzu, The Art of War
But in order to show 1st party & 3rd party products on the same detail page, we needed a canonical product catalog. Jeff created a team to re-architect the catalog around universal identifiers for every product on the planet (including categories Amzn didn’t yet offer).
At the time, each retail division was responsible for its own P&L. For example, I was in charge of computers - source & manage inventory, set prices, run promos, bundles, etc. This is standard merchandising for any retail biz - balancing act between inventory / pricing / margin.
After the universal catalog was complete, Jeff told the retail teams: “You will now be competing with other sellers for the buy button. If they offer a lower price, they get the button. Adjust your inventory, pricing and margin plans accordingly.”
This was an impossible task for the retail merchants to manage. How could we plan our biz in the face of unkowable actions from 3rd parties? Our senior execs with deep retail experience were shocked / perplexed. This was why I had dropped out of b-school, learn on the job!
The project was called “Single Detail Page.” Within a few years, 3rd party sales went from 0.x% of GMV to 40%. 3rd party profits far exceeded 1st party - no inventory risk, no fulfillment cost, pure margin. eBay’s market cap peaked at 4x Amzn’s, today Amzn is worth 40x eBay.
“So in war, the way is to avoid what is strong, and strike at what is weak.”

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More from @drose_999

17 Oct
In 2004 I had an offer to join the new Kindle team at Amzn and I jumped at the oppty. I was on our retail team at the time -> Kindle was new/sexy. But a week before I was scheduled to start my new job, I was told to stay put and I learned an important lesson. Here’s the story:
2 years earlier I had been given P&L responsibility for Amzn’s cell phone store. We sold phones + plans (like Car Warehouse and Best Buy). This was Amzn’s highest margin biz, but it was tiny and not growing and I was told it could get shut down. I had 6 mos to turn it around.
The industry model at that time was give phones for free w/ service plan attach. I reinvested the service plan margin to make phones less than free, and rev growth exploded. GM % plummeted, but profit $ went way up. My little biz was our fastest growing segment at Amzn!
Read 10 tweets
3 Oct
In 2008 Facebook’s user growth hit a wall at 80M and we were having serious debates about whether any social network could ever reach 100M users. 2 years later we had doubled our user base and not long after that we reached 1B users. Here’s how we did it:
I joined FB in summer ‘06 when we had 7M users and were adding 5k/day. Over the next 18 months, Zuck shipped News Feed, Open Registration, Platform and community-led translation. By end of ‘07 we had 70M users and it seemed like we couldn’t be stopped.
Towards end of ‘07 I helped raise our Series C at $15B valuation. We had <400 employees and only $250M revenue, but we had explosive user growth and powerful network effects. Our entire valuation was based on how fast people were signing up for FB all over the world.
Read 13 tweets
19 Sep
May 18, 2012 - there was a crisp blue sky at FB’s campus as we rang the opening bell. Emotions ran high as we took a brief moment to celebrate our hard work. The stock traded up for the first few hours. Then it traded down for the next 12 months...
Facebook’s IPO coincided with a paradigm shift in technology. The majority of our usage and revenue transitioned from desktop to mobile practically overnight. Facebook’s journey to a mobile-first company started with a strategic error and ended with a pivot. Here’s the story:
Mobile initially presented us with a number of challenges, and our instinct was to innovate our way around them. The heart of our strategy was HTML5, which turned out to be a flawed approach. We spent 2 years sprinting down the wrong path before reversing course. Why?
Read 16 tweets
12 Sep
Amazon launched in July 1995, and every Xmas was a near death experience for the first 7 years. I joined in ‘99 and got to experience this first hand. Starting in late Nov, all corporate employees were shipped to fulfillment centers to pack boxes for 6 weeks. Here’s what I saw:
Despite efforts to plan ahead, the company literally couldn’t keep up with holiday demand. 40% of all annual orders would come through in 6 weeks from Thxgiving through New Years. Ops teams would start planning in Jan, but by Sept they were always massively behind.
As “earth’s most customer centric company,” failing to deliver presents for Xmas would have been like Santa missing his deadline. But when demand exceeds even your most aggressive forecasts, it’s a physical world problem that requires physical world solutions - ie human bodies.
Read 11 tweets
4 Sep
I dropped out of b-school to join Amazon July ‘99. By Dec Amzn’s stock had doubled, Jeff was Time Man of the Year. Then March ‘00 internet bubble popped -> my stock options were underwater and Amzn faced bankruptcy. Yet dropping out was the best decision I ever made. Here’s why:
I needed a pattern interrupt. My life had been conformist up to that point - straight A’s, awards, Harvard, b-school. But business is messy, life is messy. I knew deep down I needed to mess stuff up, get outside the box. I’ve tried to maintain that mentality ever since then.
Shortly after I started my internship at Amzn, I asked CFO Joy Covey if she thought I should drop out of b-school to stay on full time. She said I would learn more on the job than in school (she had dropped out of high school). She was right, you can’t learn biz in a classroom.
Read 8 tweets
8 Aug
A few months after I joined Facebook in 2006, we shipped the 2 most important products in FB’s history: News Feed + Open Registration. A lot of smart people thought these moves would destroy FB. Instead, they transformed the company and cemented Zuck’s leadership. The backstory:
News Feed shipped first. In 2006 there were no feeds (other than RSS), NF was a novel product idea. Websites were measured on page views back then, and NF was designed to reduce PVs by eliminating the need to click around profiles. Less PVs = less ad impressions, seemed crazy.
Mark described FB as a utility, and NF was central to his vision. It showed info you could already see on people’s profiles, but organized efficiently on the home page. And stories would be ranked based on what people found most interesting. This was a massive change.
Read 10 tweets

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