Thread by @doctorow

Amazon is *very* proud of its #flywheel: first, they subsidized customers, luriing in sellers. Then they demanded lower prices, luring more buyers. With more customers, more sellers piled in. Faster the flywheel spins, creating the #EverythingStore:

fourweekmba.com/amazon-flywhee…

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If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

pluralistic.net/2023/04/25/gre…

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The flywheel is everywhere - they even teach it in business-schools. But Amazon is not a reliable narrator. It doesn't tell the truth about the flywheel. To understand what's really going on with the flywheel, you have apply #enshittification to it.

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First, Amazon is good to its end users. Then it claws back the benefit to those users and delivers them to sellers. Then it claws back from sellers and takes everything for its shareholders. Then, it turns to shit. Enshittification.

pluralistic.net/2023/01/21/pot…

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Amazon - like other platforms - externalizes costs onto its suppliers, reaping the majority of the reward. Uber drivers take the risks - car and fuel, unpaid time waiting for a ride - and Uber creams off most of the money that riders pay:

pluralistic.net/2023/04/12/alg…

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You can think of this as the eucalyptus tree strategy: eucalypts drop oily leaves around their base. The leaves pile up, trapping heat among all that oil until, eventually, they burst into flame, burning down all the vegetation for miles around.

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The only things that survive the conflagration are eucalypt seedpods, which need fire to open and begin germinating. Meanwhile, all the potential competitors for water, sunshine and soil nutrients have been incinerated, forming a rich, ashy mulch for the eucalypts to grow in.

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(Like many Australian plants, insects and animals, eucalypts are horrifyingly bad ass.)

Uber is a pure enshittification play. For more than a decade, the company lost more than 40 cents on every dollar.

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Uber used #PredatoryPricing to destroy the yellow cab business and public transit. Now it employs ex-cab drivers at half their old wages to drive passengers at twice the old fares. It incinerated the forest and took root in the ashes.

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Amazon's arson relies on the same scorched-earth lock-in that Uber and other enshittifying eucalypts deploy. Amazon used investor cash to lure customers then locked them in by subsidizing pre-purchases of a year's worth of shipping (AKA #Prime).

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Once you've pre-paid for a year's worth of shipping, you don't shop anywhere else.

Prepayment is a *huge* part of Amazon's lock-in: that's the real strategy behind its subscriptions services for ebooks and audiobooks.

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If you've already paid for a book this month - a payment you owe whether or not you actually choose a book - then any time you come across an interesting book, you get it on Kindle or Audible, because you've *already paid for it*.

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With digital items, Amazon has a *double* lock-in, thanks to #DigitalRightsManagement (#DRM). Under #Section1201 of 1998's #DigitalMillenniumCopyrightAct (#DMCA), it's a felony to provide someone with a tool to remove DRM.

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That's true *even if no one ever uses that tool to infringe copyright*. That means that if Amazon sells you one of my books wrapped in its DRM, you can't play it unless you use an Amazon-authorized player.

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It also means that if I - the author - give you a tool to remove DRM and move your book to a rival platform, I *commit a felony* punishable by five years in prison. Small wonder Amazon insists on every audiobook on #Audible - its monopoly audiobook store - be wrapped in DRM.

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So first, Amazon locks in its users, with presales, subsidies, and DRM. This lures in sellers. As brick-and-mortar retail fails, sellers pile into Amazon's Marketplace. All the trickery with the users is the stick: "keep trying to sell off-Amazon and you'll go bust."

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The carrot is Marketplace: "Sell through Marketplace and you'll reach those buyers, and we'll subsidize shipping and returns, and we'll add your products to a thoroughly indexed, searchable catalog so every person looking for a part or product will go straight to your item."

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Sellers can't easily use Amazon as one retailer among many. On @techwontsaveus, @moiragweigel discusses her research on how firms have to retool to optimize for Amazon, in an episode entitled "How Amazon Reshapes Small Business to Serve Itself":

techwontsave.us/episode/162_ho…

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The episode elucidates her study of Amazon sellers for @datasociety, "Amazon’s Trickle-Down Monopoly: Third Party Sellers and the Transformation of Small Businesses":

datasociety.net/library/amazon…

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As the sale of all kinds of merchandise is retooled for Amazon delivery, every other retailer finds it harder to stay in business. The choice of goods available in physical stores dwindles, so more shoppers pile into Amazon.

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As Amazon's pool of shoppers grows, more merchants are driven to Amazon. This is Amazon's flywheel - not so much a virtuous cycle as a *vicious* one.

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Having locked in buyers and sellers, Amazon is now in the "burn down the forest" phase of #EucalyptusCapitalism. The company now extracts *the majority* of its third-party sellers' income in junk fees - fulfillment, service charges, payment fees, and more.

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One especially juicy source of revenue is Amazon's "advertising" business:

bloomberg.com/news/articles/…

Whenever discussions of #adtech monopolization comes up, someone will inevitably point out that the market isn't as stagnant as it seems.

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After all, Amazon was able to enter the market despite the dominance of the #Googbook duopoly, and build a $31b/year advertising product. But Amazon's advertising isn't like Google or Meta's advertising (not that those are good - just different).

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Googbook serves as a broker between advertisers and publishers, targeting ads based on the surveillance data they amass or purchase on billions of internet users.

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Amazon does some of that, but it's main "ad" business isn't advertising at all - it's #payola. Amazon once told sellers, if you sell the best match for a buyer's search, you'll top the results.

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Now, Amazon makes its sellers bid against each other to be at the top of your results, whether or not they're the best match for your search.

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That's why the first five screens of results to a search for "cat beds" are 50% ads (the first screen is 100% ads). Much of what remains is Amazon's clones of its sellers' products.

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(Amazon surveills its sellers shipments to fully book out the factories that make their goods, so the next time the seller orders another batch, the factory is unable to fill the order for years; Amazon sellers call this "#dragonboating":)

pluralistic.net/2022/11/28/ens…

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In other words, Amazon isn't making $31b/year selling ads - it's extracting $31b/year from its merchants to make its shoppers' experience worse.

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The results at the top of your search aren't the best products - they're often the *worst* products, because sellers who waste money making *good* products don't have anything left over to pay danegeld to Amazon:

pluralistic.net/2023/04/08/lat…

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But maybe this doesn't matter to you. Maybe you're "good at Amazon" and can skip over the paid product placement (here's a tip, search for Amazon products on *Google*, which will often take you to a better match than Amazon's own search, skipping over the pay-to-play).

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Does any of this matter to you? You're still getting low prices, right?

Enshittification is an equal-opportunity pathology. It's not just squeezing *sellers* - it's squeezing *buyers*, as anyone who's paid $55 for an Uber that used to cost $18 (or $22 by cab) knows.

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There's just not a lot of vendors who have 51% margins on their goods. If merchants *must* sell on Amazon, and if selling on Amazon means you *must* give up 51% of your take, then you're going to go out of business. Unless...you raise prices.

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But wait! Amazon prices aren't higher than they are anywhere else! You can check it yourself - Amazon prices are the same as the price at Walmart and Target, they're the same as the price at your local mom-and-pop shop.

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They're even the same as the price if you buy direct from the manufacture. Amazon sellers aren't raising prices to cover Amazon's junk fees, are they?

Oh hell yes they are.

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Amazon binds its sellers over to something called #MostFavoredNation status. That means that sellers can't offer their goods more cheaply than they do on Amazon - even if it costs them (lots) less to sell in Target or direct from their websites.

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This means that every time a seller adds a dollar to their Amazon sale price, they have to add a dollar to the price of their goods *everywhere else*, too.

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If this sounds illegal, it's because it is. A per se violation of antitrust law, even the weak and watery version instituted during the Reagan revolution, where "consumer welfare" (AKA "low prices") is the only thing antitrust seeks to preserve.

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After a bunch of state AGs filed lawsuits against Amazon over this, the company promised to cut it out.

They lied.

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A new filing in California's suit against Amazon reveals that sellers live "in constant fear" of retaliation from Amazon if they allow their goods to be sold more cheaply elsewhere:

finance.yahoo.com/news/amazon-vo…

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Indeed, the company *expanded* the penalties it slapped on sellers, though their execs fretted that this "may generate pushback given recent positive press about our change to remove the previous price parity clause."

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The exec added that when these penalties came to light, it might cause people to assume that the promise to end Most Favored Nation "was not only trivial but a trick and an attempt to garner goodwill with policy makers amid increasing competition concerns."

Ya think?

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The new documents reveal Amazon execs committing the cardinal sin of monopoly: documenting their nefarious plans in memos - memos in which they talk like mafia bosses.

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"You might want to ask [a seller] to check if his sales on other sites directly or through distributors is putting him and us at a relative competitive disadvantage. He might get the hint :)"

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Amazon's chief economist told his colleagues that the ad business would "reduce selection, are not relevant to the customer’s search, and/or lead to increases in prices."

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In her excellent interview with Tech Won't Save Us's @parismarx, Weigel was critical of the way that the antitrust movement thinks about Amazon, accusing modern trustbusters of being concerned with competition for its own sake.

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There are undoubtably some "#NeoBrandeisian" antitrust activists who feel that way, but it's a mistake to paint the whole movement with that brush.

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For many trustbusters, the point of antitrust isn't increasing competition - it's *reducing corporate power*. Amazon has built the "planned economy" that capitalists claim to deplore, but this planned economy isn't run by democratically accountable government technocrats.

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Amazon is run by Party Secretary Bezos and his Commissars, who decide which goods are can be profitably made and sold.

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Companies are disciplined by two forces: competition and regulation. But a company that doesn't face competition swiftly becomes ungovernable, because its centrality makes it #TooBigToFail.

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And monopoly profits make companies #TooBigToJail. Amazon's ability to corrupt the political process and win deep subsidies from towns and states is purchased with monopoly money.

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Amazon's ability to spend millions on union busters and millions more on labor lawyers to sabotage union votes in court are bought with the same cash.

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Competition is a means of cutting Amazon down to size, so that it *can* be regulated. Sure, we can try to do direct regulation, like breaking up Amazon. That plan has a lot going for it - but it won't be fast. It took *69 years* to break up AT&T.

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IBM outspent the entire @JusticeATR, every single year, for *twelve consecutive years*, in a war of attrition they call "Antitrust's Vietnam." In the end, IBM wriggled off the hook:

onezero.medium.com/jam-to-day-46b…

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We should do *everything* to blunt the power of monopolists, including Amazon: breakups, competition rules, unionization, organized boycotts, lawsuits...everything.

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They have the money, but we have the people, because now that Amazon has entered end-stage enshittification, it's running out of friends. When the platform withdraws its favor from buyers, sellers and workers, who's left to stick up for it?

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Separately, no group of Amazon stakeholders can't hold it to account, but when we all join together, we can smash the company's power - forever.

eof/