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Welcome to the Json and Scott show this is episode 329 being recorded on Friday August 1st,

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2025 I’m your host Jason retail geek Goldberg and as usual I’m here with your co-host Scott Wingo.

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Hey Jason and welcome back Json and Scott showed listeners.

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Well today we are going to go over Amazon earnings it was a very eventful earnings season so let’s set it up before we jump into Amazon.

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So back on July 23rd so about a week ago Google announced their results and they were what I would call mixed.

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Search grew 12% which was good.

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But there were some concerns and management kind of dodged some tricky questions about what’s going on with AI overviews and how that’s impacting search Google Cloud did very well but not what I would say crushing it.

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So then their stock did not react
great or bad to that so it’s been kind of flat to down slightly since then
so then that was the setup last week.

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And then on Wednesday of July 30th we came in and had Microsoft and meta announced on the same day which is really hard for our internet analyst friends out there to have 2 Big E’s announcing at the same time but they they survived.

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Came out I just uh did this alphabetically and.

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Meta came out first and it was a a Whopper so it was a the best thing you can do in Wall Street is,

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to not only meet expectations but meet them and then raise next quarter’s expectations and that’s what meta did so it was a what we call a classic beaten rays which is a.

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It’s kind of the the Holy Grail the upper right quadrant the place to be if you’re a public company.

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So they beat the Topline estimates by 6% which is good but then they just crush the bottom line coming in about 21% more profitable than Wall Street,

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expected and then the icing on the cake if it as if it couldn’t get any better it did is they their growth is accelerating so in the first quarter they grew 16% year-over-year and then in second quarter they grew 22% year-over-year,

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so that’s a really material quarter on quarter roll acceleration to their business.

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And they they attribute a lot of that to the use of AI internally at meta to run their advertising systems and automate the whole.

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Supply chain of advertising from you know bid management which is where they they’ve been working at,

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probably the most and then now add creation that type of stuff and Wall Street rejoiced and the stock was up 8% which these are Big market cap companies and that’s a really big move.

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Jason anything on meta before we move on to Microsoft.

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No I mean I think you you covered it interestingly,

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I would just point out I found it interesting it was so much about the future and Ai and kind of meta as a technology company and you know historically all the revenue at meta comes from.

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Advertising and you know there are all these macroeconomic uh interesting conversations that at the moment that are a play about the future of that advertising business and all these Chinese advertisers that are on again off again on on The Meta platform I was,

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somewhat struck by how little conversation like how little any of that seem to matter like their current.

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Predominant source of Revenue seem somewhat Irrelevant in the whole dialogue am I do you feel like I missed that or do you think it’s.

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No I think that’s right yeah yeah because they’re they basically give away Ai No 1 really cares other than it it’s impact on the business.

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The and then Microsoft came up and they said hold my beer so they also did a beat and raise and both on the top and bottom line.

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And then they’re they’re really confusing because they talk about AI overall which is includes a bunch of stuff,

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and that grew 157% which is just Bonkers but I.

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Parsed what that means some of its tokens and it’s just really hard but then the other thing that Wall Street was really pleased with,

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and you’ll remember for the longest time Amazon wouldn’t break out the ads business and everyone was really frustrated and then for the longest time they wouldn’t break out the AWS business and everyone was frustrated,

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and same at Microsoft they have not broken out their Azure platform which is their cloud computing separately uh and then they finally for the first time made a disclosure on that,

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uh Wall Street just really liked that and they always take it as a signal when companies disclose things that the company’s feeling really great about that long term and,

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and is opening up new disclosures because they feel like they’re all going to go up into the right.

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And isn’t it always a coincidence that they decide to do that on a quarter that’s quite favorable.

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They yes it is because if you did it when you were not doing well no 1 would care so like why why do that and then the,

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yeah so wall Street’s weird like that lots of it’s a psych it’s 80% psychology in ways and 20% reality but that’s that’s kind of.

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How the world Works anyway
so I think the most Germaine part to our discussion in there is that the,

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Ai and it’s not Azure in this disclosure grew 39% and so that was good and analysts had they kind of pick apart at it and get to a number and their their guesstimate was 34%.

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That stock went up about 8% at at the peak and is down now a little bit.

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But for a while there Microsoft was the second company to get the the 4 trillion dollar market cap which Nvidia passed a while ago,

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so that was the setup coming into this so you had Google mid Microsoft and meta crushed it,

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and then within within Google and Microsoft their cloud computing is accelerated quarter-on-quarter so,

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I think expectations really started to rise going into the Amazon report that AWS would see something similar because you kind of think well there’s this AI tide lifting all the boats certainly we will see it in AWS

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and that brings us to
Amazon news
your margin is z opportunity.

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So unfortunately Amazon’s results were probably more similar to Google’s than than meta in Microsoft in in your setup Scott it was sort of mixed but

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but in you know a a pretty bad way of your Amazon investor probably so predominantly that’s because AWS didn’t

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expectations relative to to the other big cloud platform businesses and you know given all that

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that favorable traction that meta Microsoft got like that we’re already starting to see their their stock get punished I think,

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after hours trading started like in the middle of their earnings call and the last time I checked Shares are down like like 6% which is.

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Kind of put you at that 2.5 trillion dollar market cap
you know which means they they,

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was something like 150 billion dollars since the earnings call which you know a few billion here billion there it adds up.

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What’s I guess slightly weird or lost in all that conversation is like the top line was pretty good like like they were beats like Revenue was up 12%,

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which was a beat versus expectations operating uh margin was was up which like like.

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I think they came in for the quarter like nearly 20 billion write 19.2 billion good job intern which which was a Beat,

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and so the overall business performed well and there is we’ll we’ll break it up of course all down and we’ll we’ll highlight a lot of things that are going well but big picture.

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AWS is still a fast growing business for them and grew fast it didn’t grow as fast as their competitors,

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and as we’ll dive deeper into it the the narratives surrounding that was not completely fulfilling and so the the stock is is taking a hit at the minute at the moment but.

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Kind of going back to the to the top level there were a lot of interesting things that came up in in the earnings call in a few things that were interesting that didn’t come up for those of us that care mostly about retail I would I would say like.

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The supply chain discussion you know continues to Roll Along that you know the people are forgetting about 18 months ago they made this major transformation from from a national distribution system to a regional Hub and spoke system and they’ve been,

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claiming wild successes both,

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improving their service level by having faster delivery and more products available for faster delivery and improving their profit profitability and the cost to serve going way down and all of those Trends continued this quarter,

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they’re improving their service levels Nationwide for delivery and they’re improving their cost to serve which is,

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beneficial to their margins the the North American retail business which you know the way they measure it because their Marketplace and and have this big ads business is slightly problematic but but kind of just base it on Gap.

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North American retail was a Beat by 2% potentially more importantly International retail was a Beat by 7% the US is Amazon’s most mature market and so,

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in a lot of ways.

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You know it’s it’s slowed down because of the law of large numbers and so the analysts really pay attention to how Amazon’s growing in these more emerging markets and and seems like there’s still gas in the in the international growth for Amazon,

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the I saw 1 Tibet in their earnings that that online Revenue increased by 11% I’m sorry 10%,

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I have seen some analysts that are saying that like the US Quarter over quarter gmv growth was probably 11%.

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And they’re now predicting that the annual gmv growth is going to be in the area of 8.7% so those are all good numbers,

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if you consider the US retail industry is growing right now at 3.8%.

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And even e-commerce at the moment across the US is only growing about 7% and so you know talking about Amazon growing between 9 and 11%.

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As big as they are is is super impressive physical stores grew this is a relatively small number in the overall scheme of things that Amazon and of course it’s it’s it’s almost exclusively Whole Foods at this point but Whole Foods has been kind of a.

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A mixed story for Amazon so growth there is interesting physical stores grew 7.5% year-over-year so that’s now up 5. 6.

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1 interesting thing third-party seller growth for the first time that I can remember in a long time they had good third-party seller growth I think it was like 10% but it was actually slower than their first-party sales growth so,

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I mean I would argue that transcends the day they invented the marketplace has been that the 3p has grown faster than than 1 P with a few exceptions this quarter they saw 1 p,

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drove faster and partly that’s back to the supply chain story because there’s always been a lot of demand for these low-cost everyday essentials that,

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in the old Amazon supply chain we’re not very efficient to deliver an Amazon wasn’t as competitive on but as they’ve improved their supply chain there are a lot better at selling these

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like you know I just need a pack of paper towels I just need a pack of of razor blades and in a macroeconomics world where,

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a lot more consumer spending is going to those everyday essentials the fact that Amazon is competing more successfully in that space and selling more 1 P every day Essentials because the.

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Party Marketplace is not a an awesome offering for those everyday essentials at the moment so that was all super interesting subscription Revenue was up unit sales were up.

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The I still think they’re they’re hovering around 62% of all their their Market retail sales are Marketplace
and I think they they had a stat in the.

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In the discussion that every day Essentials are now 1-3 of their their total sales which is.

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Another unsung story of kind of Amazon successfully Reinventing their business while No 1 not
yeah let me take a breath Scott do you.

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Yeah I thought I thought that’s a good recap I thought it was interesting it,

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you know we’re in like the summer movies Zone and I just saw Superman I’m gonna see Fantastic 4 and I know there’s going to be there’s always these multiverses I almost wonder like if there was a universe where.

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All of retail missed but AWS did better I I think the stock would have been up 10 so so we’re in this really weird phase.

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That Tobey Maguire Spider-Man version of okay sorry.

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But in a way AWS is bringing down the retail part of the business which is kind of crazy for because for the longest time it was the other way around.

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I was going to say the retail business owes.

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It’s a weird Bizarro world world.

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Owes AWS carrying that water for some quarters.

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It does yeah yeah but as as we’ll get to you here’s a tip for you there is another piece that’s carrying the retail part what do you think that is Jason.

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Oh my gosh you know what would be interesting is if you had the world’s attention and you you you rent it or sold that attention in the form of like some kind of advertisement.

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Yeah how did dads do.

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Well obviously this has been.

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A big story to Amazon for a long time and it continues to to be 1 of the bright stars in Amazon growing much faster than the overall business and so you know we’ve

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we broken down the math the number of times the the annual run rate on their ads business is well over 60 billion dollars a year this quarter,

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they they did 15.7 billion which was a beat versus analyst expectations and so the the year-over-year growth was like 23% 22.9 percent,

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so that that is actually a slight deceleration of the ad growth because it’s been growing so fast but obviously compared to the overall Amazon business.

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This is a 60 billion dollar business that’s that’s still growing.

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You know super fast and and well in excess of of wall Street’s expectations which were like 17%.

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So so the ad business continues to be a bright star sparked side note that’s the bane of my existence because every other retailer on the planet sees that and they want to replicate that and for variety of reasons most retailers.

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Can’t and shouldn’t try.

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My whole industry spends a lot of time whipping up the the lather around retail media networks and and as we’ve covered in the past on this show,

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if you’re not Amazon or Walmart retail media networks are kind of meh
so I’ll just shout out to to Carrie in case you’re listening.

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The but again good quarter for Amazon the ads are going up there’s some big news in ads that will will talk about later.

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The thing I’m always watching in their ad business is is I would actually argue,

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there’s 2 add businesses at Amazon and they kind of off off skate each other there’s sponsored product listings on a third-party Marketplace which is.

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All the high volume stuff and it’s it’s you know that that’s true the true retail media network but increasingly.

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Amazon is a darn successful Media company with sports franchises and unique programming and so you know you you’d want to hear them talking about their ad success for all of that content and how that compares with,

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Disney and HBO or whatever they want to call themselves this month and and the you know the the old school television networks and you’d want to see how their growth rate there is comparing with those other content providers uh and talk about that separate from how

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their retail media is competing with Walmart but we can’t because they they bundle all these 2 wildly different things together and call it adds,

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but and and we didn’t get a very good hint about how much traction they’re getting on on the content ads they are continuing to increase the,

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the inventory of type of ads and so that’s somewhat interesting and of course you know I’m always listening for tidbits about those 2 Worlds colliding and how you might introduce shoppable ads

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you know or or more ads with a direct call to action in all that content and and this quarter there wasn’t much discussion of any of that because
the,

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Ai and AWS stole all the all the attention.

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Yeah on on the add topic everyone I talked to about prime day said Amazon was pushing ads so incredibly hard that it was almost a gate for you had to buy make commit to a big ad Buy before you could even get into the programs and stuff,

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so so I suspect we may actually see this 1 accelerate again into Q3 because,

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the Amazons really leaning in and and you know but at some we we’ll talk about this in a minute but I have some theories on this ad thing that.

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Yeah I mean I

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I would just say like whether Amazon’s trying to lean in or not like it’s almost inevitable because of their assortment right like you’re you’re a billion items now no 1’s ever going to organically find any of your items

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and so ads are the only path to Discovery for all all of the sellers on the platform and a smaller version of that same thing is playing out for Prime day like there there used to be 3,000 items for sale on Prime day and 100 lighting deals right

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and and you could browse all those in the same way that people used to browse the internet on Yahoo but you know now,

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there’s no way to to browse any of those things so unless you have an ad promoting your,

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Prime Day deals or promoting your Lightning Deals nobody’s ever going to see them and so even if Amazon wasn’t putting the screws to people which they are.

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You would still like advertising is now the the most important and necessary path to any kind of success on on Amazon’s platform and obviously Amazon’s not overly disappointed about that.

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So this brings us to AWS so as mentioned the top line was in line to a slight beat but the bottom line missed so Wall Street was expecting 10.9 billion on the bottom and it was 10.2.

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So that’s a that’s a pretty good miss their or bad Miss.

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It grew the AWS grew 17.5% year-over-year which is good but it was not an acceleration which again the comps of gcp and Azure did accelerate,

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this is the first time the margins of actually declined since the second quarter of 2023,

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on the call and we’ll talk about this a little bit more but specifically they talked about they are very capacity constrained.

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And they they called out power a lot of these data centers that are trying to be built are are really having a hard time getting to enough power to build out things so that’s an area but I think.

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They’re actually kind of low on the the king of all this is NVIDIA they make the the biggest gpus that these centers need Amazon has its own chipset I don’t think it’s nearly as good as Nvidia and it’s cheaper which is great.

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But they’re not adding enough of those and they’re not adding enough Nvidia.

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So that’s a huge problem they also called out part of the part of the margin decrease was some just structural things around how you calculate stock based comp and some depreciation things so a lot of it wasn’t really a change in the business model.

00:19:51.209 –> 00:19:59.981
The the so that that’s kind of like what’s in writing and then what happened is in the conference call and that I think you got a chance to listen to this,

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the Jassie just seemed off is kind of like how people described it and especially when it came to this AI topic and let me just read like a little note I thought was interesting.

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RBC has an analyst Brad Erickson and he said the title of his report for the whole quarter was is this a structural issue or just an off night and here’s a little excerpt,

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on the other for AWS growth didn’t accelerate like its peers margin missed and Management’s commentary on the call did little to attenuate investor fears that AWS may have a bigger structural issue in capturing its fair share of the growth from AI.

00:20:33.759 –> 00:20:46.245
The retail strength pushes our estimates higher and Target Target moves up modestly but admittedly the Optics of AWS underperformance in isolation and Management’s commentary make it hard to defend Amazon so.

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You know there was this really long rambling answer that jasse gave where this the question was specifically like are you doing enough to capture.

00:20:55.079 –> 00:21:03.870
AI share and he answered it a little bit in this like 8 Minute answer but then he kept talking about how they’re using it internally and it’s helping the retail business it felt like a big.

00:21:04.243 –> 00:21:06.935
Hey not a very great answer because it kind of went.

00:21:07.247 –> 00:21:18.460
All over the place but then it felt like a hard diversion from answering the question which people were kind of he didn’t lean in and say we’re crushing it in AI we’re going to dominate and I think that’s what they wanted to hear.

00:21:18.725 –> 00:21:20.221
Yeah it should have been a 1 cent,

00:21:20.221 –> 00:21:30.724
yeah well so a like I I want to say the analysts that actually asked the question was the Morgan Stanley Guy Brian Nook and I I when I was listening it was awesome because he he,

00:21:30.725 –> 00:21:39.690
pre-war in the question I think it started something like hey I have 2 questions for you about AWS they’re a little tough but I’m going to throw them at you
with with.

00:21:39.895 –> 00:21:41.733
Please don’t penalize me for asking a hard question.

00:21:41.445 –> 00:21:51.876
Yeah which is literally like the the setup right and then he goes into this there’s a Wall Street you know Finance person narrative right now that AWS is falling behind in generative AI

00:21:51.799 –> 00:21:56.449
and that you’re losing share to your peers what’s your rebuttal to that right and.

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You know again you would expect a a polished CEO like Andy who had generally kills it in these in these settings to have a.

00:22:04.754 –> 00:22:11.105
Short crisp answer about why oh we’re actually killing both of those but since we’re so far ahead of them,

00:22:11.304 –> 00:22:21.225
like it’s harder for us to earn the growth right that would have been the easy 1 sentence answer right like we’re we’re 3 times larger than them so we we we grew a little bit slower than them.

00:22:21.477 –> 00:22:28.255
And there are all these endemic constraints on all of us the world doesn’t have enough electricity the world doesn’t have enough chips right like you could have come up with some.

00:22:28.550 –> 00:22:40.039
Some kind of conversation like that but you for your point like he went on a 8 Minute narrative that like I I think included a couple visits to his own shopping behaviors and things
and it it was just unclear like.

00:22:40.490 –> 00:22:50.459
Did he just miss the importance of the question and he gave a bad answer or was he literally like trying to dodge the question and and distract people.

00:22:50.706 –> 00:22:56.846
I tend to think it was the first that it just it wasn’t wasn’t his
his most Stellar answer but.

00:22:57.604 –> 00:23:05.914
Yeah the the problem is
they don’t have a model right so so Microsoft is married open AI they are an investor.

00:23:05.848 –> 00:23:10.733
Side note did you see that openai is now buying capacity from G gcp too.

00:23:10.740 –> 00:23:20.053
Yeah yeah yeah they’re the rumor is they’re building their own tpus they’re going to use that to kind of start coding against TPS and they’re going to build their own their own inference.

00:23:21.568 –> 00:23:24.590
The they do have a relationship with anthropic.

00:23:24.927 –> 00:23:37.642
But anthropics kind of taking a hard left turn into the coding vertical which is great but you know the workloads Amazon is looking to help people with their probably more corporate and so they they’re kind of,

00:23:37.811 –> 00:23:47.875
I do think they’re in a little bit of a hard position with AWS and I don’t think they’ve leaned in enough on building against this I think I think it’s probably because they’re a little bit more conservative with their retail background,

00:23:48.026 –> 00:23:52.761
I don’t think they’re going like all suck on this and paying people billions of dollars and building,

00:23:52.875 –> 00:23:59.755
you know as much infrastructure as they probably could have so so I think there is a there is an argument that there’s a structural issue here.

00:24:00.261 –> 00:24:07.219
Yeah Amazon’s good and they have all the resources to be able to get out of this I don’t feel like it’s un unfixable.

00:24:07.327 –> 00:24:11.599
No and I but I would say just in general Amazon is used to

00:24:11.558 –> 00:24:22.686
inventing a darn good moat that gives them some kind of endemic competitive advantage and you know at the moment like everybody’s in the same boat on electricity right like there’s so many so you know so many,

00:24:22.813 –> 00:24:27.980
sides to build data centers next to hydro electric dams and whatnot and and you know the,

00:24:28.149 –> 00:24:37.979
the market for energy is pretty efficient and Amazon has some cool IP they I think they would argue stronger than you would that the their IP for for chips is,

00:24:38.058 –> 00:24:46.392
is competitive but they don’t have their own Fab so like they don’t they don’t have a way to Seoul to solve their capacity problems so they’re kind of in the.

00:24:47.624 –> 00:24:50.580
Level Playing Field which they’re not used to.

00:24:50.280 –> 00:24:50.832
Mhm,

00:24:51.043 –> 00:25:01.727
yeah absolutely
and then that brings us to guidance which was also mixed so the midpoint of Revenue was a bit up from consensus which is viewed as positive but margin was light.

00:25:01.986 –> 00:25:10.777
And you know everyone’s parsing through that given this kind of psychological fear around AWS and kind of reading through it that.

00:25:11.114 –> 00:25:16.395
There’s no no anticipated fix in AWS in this guidance.

00:25:16.894 –> 00:25:27.434
So so there’s a little bit of a wall of worry around Amazon right now and you know just a a we’re doing this actually we usually record at night we’re doing it during the day oddly today but you know it’s down 8% now.

00:25:27.801 –> 00:25:33.431
So a couple other interesting tidbits I I I did think it was interesting,

00:25:33.545 –> 00:25:40.209
that they specifically called out that tariffs have not impacted demand or margins or,

00:25:40.215 –> 00:25:52.642
cause ASP or average order value or or the ticket price to go up so so they they basically said so far they’re not seeing anything from these tariff changes which there was a lot of worry around that on the retail side of the business.

00:25:52.967 –> 00:25:53.934
And then.

00:25:54.199 –> 00:26:03.674
I thought you had teased this earlier but what did you you know another interesting tidbit is what’s going on between them and Google right now what what are you seeing there.

00:26:03.717 –> 00:26:18.619
Yeah well so there was there was big news last week while we were recording our last episode Scott that Amazon essentially took all of their shopping search ads off of Google and you know for those that don’t know

00:26:18.517 –> 00:26:28.666
Amazon is the largest Advertiser on Google and they spend something in the order of 17 billion dollars a year on on ads and I’ve always argued

00:26:28.444 –> 00:26:36.772
like this is the greatest unsung story in the history of business that Amazon essentially buys 17 billion dollars worth of eyeballs from Google every year.

00:26:36.989 –> 00:26:43.815
And then they they sell some paper towels to those eyeballs and make money on those paper towels but then,

00:26:44.002 –> 00:26:53.952
they once that eyeball has bought a paper towel from Amazon Amazon shows them an ad for a third party Marketplace seller and they sell the ads that they show for 60 billion dollars.

00:26:54.235 –> 00:27:08.296
Um so it’s it’s awesome eyeball Arbitrage they buy 17 billion dollars of ads from Google that that by the way means Amazon has the largest share of products search results on Google they’re about 60% of all,

00:27:08.387 –> 00:27:14.978
product tiles that pop up on Google are send you straight to Amazon and so it seems like these 2 have this.

00:27:15.255 –> 00:27:23.944
Very synergistic relationship that seemed like it was working done well for both of them and so then overnight Amazon goes.

00:27:24.293 –> 00:27:31.677
Yeah we’re turning that down to zero and and when it first happened everyone’s like oh this something weird is happening here and we’ve seen them,

00:27:31.810 –> 00:27:41.592
reset before where like maybe they over spent slightly and they pulled back for a short period of time or they did a test in some some Geo and so I kept like.

00:27:42.055 –> 00:27:49.704
Pulling more data at waking teams up in the middle of the night like hey let’s figure out what the scope of this is is it really as big as it seems is it a blip,

00:27:49.861 –> 00:27:58.880
is it some kind of test what you know is there some are they under some negotiation and this is a negotiating tactic like there are all these hypotheses.

00:27:59.277 –> 00:28:06.422
You know now it’s been a week later the ads are all still off
and you can imagine that.

00:28:06.921 –> 00:28:17.737
Google has a bunch of salespeople they just lost 60% of the revenue that are now knocking on every other Retailer’s door in the world saying hey you’ve got an unprecedented chance to buy more share of voice like,

00:28:17.911 –> 00:28:22.159
you know and they’re they’re trying to get all the other retailers to step up and and.

00:28:22.376 –> 00:28:34.111
Take over Those ads it’s a a reverse auction For Those ads so when the the biggest spend or leaves obviously the the cost of those ads goes down nominally and so that’s,

00:28:34.172 –> 00:28:43.846
that’s been interesting and you know they’re all we like to talk about all these new AI shopping things a lot of the AI shopping things at the end of the day result in a,

00:28:44.027 –> 00:28:52.812
product tile that you can click on to buy something and now all those ones that are being fed by Google don’t have Amazon product tiles in them so.

00:28:53.059 –> 00:28:55.888
So this was a super interesting thing.

00:28:56.153 –> 00:29:06.585
The number 1 topic I’ve I’ve had with any of my retail clients over the last week has been related to this all you know the internal teams that in my big giant Ad Agency are spun up around this I’ve got,

00:29:06.651 –> 00:29:15.298
Limitless hypotheticals about what could be going on but we all frankly were eagerly waiting last night for some,

00:29:15.358 –> 00:29:25.285
mention or explanation to answer all this this conjecture and I with some pretty carefully and as far as I can tell there was Zero mention Amazon,

00:29:25.291 –> 00:29:33.157
did not bring it up in any way and someone surprisingly none of the analysts or reporters on their 2 calls like nobody nobody asked them.

00:29:34.371 –> 00:29:42.224
The at the same time yesterday they added code to robots text and also to their their,

00:29:42.321 –> 00:29:53.245
you know it’s very clear there now blocking Google’s not their web crawler but their AI crawler that they have perplexity anthropic and open AI are now being blocked by by Amazon,

00:29:53.330 –> 00:29:59.909
so Amazon is and then they’ve also blocked operator for a while and which is now called Agent at openai.

00:30:00.276 –> 00:30:13.730
So Amazon’s taking this we are going to put a Walled Garden around our data and we’ll we’ll AI out which is what they’re buy for me project does is like when you’re on Amazon you can send an AI agent out of Amazon to buy within their ecosystem,

00:30:13.808 –> 00:30:22.377
but they are not they’re they’re they’re allowing you to shop from Amazon out but not out into Amazon
now my.

00:30:22.756 –> 00:30:36.672
My thesis is Google shopping is data they realize they’ve made some internal decision where they’re like here’s the benefit we get from advertising on Google shopping and here’s the cost and those inverted and I think on the cost side.

00:30:36.931 –> 00:30:47.116
If you think about what is what is Google shopping get they get a data feed of product data and I think Amazon is increasingly believing that is valuable in in their world,

00:30:47.297 –> 00:30:55.505
I think that’s I think that’s wrong but that’s the theology so it’s hard to you know there’s no right or wrong I guess is what you believe but then also,

00:30:55.680 –> 00:31:04.260
it may not just be the product catalog I think it’s probably actually more about the Google can use that for signals right so if you have.

00:31:04.597 –> 00:31:15.575
100 million skus from Amazon and Google shopping you can they don’t see the transaction data but they see the click data so they they know what the most popular products are at Amazon and that may be,

00:31:15.612 –> 00:31:22.912
that’s a little bit more gold Dusty to me than just product catalog data is starting to get some idea of the the,

00:31:23.009 –> 00:31:35.555
the sales rank of products and and whatnot and I think that’s Amazon’s kind of saying why don’t we start like building a fortress of our data right now and then over time we can decide what we let back out,

00:31:35.706 –> 00:31:37.058
I think that’s what’s going on.

00:31:37.316 –> 00:31:48.150
Yeah I I generally agree there’s you know this the there’s a aam’s razor which is the the likely answer is usually the the simplest I I think fundamentally.

00:31:48.439 –> 00:31:57.002
Amazon and Google are more direct competitors and they each see that each other aspires to to move into each other’s things and so they,

00:31:57.056 –> 00:32:05.432
there the US need uh each other and they must want to share any helpful insight with each other and so I think this is just.

00:32:05.703 –> 00:32:13.407
A a move in that direction I’m I’m sort of with you like I don’t personally value the product feed in and of itself that much but.

00:32:13.713 –> 00:32:25.389
All the most common economic model for all of these things is advertising in the old world of advertising advertisers sold reach like here’s how many millions of people saw my ad over the last 20 years of digital,

00:32:25.467 –> 00:32:29.763
like I would argue unfortunately everybody’s pivoted to the.

00:32:30.226 –> 00:32:39.053
The direct effectiveness of the ads did someone click on that ad and then immediately buy something and I actually think there’s too much focus on that and it’s it’s not prudent.

00:32:39.450 –> 00:32:50.531
In that world what you most need in order to establish value for your ads is data about how many people bought something right and so for Google it’s super valuable to know

00:32:50.483 –> 00:32:58.066
how how many of those ads resulted in someone on a product detail page and the product detail Pages people ends up on the most,

00:32:58.187 –> 00:33:05.403
is on Amazon so by taking that that that 17 billion dollars of Revenue away from Amazon they’re taking away

00:33:05.313 –> 00:33:17.145
that’s super important signal that from Google that that Google could have used to dramatically improve all its AI to become a better Marketplace and shopping engine itself any of the,

00:33:17.163 –> 00:33:25.648
if the 10 year future of all this AI stuff is that that that the best answer engines that win the glass and win the attention of the consumer

00:33:25.630 –> 00:33:32.594
are are actually the sellers then you know Amazon wants to be that and they don’t want to help Google be that.

00:33:34.277 –> 00:33:39.871
Yeah I think
I think it’s interesting I wish someone had asked the question because I would like to hear the Meandering answer on.

00:33:37.534 –> 00:33:47.382
I I do too I’m I’m not surprised that they didn’t bring it up but I it didn’t occur to me when the night started that no analyst would bring that up.

00:33:47.647 –> 00:33:52.136
I think they’re so worried about AWS they don’t care about in their retail stuff at this point.

00:33:52.004 –> 00:33:58.920
Yes and this is why it’s annoying when when obviously people should only be talking about retail all these other silly distractions are really annoying.

00:33:59.942 –> 00:34:05.806
I have a 2 a mini soap box and then a bigger soap box so my first soap box it’s not.

00:34:07.291 –> 00:34:16.628
My first 1 is it’s just like mind-blowing to me so so I went through and now that we’ve had this cycle Google Google’s capex for 2025.

00:34:16.917 –> 00:34:28.052
Is going to be 85 billion so they it was 75 and then they bumped it up 10 and almost all of this is going towards Data Center and AI meta is at 72.

00:34:28.335 –> 00:34:31.970
Microsoft 80 and Amazon 118.

00:34:32.277 –> 00:34:44.006
If you swirl all that together you get 355 billion for 2025 in investment in basically gpus and data centers to support this AI buildout.

00:34:44.259 –> 00:34:59.161
That doesn’t include what open AI is doing themselves they have a partnership with Oracle and then also Elon at X and and then also Tesla is building a huge AI data center that there’s there’s probably another hundred billion out there so let’s call it.

00:34:59.377 –> 00:35:06.149
500 let’s round it to what you know what’s 100 billion between friends so it’s half a trillion dollars in capex in a year.

00:35:06.474 –> 00:35:16.575
To put that inspect in perspective over the last 10 years Amazon has spent 115 billion in fulfillment centers so think about that so so in 1 year,

00:35:16.750 –> 00:35:24.735
we are spending on AI investment 5 times what Amazon spent for their whole fulfillment network over the last 10 years so.

00:35:25.012 –> 00:35:34.236
It’s just it’s just nuts to me that this is such a big you and I have been at this a long time we’ve never seen anything on this scale,

00:35:34.404 –> 00:35:47.936
of build out and there it’s not speculative the every 1 of these companies is seeing their revenue surged from usage of these things these are not they’re out of the experimental phase and they’re into having dramatic business impact phase,

00:35:48.129 –> 00:35:57.166
it’s like the weirdest
it’s a it’s an exciting time because
it’s gonna change things in ways we can’t predict but it’s also scary so that’s.

00:35:56.932 –> 00:36:04.155
I I think there was a specific narrative in it might have been in the middle of Andy’s 8 Minute rant but where he basically said like,

00:36:04.179 –> 00:36:13.703
we’re we’re probably not even in the first inning of this game yet and it’s already 123 billion marked into run rate right like,

00:36:13.800 –> 00:36:21.203
like how often do we talked about you know the that scale of numbers when like it hasn’t even scaled yet like it’s crazy.

00:36:22.092 –> 00:36:30.745
And then the other 1 is if we if we so now let’s narrow the feature back to Amazon the the lens and if we if we look at the internals of Amazon there’s,

00:36:30.794 –> 00:36:37.992
the fastest growing component is ADS at 23% and then you have AWS at at 17.5.

00:36:38.593 –> 00:36:45.635
There’s just something wrong with that and then overall they’re going 12% in the retail business is growing kind of smaller than that so the.

00:36:46.351 –> 00:36:50.022
I really worry about this ad component I I think.

00:36:50.305 –> 00:37:01.445
I think a year ago or so the user experience at Amazon jumped the shark
it’s not getting better it’s getting worse this ad load is crazy and they’re clearly pushing it.

00:37:01.782 –> 00:37:05.297
You know even further that we’re going to see it accelerate more.

00:37:05.598 –> 00:37:15.831
And I think it’s this Canary in the coal mine that they’re covering up for you know a degradation of something and it it just feels like.

00:37:16.126 –> 00:37:26.629
In my heart of hearts you cannot have a deteriorating user experience for very long in this world because people will start to go other places and I I feel like they’ve opened up a strategic error here,

00:37:26.696 –> 00:37:33.504
where the agentic shopping folks are going to drive a huge wedge into it now they can try to block it and everything,

00:37:33.600 –> 00:37:38.287
but I also think these agentic browsers are unblockable and I don’t.

00:37:38.510 –> 00:37:45.077
I think all that effort they’re doing on that is going to end up being for not and it’s going to be really interesting to see.

00:37:45.390 –> 00:37:52.967
Hey if I’m right and when this starts to be a problem for us at all and what it all looks like when it you know if it does.

00:37:53.238 –> 00:38:04.342
It’s probably the biggest strategic opening I’ve ever seen anyone have against Amazon since I’ve been following them for 20 years and I’m going to be really interested to see if openai or you know 1 of these companies can drive a wedge in there.

00:38:04.553 –> 00:38:17.869
Yeah no I I generally agree the worst sentence I heard in the whole earnings report last night by the way Scott was there I can’t remember if it was a response to a question or it was part of some other answer but Andy says that

00:38:17.743 –> 00:38:23.127
oh when he was bragging about how much better Alexa plus is than than

00:38:23.061 –> 00:38:29.244
previous things and we we you and I talked about this in the last podcast it it is excellent in a lot of ways.

00:38:29.521 –> 00:38:37.020
And he mentioned that that he could well imagine you know a version of ads being in that at some point
which,

00:38:37.062 –> 00:38:46.935
a was from a user experience standpoint was pretty disappointing for me to hear like I I think there’s a bunch of things that are problematic about voices a user interface for a lot of things and then once,

00:38:46.989 –> 00:38:56.759
once you add more Interruption to the voice like I think it’s potentially awful right and the I I agree like if other people invent.

00:38:57.433 –> 00:39:04.914
Alternative versions of this that are less dependent on ads than Amazon’s is they’re just going to be at a fundamental,

00:39:05.118 –> 00:39:08.357
customer experience disadvantage and in the past they’ve had,

00:39:08.532 –> 00:39:16.980
such a huge moat because of their supply chain advantages that they could kind of get away with it for a short term but I’m with you I don’t think they can get away with it in the long run.

00:39:17.335 –> 00:39:26.072
Yeah yeah so it’s going to be interesting to watch that I noticed they do have ads and Rufus now so Rufus is already not very good and it already is like down a notch in my book because.

00:39:26.907 –> 00:39:36.023
Uh I’ve been a really good example is to take some of these everyday essentials and that’s where the ads are really just kind of at this fever pitch cpg type stuff.

00:39:36.498 –> 00:39:44.988
Like I was getting these dog Dental things and I asked ruthless about it and it did everything it could to sell me something else and not give me the thing I wanted.

00:39:45.193 –> 00:39:56.586
Yeah and you know again we’ll probably have to do a new an episode about this but I I actually think there’s a vast overdependence on ads as an economic model and it

00:39:56.580 –> 00:40:02.204
it has worked great for the last 20 years I don’t see it working as well going forward

00:40:02.157 –> 00:40:16.632
compared to some of these other businesses there there’s a lot more ambiguity about how effective ads actually are right and the all the math that we all use is is horrible the Hocus Pocus and and doesn’t doesn’t measure very well but here’s the biggest thing

00:40:16.626 –> 00:40:25.928
if if the world goes from 1 quick to zero click if if there’s a bunch of these every day Essentials if we turn over shopping responsibility for those to the Bots then.

00:40:26.193 –> 00:40:36.204
Ads don’t matter anymore in in any of those categories like the AI like the ad was to help a human do something that was hard for the human is the most generous version.

00:40:36.480 –> 00:40:43.649
And when the human isn’t doing that there’s no purpose for the ads and so all the businesses that are based on the revenue from Those ads.

00:40:43.902 –> 00:40:47.891
Are going to have to reinvent themselves so I I think it’s um,

00:40:48.078 –> 00:40:58.491
it’s going to be a super interesting time I can’t wait to be a retired senior citizen talking to the smart people that are running these businesses down the road and hearing how it all played out because I.

00:40:58.792 –> 00:41:07.493
I don’t think I’ll make it that far
but Scott I wanted to touch I know we’re running up on time you did mention 1 other thing you talked about.

00:41:07.800 –> 00:41:16.398
Amazon said we see we’ve seen no sign of effective tariffs on the on the business so far which is certainly accurate from what I I heard them talk about.

00:41:16.645 –> 00:41:22.606
I did just want to point out Terrace is super interesting in the macroeconomics because it arguably has 2 effects like,

00:41:22.780 –> 00:41:33.482
people lose consumer confidence in their their worried about their their own economic situation and they spend less so it can have a detriment effect on spending but it also,

00:41:33.687 –> 00:41:43.409
we’re not living through the the worst of the tariffs like the it’s mostly a fear of future tariffs and so that actually has a positive effect people rush out to spend money,

00:41:43.608 –> 00:41:48.859
before the the tariffs come into full effect and so the the most.

00:41:49.280 –> 00:41:57.614
Obvious example I’ve seen of that this week was UPS also reported yesterday and they had the a pretty crazy earnings report they specifically said,

00:41:57.705 –> 00:42:06.592
we’ve seen consumer demand fall off a cliff like we’ve seen like consumers are super worried about these terrorists and they’re not spending on anything and then in the next breath they’re like,

00:42:06.707 –> 00:42:15.545
but consumers are so depressed about the doomed economic situation that they’re like indiscriminately spending to make themselves feel better right so they,

00:42:15.678 –> 00:42:25.370
UPS kind of put every theory of of what impact terrorists were having out there all all in the same earnings call uh so I’m going to Discount all of that but I’m just going to tell you the.

00:42:25.791 –> 00:42:34.847
The mic drop moment in the UPS call was and so stuff is so uncertain and so confusing that we’re not going to issue a go forward guidance.

00:42:35.232 –> 00:42:42.226
And I I do think that’s an interesting note for for all of us that you know the next 6 months of this year.

00:42:42.509 –> 00:42:49.677
Have a lot more uncertainty than I think some of us us realize and you know it could go in a bunch of different directions it’s going to be really interesting.

00:42:50.993 –> 00:42:55.181
Yeah so we will be here reporting on it at the Jason’s gotcha.

00:42:55.602 –> 00:43:04.622
And hopefully that added some value for you and if it did we sure would appreciate it if you jump on iTunes and leave us that 5-star review regular listeners will know,

00:43:04.706 –> 00:43:10.991
that the Amazon earnings calls are Scott’s second favorite episode of the Year second only to May 4th episode.

00:43:11.340 –> 00:43:19.656
But that is all the time we have for today we finished a little early so you’re all welcome and until next time happy e-commerce Singh.