Jeff Bezos poses on a lorry after handing over a two billion dollar cheque to Indian Vice President and Country Manager of, Amit Agarwal, in Bangalore. Photo: Manjunath Kiran/AFP/Getty
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The party is over for Amazon

The retail giant was unstoppable – until this year. What happened?

At Business Insider’s annual Ignition conference Tuesday, CEO Jeff Bezos explained why Amazon’s stock price keeps rising despite almost zero profits: the company continues to invest in new businesses, and Amazon’s investors are OK with that. “If you’re going to take bold bets, they’re going to be experiments,” he said. “And if they’re experiments, you don't know ahead of time if they're going to work. Experiments are by their very nature prone to failure. But a few big successes compensate for dozens and dozens of things that didn’t work.”

But Amazon hit a road bump in 2014: its stock is down 18 per cent, and investors are no longer optimistic about the company’s outlook. This year has exposed the limitations of Bezos’s business strategy.

For most of Amazon’s existence, the company has been barely profitable. From 2007 through 2013, its revenues quintupled from $14.8bn to $74.45bn, but profits dropped from $436m to $273m. Note: that's billions in revenue, and just hundreds of millions in profits. Meanwhile, Amazon’s stock has consistently risen because investors didn't care about the dwindling profit margins. Bezos’s strategy worked: Amazon is now the US leader in online retail. It’s so big that the editor of the New Republic, Franklin Foer, wrote a cover story declaring the company a monopoly.

Then 2014 hit, and investors turned on the company. When Amazon announced on Monday that it would issue new unsecured debt, Moody’s downgraded the company’s outlook to negative. There are two reasons for this change in investor sentiment.

1. Revenue growth has slowed from 40 per cent in 2010 and 2011, to 27 per cent in 2012, to 22 per cent in 2013. This year it is projected to be between 16 and 20 per cent.

2. Amazon’s newest investments aren’t paying off. The most notable failure has been the Fire phone, which has received terrible reviews. In October, the firm took a $170m write-down loss as its inventory piled up and the company cut the cost of the phone from $200 to 99 cents. The Fire’s failure, at least so far, does not necessarily reveal a flaw in Bezos’s strategy. After all, if you make big bets, you’re going to have some major failures as well. “What really matters is that companies that don’t continue to experiment – companies that don’t embrace failurethey eventually get in a desperate position, where the only thing they can do is make a ‘Hail Mary’ bet at the very end,” Bezos said on Tuesday. Of course, not all of Amazon’s recent investments have failed. Fire TV, for instance, has been a success. But investors get nervous when those bets fail to pay off at the same time the core business’ growth slows. And the Fire phone was a big bet that has not worked.

Matt Yglesias, then writing for Slate, predicted this in January. “Amazon gets away with relentlessly investing in the future only because, for now, investors have faith in Bezos and his strategy,” he wrote. “But that faith has been tested in the past, and it’s likely that some future convulsion in markets will cause it to wane again.” Yglesias didn’t see any reason for this strategy to fail soon, much less this year. “For the foreseeable future, the party can – and willgo on, crushing everything in its path and generating mighty gains for consumers.”

On that point, Yglesias was wrong: investors have turned the lights on. The party is over. And yet, if his comments on Tuesday are any indication, Bezos isn’t planning to change his strategy anytime soon. That’s good news for Amazon’s penny-pinching customers, but could mean a rocky 2015 for the retail giant.

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How the row over Jackie Walker triggered a full-blown war in Momentum

Jon Lansman, the organisation's founder, is coming under attack. 

The battle for control within Momentum, which has been brewing for some time, has begun in earnest.

In a sign of the growing unrest within the organisation – established as the continuation of Jeremy Corbyn’s first successful leadership bid, and instrumental in delivering in his re-election -  a critical pamphlet by the Alliance for Workers’ Liberty (AWL), a Trotskyite grouping, has made its way into the pages of the Times, with the “unelected” chiefs of Momentum slated for turning the organisation into a “bland blur”.

The issue of contention: between those who see Momentum as an organisation to engage new members of the Labour party, who have been motivated by Jeremy Corbyn but are not yet Corbynites.

One trade unionist from that tendency described what they see the problem as like this: “you have people who have joined to vote for Jeremy, they’re going to meetings, but they’re voting for the Progress candidates in selections, they’re voting for Eddie Izzard [who stood as an independent but Corbynsceptic candidate] in the NEC”.  

On the other are those who see a fightback by Labour’s right and centre as inevitable, and who are trying to actively create a party within a party for what they see as an inevitable purge. One activist of that opinion wryly described Momentum as “Noah’s Ark”.

For both sides, Momentum, now financially stable thanks to its membership, which now stands at over 20,000, is a great prize. And in the firing line for those who want to turn Momentum into a parallel line is Jon Lansman, the organisation’s founder.

Lansman, who came into politics as an aide to Tony Benn, is a figure of suspicion on parts of the broad left due to his decades-long commitment to the Labour party. His major opposition within Momentum and on its ruling executive comes from the AWL.

The removal of Jackie Walker as a vice-chair of Momentum after she said that Holocaust Memorial Day belittled victims of other genocides has boosted the AWL, although the AWL's Jill Mountford, who sits on Momentum's ruling executive, voted to remove Walker as vice-chair. (Walker remains on the NEC, as she has been elected by members). But despite that, the AWL, who have been critical of the process whereby Walker lost her post, have felt the benefit across the country.

Why? Because that battle has triggered a series of serious splits, not only in Momentum’s executive but its grassroots. A raft of local groups have thrown out the local leadership, mostly veterans of Corbyn’s campaign for the leadership, for what the friend of one defeated representative described as “people who believe the Canary [a pro-Corbyn politics website that is regularly accused of indulging and promoting conspiracy theories]”.

In a further series of reverses for the Lansmanite caucus, the North West, a Momentum stronghold since the organisation was founded just under a year ago, is slipping away from old allies of Lansman and towards the “new” left. As one insider put it, the transition is from longstanding members towards people who had been kicked out in the late 1980s and early 1990s by Neil Kinnock. The constituency party of Wallasey in particular is giving senior figures in Momentum headaches just as it is their opponents on the right of the party, with one lamenting that they have “lost control” of the group.

It now means that planned changes to Momentum’s structure, which the leadership had hoped to be rubberstamped by members, now face a fraught path to passage.

Adding to the organisation’s difficulties is the expected capture of James Schneider by the leader’s office. Schneider, who appears widely on television and radio as the public face of Momentum and is well-liked by journalists, has an offer on the table to join Jeremy Corbyn’s team at Westminster as a junior to Seumas Milne.

The move, while a coup for Corbyn, is one that Momentum – and some of Corbyn’s allies in the trade union movement – are keen to resist. Taking a job in the leader’s office would reduce still further the numbers of TV-friendly loyalists who can go on the airwaves and defend the leadership. There is frustration among the leader’s office that as well as Diane Abbott and John McDonnell, who are both considered to be both polished media performers and loyalists, TV bookers turn to Ken Livingstone, who is retired and unreliable, and Paul Mason, about whom opinions are divided within Momentum. Some regard Mason as a box office performer who needs a bigger role, others as a liability.

But all are agreed that Schneider’s expected departure will weaken the media presence of Corbyn loyalists and also damage Momentum. Schneider has spent much of his time not wrangling journalists but mediating in local branches and is regarded as instrumental in the places “where Momentum is working well” in the words of one trade unionist. (Cornwall is regarded as a particular example of what the organisation should be aiming towards)

It comes at a time when Momentum’s leadership is keen to focus both on its external campaigns but the struggle for control in the Labour party. Although Corbyn has never been stronger within the party, no Corbynite candidate has yet prevailed in a by-election, with the lack of available candidates at a council level regarded as part of the problem. Councilors face mandatory reselection as a matter of course, and the hope is that a bumper crop of pro-Corbyn local politicians will go on to form the bulk of the talent pool for vacant seats in future by-elections and in marginal seats at the general election.

But at present, a draining internal battle is sapping Momentum of much of its vitality. But Lansman retains two trump cards. The first is that as well as being the founder of the organisation, he is its de facto owner: the data from Jeremy Corbyn’s leadership campaigns, without which much of the organisation could not properly run, is owned by a limited company of which he is sole director. But “rolling it up and starting again” is very much the nuclear option, that would further delay the left’s hopes of consolidating its power base in the party.

The second trump card, however, is the tribalism of many of the key players at a local level, who will resist infiltration by groups to Labour’s left just as fiercely as many on the right. As one veteran of both Corbyn’s campaigns reflected: “If those who have spent 20 years attacking our party think they have waiting allies in the left of Labour, they are woefully mistaken”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.