Amazon reports profit plummeting, stocks hit record high

Bizarro world in Wall Street.

Wall Street really is bizarro-land. Yesterday afternoon, Amazon reported that growth in revenue and earnings per share for the fourth quarter of 2012 was below expectations ($21.27bn and $0.21 respectively), and that profit actually fell year-on-year for the same period (down to $97m). In addition, the company gave weaker-than-expected sales guidance for the first quarter of 2013, estimating $15-16.6bn versus expectations of $16.9bn.

In response to the news, shares jumped 11 per cent in after-hours trading, to an all-time high for the company. (The increase has settled down since to just 8.5 per cent.)

Matt Yglesias gives the best response:

Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers… Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way.

As I wrote last week, it's this side of Amazon, far more than its UK tax avoidance, which is ultimately responsible for the demise of HMV. The company apparently has the most trusting, long-termist investors in the world, who are prepared to wait through quarter after quarter of negligible growth — and outright loss — to reach the mythical period when the company will become profitable.

Some of the news in Amazon's earnings call does imply that that period might be getting closer. The company announced that ebook sales was a "multi-billion dollar" category, and grew by 70 per cent in the last year, compared to just 5 per cent growth for physical book sales. With Amazon aggressively fighting to cut out middlemen from ebooks, and the naturally low marginal cost of selling them, the potential for a higher profit margin is there. But the company, for the moment, is responding by cutting prices (even down to zero), not increasing its margin.

And ultimately, even if investors do think that profitability for Amazon will come in their lifetime, they have to take it on trust, because the company also shows no hint of changing its pattern of being one of the most opaque in the business (even Apple releases more hard numbers than Amazon). There are no numbers at all for Kindle sales, more are there absolute figures for ebook sales.

One day, Amazon may succeed in out-competing every other retailer, and gaining monopoly profits. But there's no hint here that that day is nearing.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Lindsey Parnaby / Getty
Show Hide image

The public like radical policies, but they aren't so keen on radical politicians

Around the world, support for genuinely revolutionary ideas is strong, but in the UK at least, there's less enthusiasm for the people promising them.

You’re probably a getting a little bored of the litany of talking head statistics: trust in elected officials, parliament, the justice system and even democracy itself has been falling steadily for years and is at record lows. Maybe you’ve seen that graph that shows how people born after 1980 are significantly less likely than those born in 1960 to think that living in a democracy is ‘essential’. You’ve possibly heard of the ‘Pasokification’ of the centre-left, so-named the collapse of the once dominant Greek social democratic party Pasok, a technique being aggressively pursued by other centre-left parties in Europe to great effect.    

And so, goes the logic, there is a great appetite for something different, something new. It’s true! The space into which Trump et al barged leaves plenty of room for others: Beppe Grillo in Italy, Spanish Podemos, Bernie Sanders, Jean Luc Melanchon, and many more to come.

In my new book Radicals I followed movements and ideas that in many cases make someone like Jeremy Corbyn seem positively pedestrian: people who want to dismantle the nation state entirely, use technology to live forever, go off grid. All these ideas are finding fertile ground with the frustrated, disillusioned, and idealistic. The challenges of coming down the line – forces of climate change, technological change, fiscal crunch, mass movements of people – will demand new types of political ideas. Radical, outsider thinking is back, and this does, in theory at least, offer a chink of light for Corbyn’s Labour.

Polling last week found pretty surprising levels of support for many of his ideas. A big tax on high earners, nationalising the railways, banning zero hours contracts and upping the minimum wage are all popular. Support for renewable energy is at an all-time high. According to a recent YouGov poll, Brits actually prefer socialism to capitalism, a sentiment most strongly held among younger people.

There are others ideas too, which Corbyn is probably less likely to go for. Stopping benefits entirely for people who refuse to accept an offer of employment is hugely popular, and in one recent poll over half of respondents would be happy with a total ban on all immigration for the next two years. Around half the public now consistently want marijuana legalised, a number that will surely swell as US states with licenced pot vendors start showing off their dazzling tax returns.

The BNP effect used to refer to the problem the far-right had with selling their ideas. Some of their policies were extremely popular with the public, until associated with the BNP. It seems as though the same problem is now afflicting the Labour brand. It’s not the radical ideas – there is now a genuine appetite for those who think differently – that’s the problem, it’s the person who’s tasked with delivering them, and not enough people think Corbyn can or should. The ideal politician for the UK today is quite possibly someone who is bold enough to have genuinely radical proposals and ideas, and yet appears extremely moderate, sensible and centrist in character and temperament. Perhaps some blend of Blair and Corbyn. Sounds like an oxymoron doesn’t it? But this is politics, 2017. Anything is possible.

Jamie Bartlett is the head of the Violence and Extremism Programme and the Centre for the Analysis of Social Media at Demos.

0800 7318496