Amazon CEO Shareholder Letter Goes Big on AI and AWS

Amazon CEO Andy Jassy published his 2023 Letter to Shareholders Thursday (April 11), outlining how the company is changing and its goals for the future.

It’s a 28-minute read by Amazon’s own count. If you don’t have the half hour to spare, here are some key highlights (a three- to four-minute read by our count).

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Perhaps most notably, Jassy focused more on the ways the company is transforming the experience for developers than for consumers.

Jassy emphasized Amazon’s commitment to improving the process for developers through the provision of foundational building blocks, known as primitives, through Amazon Web Services (AWS) to facilitate innovation, speeding the process along.

By offering discrete and flexible components, Amazon aims to streamline the development process, allowing developers to focus on solving real customer problems efficiently.

He said the introduction of primitives has enhanced the speed and agility with which developers can create and deploy applications, citing examples such as Amazon S3 (Simple Storage Service) and Amazon EC2 (Elastic Compute Cloud) as foundational services that have simplified the way developers build and scale applications.

By enabling developers to build innovative applications more efficiently, Amazon can drive customer engagement and loyalty across its platform, both the B2B and B2C sides.

“Being intentional about building primitives requires patience,” Jassy said. “Releasing the first couple primitive services can sometimes feel random to customers (or the public at large) before we’ve unveiled how these building blocks come together.”

The Three-Layer Approach to Generative AI

One such primitive is generative AI. The company is breaking this down into three layers. At the bottom layer, Amazon is providing foundational tools for developers and companies to build their own AI models, known as foundation models (FMs).

In the middle layer, Amazon offers managed services that enable customers to use existing foundation models and customize them for specific applications. One such service is Amazon Bedrock, which provides a platform for building and scaling generative AI applications using a variety of pre-trained models.

At the top layer, Amazon is building a range of generative AI applications across its consumer and AWS businesses. These applications include AI-powered shopping assistants, enhanced voice assistants like Alexa, and new advertising solutions.

Turning Clicks Into Bucks With Advertising

Speaking of advertising, last year, the company’s advertising business grew 24% year over year, reaching $47 billion, with the help of sponsored ads.

With advertising revenue experiencing steady growth, Amazon is using its extensive reach to provide brands with innovative advertising solutions across various platforms, including streaming TV services like Prime Video and Twitch. By seamlessly integrating ads into popular entertainment offerings, Amazon aims to create new avenues for brands to engage with consumers, opening up additional revenue streams.

Let’s Make a Deal

As economic pressures have consumers seeking deals, Amazon has focused on tailoring its offerings to value-chasing behavior.

One such strategy to meet the demand for deals is the introduction of more seasonal savings events such as Prime Big Deal Days and extended Black Friday and Cyber Monday promotions. These events offer Prime members early access to discounted products, providing an incentive for customers to shop and save ahead of traditional holiday shopping periods. By launching these events, Amazon taps into consumers’ desire for bargains while fostering loyalty among Prime members.

PYMNTS Intelligence’s “Amazon Spring Sale Turns Deal Seekers Into Prime Members” found that in the company’s most recent deals event, 28% of U.S. consumers participated. The event was especially popular among consumers annually earning more than $100,000 as well as among millennials and Generation Z shoppers.

Overall, financial concerns are top of mind for retail customers. The February/March PYMNTS Intelligence report “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck” drew from a survey of more than 4,200 U.S. consumers. It found that half of shoppers switched to cheaper merchants in the face of retail product price increases. Plus, 60% of shoppers have cut down on nonessential purchasing.

The Drone-Powered Future of Grocery Delivery

Jassy highlighted the potential of drone delivery in revolutionizing the grocery and pharmacy sectors. He emphasized that Amazon’s drone delivery service, known as Prime Air, aims to offer rapid delivery of packages within an hour, transforming the way perishable items are ordered and received.

While acknowledging that initial drone deployment may be limited in terms of package size and location coverage, Jassy expressed confidence in the eventual widespread adoption of drone delivery for groceries and pharmaceuticals. He underscored the importance of using innovative technologies like drone delivery to enhance customer convenience and efficiency in receiving essential goods.

Consumers, for their part, want to buy groceries from major retailers. A PYMNTS Intelligence study found that U.S. shoppers are 55% more satisfied when buying groceries from large merchants.

“Drones will eventually allow us to deliver packages to customers in less than an hour,” Jassy wrote. “It won’t start off being available for all sizes of packages and in all locations, but we believe it’ll be pervasive over time. Think about how the experience of ordering perishable items changes with sub-one-hour delivery.”

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