Jeff Bezos is the richest person in the world. Well, at the moment he’s the 2nd richest in the world, but still. He has managed to create a platform for products to serve as a middleman from vendors to consumers; All while being completely online. How did Amazon become such an eCommerce giant? More importantly, how did Amazon do this without actually using their own products to do so? The middleman has been so important in the business and tech world for a long time, it’s time to take a deep dive into how this came to be.
Amazon started out as a business selling books, although Bezos always had the vision to create the “everything store“. The name Amazon came about after a few other failed choices (Relentless, Cadaver) to be named after the largest river in the world. The marketplace of Amazon launched in 2000, which allowed third-party vendors to sell for the first time. In 2005, Bezos launched Amazon Prime, which was a loyalty program first of its kind. For $79 a year, customers would receive two-day shipping for more than a million items. This was the business move that catapulted Amazon into the #1 spot of eCommerce. Amazon also let almost anyone sell (almost) everything on Amazon. The one-click (buying with one click) certainly had some great results for analytics and grabbing data as well, which was also one of the reasons for their supremacy.
Airbnb is also a service that has had massive growth without actually owning the services that they sell. At the start of growing their business, the founders of Airbnb Brian & Joe moved to San Francisco from New York. They were having trouble paying rent and were looking for a way to earn money. They noticed that all the hotel rooms in the city were booked, which sparked the first idea of Airbnb. It started out as “Air Bed and Breakfast”; they bought a few air beds and quickly made a website. They wanted to offer a place to sleep with breakfast in the morning. They had some short-term success, but ultimately failed and re-launched in 2008 before the Democratic National Convention. Again, they had short term success (even bigger than before) but still, ultimately failed. They needed a new approach, so they tried selling election-themed cereals. With Obama-O’s and Cap’n McCains they made $30,000. They used their earnings to travel to New York to meet their users in their biggest market. They noticed that people were using photos that were not good on listings. So, they went door to door with a camera they bought to take better pictures. In 2009, Airbnb changes from shared spaces to all types of accommodation and has 10,000 users with 2,500 listings. After some investments in 2010, the business finally got their multi-million-dollar investment which made the company here to stay.
The final company I’d like to discuss is Instagram. Instagram has been in the top 3 social media platforms for 5+ years. This social giant owns no products nor inventory, only facilitates photo sharing & conversations between users. If you are wondering how Instagram became, you are about to have some answers. The founder Kevin Systrom loved photography and started by building a photo sharing site for his fraternity brothers in his spare time while in college. Systrom interned at a podcasting company called Odeo before his senior year. There, he met the founder of Odeo, who was also the founder of Twitter, Evan Williams. In 2004, Systrom was actually recruited by Zuckerberg to work at Facebook; turning him down only because he wanted to finish college. Early on, Kevin had a ton of elite connections, including the later-CEO of Twitter, Jack Dorsey. After working three years at Google, Systrom left to work at a startup called Nextstop. Around this time, he started working on his own app which he called Burbn. This app combined location-based social networking and photo sharing. A conversation with his wife led to the biggest development of the app, filters. In October 2010 the name was officially changed to Instagram and when the app went live, more than 25,000 people downloaded it in the first 24 hours, crashing the servers. After 9 months, users were up to 7 million.
As you can tell from reading this article, in recent history it has been a smart move to open a business serving as a middleman. The most successful businesses have followed that business model with a unique audience. It’s been interesting to observe and analyze the growth of these businesses and how they grew into the names we know today. I hope you have gained some quality knowledge on how the middleman gained the top spot in the industry.
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