Amazon+Apple+Yahoo=Google's Nemesis

| About:, Inc. (AMZN)

By Joseph Morrison

Amazon Overview (NASDAQ:AMZN), the 15th largest retailer in the world, began in 1994 as an online bookstore and has not looked back since the sale of the first book, Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought. Amazon has grown exponentially through both organic sales and innovation as well as through acquisition. Amazon has consistently made acquisitions of competitors such as and which have complimented their growing firm. Perhaps most important to the firm, however, has been the innovation from inside the company that CEO Jeff Bezos founded. Amazon has successfully grown on it's own innovation in spaces such as supply chain management, the Kindle, and cloud services.

The world's largest internet retailer has released earnings on January 29, 2013. Amazon reported a $0.21 EPS missing consensus estimates of $0.29. This is the second straight quarter with a miss of consensus estimates. The retail arm of Amazon has famously rendered other retail giants such as Best Buy (NYSE:BBY) and Target (NYSE:TGT) into showrooms for shoppers to test out products before purchasing them on Amazon. However, it is clear that Amazon's retail arm of the business is maturing and is experiencing a slowing in growth. As a result, Amazon has been expanding into new segments for revenue growth. Amazon has famously gone after Netflix (NASDAQ:NFLX) with Amazon Prime. Amazon Prime is a frequent shopper program which combined free two-day shipping, instant access to Kindle books, and instant streaming movies and TV shows. The revenue from Prime as well as AWS, Amazon Web Services, has been a growing business segment for Amazon. It is in these spaces that Amazon will need to continue focusing in order to grow the company.

Amazon vs. The World?

Amazon's AWS now positions Amazon as a competitor to Google (NASDAQ:GOOG) in cloud computing services. The Kindle lineup puts Amazon in competition with Apple (NASDAQ:AAPL), Samsung (OTC:SSNLF), and other tablet makers. Given that Kindle users must use Amazon to purchase apps and other accessories for their tablet; this is also a competitive strike at Google. Obviously, Amazon is going after every retailer on the planet and that list is beyond extensive. Amazon is at a point now where Jeff Bezos can utter a version of famous phrase that Peter Ambeck-Madsen once said about Lego when he was CEO, "We're competing with everything that can occupy the minds of children." Except for Bezos, it would be anything that a customer can spend money on that he is after.

If Amazon stays this diversified without some major strategic alliances, it will get picked apart by the rivals. Firms which have tried to compete across too many spaces have often been spread too thin and the entire operation has ultimately suffered. At this time, Amazon has experiences growth in the new segments, Prime and AWS. These markets, however, are relatively in their infancy. There is exponential growth projected in these segments and if positioned properly, Amazon could emerge as a leader in these spaces but so could Google. After all, Google owns YouTube which competes with Prime's streaming services and Google has been fighting for share in the cloud market. In addition, these firms have competing app stores and tablets.

Rather than try to take on everyone who fights for customer dollars, Amazon should create new alliances to combat Google. Amazon's retail arm is doing fine, and while it should not be neglected, it is a mature segment in the firm. If Amazon is going to be successful in these other ventures, it needs to so after the firm which it most closely resembles.

Alliances Against Google

Amazon needs to single out a competitor and form strategic alliances. Amazon should therefore go after Google specifically and form alliances around that. Firstly, Amazon should link up with Google's biggest competitor, at least in the view of the public, Apple. The easiest way to create this partnership is through a distribution partnership between Apple and Amazon. Amazon has the opportunity to begin eating away at Google by promoting Apple products to their customers. The third component that would make this alliance a real problem for Google would be Yahoo (NASDAQ:YHOO).

Amazon partnership aside, it makes terrific sense for Apple to buy Yahoo. The acquisition provides Apple with a search and email rival for Google. It would give Apple a platform to expand its web presence as well as a turn as a content provider on the "most visited frontpage on the internet." As the recent Yahoo earnings have shown, CEO Marissa Miller has done a wonderful job turning around Yahoo. Yahoo is now in a position to take share back away from Google with the right partnerships.

If a customer is able to go on Amazon and get an exclusive deal on an Apple product then when that user opens their search and mail on Apple, it's all set to Yahoo that user is precluded from even having to think of Google, rather it makes a more inclusive environment without the presence of rivals. That can be enhanced further if the YouTube app, which is a preset on Apple devices is removed in favor of an Amazon Prime streaming app, which naturally would be free for a year with the purchase of an Apple product from In addition to that, I see an east way to segment cloud capabilities between Apple and Amazon, keep the Apple cloud for iTunes downloaded products and utilize AWS services for all other items.

Google is a conglomerated firm with many segments, many of which compete with Amazon. Amazon, however is in a position to strike alliances to combat Google on all fronts. Amazon, Apple, and Yahoo are capable of creating an all-encompassing ecosystem to bring all of their products and services to end users without the help of Google and that is when Google will start to see erosion and Amazon will begin to grow in the spaces where Google has thus far been winning.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Business relationship disclosure: The article has been written by Wall Street Trading, a group of junior market analysts. Wall Street Trading is not receiving compensation for it (other than from Seeking Alpha). Wall Street Trading has no business relationship with any company whose stock is mentioned in this article.

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