This is an article about Amazon (NASDAQ:AMZN), and how it will destroy wealth for those who are currently long, and create wealth for those who get short.
Fundamentally, Amazon's business model is based on the reduction of costs. One cost was the prior inefficiency of consumer research. Amazon has re-engineered the process of consumer education, enhancing the texture of reviews by making them social and quantified. Ultimately this has destroyed the inefficiency represented by consumers relying on salespeople for information.
Amazon also reduces costs in a more traditional manner, comparable to Wal-Mart (NYSE:WMT), through scale.
But there is an inefficiency that Amazon has not addressed, and, fate would have it, Amazon's old rival (NASDAQ:EBAY) is providing the backbone for an upstart competitor which is addressing this cost. Amazon was the Facebook (NASDAQ:FB) for consumption before there was a Facebook. But now Chirpify is the Twitter for commerce. And Twitter is sexier than Facebook.
The above picture from Chirpify.com is the basic idea of how the service works. There are variations, but the service revolves around the simplicity of sending a Tweet using Twitter linked to PayPal. Here is the official description:
The Twitter Commerce platform
Chirpify turns Tweets into transactions, enabling consumers and businesses to buy, sell, donate and transact on Twitter.
These are social, device agnostic, frictionless, in-stream, one step payments. We do this in real time at scale.
By removing all frictions of a traditional payments or e-commerce system, Chirpify transforms Twitter from a broadcast platform into a transactional one. To transact on Twitter Chirpify users need only Tweet simple commands such as "buy", "pay" and "donate".
The combination of frictionless one step transactions, social commerce, and Twitter's real-time reach, is what makes Chirpify such a powerful platform.
The problem Chirpify solves, the problem Amazon is not solving, is the lack of publicity in making a purchase. Can I share an Amazon item on Facebook or Twitter? Sure, but it's inorganic. Chirpify merges the act of appreciating an idea and paying for it. Chirpify reifies money as speech.
Amazon's P/E is generous and basically assumes two things: a growth in E-Commerce market share, and Amazon's maintenance of a leadership position in this pie. But what if the growth of e-commerce looks more like a conversation, and less like a book? Then it will look more like Twitter, and less like Amazon.
Amazon is like a Facebook for products, with a bunch of reviews inside of it that look kind of like Tweets. What Chirpify demonstrates is the inversion of this model. Instead of having a payment website (Amazon) that hosts a set of conversations (reviews), there can be a conversation website (Twitter) that hosts a payment utility (Chirpify).
The probabilities favor a "strong sell" at this time. Longs, good luck with that 137 P/E. Amazon is like Facebook, and Facebook is not sexy anymore compared to Twitter. Besides, 3D print shops and construction robots will render Amazon's supply chain unnecessary.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.