It Looks Like Facebook Is Copying Amazon in a Good Way

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By Jacob Maslow

Amazon california offices
Amazon’s office building in California

Amazon (NASDAQ:AMZN) gets a lot of flak for spending a lot of money on research and development. A lot of shareholders feel that they’re not getting as much value from their stake in a company when earnings are depressed by the huge research and development costs incurred by the company. Of course, the head of Amazon, Jeff Bezos, justifies these expenditures as a necessary investment in the future. Unfortunately, you can only make this justification for so long until it starts to wear thin.

The clamor for Amazon to start showing a more consistent profit pattern has been going for quite sometime now. While the critics would probably have to shut up now thanks to the recent stellar earnings report produced by Amazon, the criticism will probably not die down. The truth is, Amazon is dedicated to throwing as much spaghetti on the wall so that it can map out a solid future for itself. It’s willing to sacrifice near-term earnings so it can build more businesses in the future.

This is actually a stroke of genius because Amazon is not just a retail play. If Amazon was just a retail play, then its critics are absolutely correct: Amazon would be completely out of line blowing profits on research and development. However, Amazon is also a technology company. This is one key element that many Amazon’s critics don’t get. Amazon is not just a place where you buy stuff. Amazon is also a technology company. It has specific philosophies that tend to inform online technologies. These technologies enable you to buy stuff, enable you to enjoy content as well as communicate with other people online. This is the part of the business that Jeff Bezos is focusing on. This is why he spends billions of Amazon’s earnings to beef up its technology portfolio. It’s a very future-oriented company.

It appears that Mark Zuckerberg of Facebook (NASDAQ:FB) is paying attention to Amazon. This is good news for Facebook investors. Why? If Mark Zuckerberg wasn’t willing to bet heavy on research and development as well as strategic acquisitions, it becomes too easy for Facebook to become a one-trick pony or a flash in the pan.

One particular point of paranoia that’s pushing the popular social media platform forward is that it doesn’t want to become the companies it destroyed. You only need to look back a few years to see that Facebook hasn’t always been big. In fact, Facebook is not even the player in its space. MySpace used to be the 800-pound gorilla of social networking. Along with MySpace of course was Friendster. Among these two, it seemed almost improbable that Facebook would come in and totally dominate. That is precisely what happened. This is also precisely what is causing Facebook to continuously look at its rear-view mirror and ensure that it doesn’t get swallowed up by the competition. Mark Zuckerberg knows that the social networking space can be very fickle. Consumers can change their taste almost overnight. It’s no surprise then that Zuckerberg is spending a lot of money on research and development costs as well as acquisitions. He knows he has to for Facebook to stay relevant.

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