Amazon is founded

Amazon is founded

“Jeff Bezos incorporated Amazon in July 1994 and opened Amazon.com as an online bookstore from Seattle in July 1995; it went public in 1997, survived the dot-com crash and made its first profit in late 2001.”

Amazon began as a one-man company in a rented house near Seattle. Jeff Bezos, a 30-year-old vice president at the New York investment firm D. E. Shaw, left his job in the summer of 1994 to sell books over the young World Wide Web, and on 5 July 1994 his company was incorporated in the state of Washington, first under the name Cadabra. Books suited the Web because there were millions of titles, far more than any shop could stock, and two big wholesalers, Ingram and Baker & Taylor, could supply most of them. Seattle offered software engineers trained by Microsoft and the University of Washington, and keeping away from California spared most customers its sales tax. Bezos put in $10,000, lent the company small sums and signed for its bank accounts himself; his parents bought shares for about $245,000 in 1995. The first programmer, Shel Kaphan, worked in the garage of the house in Bellevue, on desks Bezos made from cheap doors.

Amazon.com opened to the public on 16 July 1995 as 'Earth's Biggest Bookstore', with a catalogue of a million titles and discounts on bestsellers. Orders came from all 50 American states and 45 other countries in the first month. The company kept almost no stock at first: it ordered each book from a distributor, then packed and posted it from a small office and a tiny warehouse in Seattle's industrial SoDo district. Sales were $511,000 in 1995 and $15.7 million in 1996. In June 1996 the venture firm Kleiner Perkins invested about $8 million, and Bezos hired experienced managers to prepare a stock market listing.

Amazon went public on the Nasdaq on 15 May 1997, selling 3 million shares at $18 and raising $54 million, three days after Barnes & Noble, America's largest bookseller, had sued it for calling itself the biggest bookstore on Earth. In his first letter to shareholders Bezos wrote that it was 'Day 1 for the Internet' and that Amazon would choose long-term market leadership over short-term profit. The company followed that plan for four years: it added music, videos, toys, electronics and auctions, opened sites in Britain and Germany, patented its '1-Click' ordering, built eight huge distribution centres in 1999 alone and borrowed more than $2 billion. Customers rose from 1.5 million at the end of 1997 to about 20 million in 2000, but so did the losses, to $720 million in 1999 and $1.4 billion in 2000.

When the dot-com bubble burst in 2000, Amazon's shares fell from a high of $113 in late 1999 to under $6 in 2001, and many investors doubted that it would survive. In January 2001 it cut 1,300 jobs, about 15 percent of its staff, and closed a new warehouse in Georgia, promising an operating profit by the end of the year. On 22 January 2002 it reported its first net profit, $5 million on sales of $1.12 billion for the last quarter of 2001; the company itself warned that a currency gain had made the difference, and its first profitable full year came only in 2003.

The founding years made the model that Amazon still follows: low prices, a huge selection, fast delivery, its own warehouses and the willingness to lose money for years to win a market. Amazon survived the crash that killed most internet shops of the 1990s, and the computing skills it built to run its website became the basis of Amazon Web Services in 2006. It showed that people would trust a website with their credit cards, and it changed how books, and later almost everything else, are bought and sold.

What happened

  1. 1994

  2. Jeff Bezos's company is incorporated in the state of Washington, under the name Cadabra. In July he buys 10.2 million shares for $10,000 and lends it $15,000; he and MacKenzie Bezos have driven west from New York and rent a house in Bellevue, near Seattle, whose garage becomes the first office.

    10704 NE 28th Street, Bellevue, Washington: the rented house in whose garage Amazon was started in 1994 and its website built

  3. Shel Kaphan, a programmer from Kaleida Labs in California, joins as vice president of research and development, the first employee; in the garage he builds the website and the ordering system.

    10704 NE 28th Street, Bellevue, Washington: the rented house in whose garage Amazon was started in 1994 and its website built

  4. The domain name amazon.com is registered. The same month Bezos lends the company another $29,000 and personally guarantees its merchant account with Seafirst Bank so it can take credit cards.

  5. 1995

  6. Bezos's stepfather, Miguel Bezos, buys 582,528 shares at about 17 cents each, some $100,000, one of the company's first outside investments.

  7. In a test version of the site, opened to friends, John Wainwright, a friend of Kaphan's, places the first order: Douglas Hofstadter's book Fluid Concepts and Creative Analogies.

  8. Amazon.com opens to the public as 'Earth's Biggest Bookstore', offering a million titles from a small office and warehouse in Seattle's SoDo district. A bell rings at every order until there are too many. Orders reach $12,000 in the first week.

    SoDo, Seattle: the industrial district south of downtown where Amazon had its first office and small warehouse when the site opened in 1995

  9. In July the Gise Family Trust of Bezos's mother buys 847,716 shares for about $145,500. By the end of the month Amazon has shipped books to all 50 states and to 45 other countries.

  10. Amazon has its first day with 100 orders; within a year it will have 100-order hours.

  11. Tom Alberg, a former president of LIN Broadcasting, buys 150,000 shares at 33 cents and later joins the board. The site now averages some 2,200 visits a day; the company has 11 employees, and its first five months of sales total $511,000, with a loss of $303,000 for 1995.

  12. 1996

  13. Bezos, president and chairman since the founding, also becomes chief executive officer.

  14. Kleiner Perkins Caufield & Byers buys Series A preferred shares for about $8 million, some 13 percent of the company; its partner John Doerr and Tom Alberg join the board, and the company is reincorporated in Delaware.

  15. Amazon launches its Associates Program, which pays other websites a fee for every sale they send it; the first associate is a dog-breeders' site, PuppyNet.

  16. The year ends with sales of $15.7 million, thirty times 1995's, and a loss of $5.8 million. In December Joy Covey joins as chief financial officer to prepare the stock offering.

  17. 1997

  18. Amazon files with the Securities and Exchange Commission to sell shares to the public; The Seattle Times reports the plan to raise about $29 million.

  19. Publishers Weekly reports Amazon's redesigned website, with book covers, colour and a magazine look; the company now has 256 employees and about 80,000 visits a day.

  20. Barnes & Noble, the largest American bookseller, which has just opened its own online store, sues Amazon in New York, claiming that it is not a 'bookstore' and that its slogan 'Earth's Biggest Bookstore' is false advertising.

  21. Amazon goes public on the Nasdaq under the symbol AMZN: 3 million shares at $18, raising $54 million, through Deutsche Morgan Grenfell, Alex. Brown and Hambrecht & Quist. The company, at 1516 Second Avenue in Seattle, is valued at about $429 million.

    1516 Second Avenue, Seattle: Amazon's head office from about 1996 to the spring of 1999, the address on its prospectus of 1997

  22. Amazon applies for a patent on '1-Click' ordering, which lets a returning customer buy with a single click using stored card and address details; the feature is introduced on the site the same month.

  23. Amazon announces that it is about to serve its millionth customer, the first internet shop to do so by its own account; in October Bezos hand-delivers the millionth customer's order in Japan.

  24. Amazon opens a 200,000-square-foot distribution centre in New Castle, Delaware, and enlarges its Seattle warehouse to 85,000 square feet, beginning to keep more books in stock.

    New Castle, Delaware: Amazon's first distribution centre outside Seattle, 200,000 square feet, opened in November 1997

  25. The year ends with 1.5 million customers, 614 employees, sales of $147.8 million, up 838 percent, and a loss of $27.6 million.

  26. 1998

  27. In its first annual report as a public company Bezos's letter to shareholders says 'this is Day 1 for the Internet' and promises to choose long-term market leadership over short-term profits and short-term Wall Street reactions.

  28. Amazon's advertising compares its prices with Barnes & Noble's superstores: the same three books cost $44 instead of $58.

  29. Amazon buys three internet companies, the British online bookshop Bookpages, the German Telebook and the Internet Movie Database, for about $55 million in shares and cash, and announces a 2-for-1 share split.

  30. Amazon borrows $326 million with high-yield senior discount notes to pay for warehouses and new product lines.

  31. The music store opens; by the end of September Amazon is the leading online seller of music. It has about 3 million customers.

  32. The Seattle Sunday papers go 'Inside Amazon.com': editors among stacks of books, everyone at desks made from old doors, and a share price up 125 percent in June.

  33. Amazon buys Junglee, a comparison-shopping technology company, for about $180 million in shares, and merges with PlanetAll, an online address book.

  34. Amazon relaunches its British and German purchases as amazon.co.uk and amazon.de, its first sites abroad. Wal-Mart sues it for hiring away its logistics managers.

  35. Amazon opens its video and DVD store and a holiday gift store with toys and electronics; by the end of the year it is also the leading online seller of videos.

  36. Amazon leases a 323,000-square-foot distribution centre in Fernley, Nevada. The year ends with 6.2 million customers, 2,100 employees, sales of $610 million and a loss of $124.5 million.

    Fernley, Nevada: the 323,000-square-foot distribution centre leased in December 1998, the first of the 1999 network
  37. 1999

  38. The Seattle Post-Intelligencer reports Joy Covey's warning that spending on warehouses, systems and marketing will make losses grow for several quarters. The same month Amazon sells $1.25 billion of convertible bonds.

  39. Amazon.com Auctions opens, a challenge to eBay; it is the first of Amazon's marketplaces where others sell to its customers.

  40. Amazon serves its 10 millionth customer, ten times the number of 21 months before. By now its head office has moved into the old Marine Hospital on Beacon Hill, the Pacific Medical Center building.

    Pacific Medical Center building (now Pacific Tower), 1200 12th Avenue South, Beacon Hill, Seattle: Amazon's head office from mid-1999

  41. Amazon opens its toys and electronics stores, its first big steps beyond books, music and videos.

  42. The United States grants Amazon's 1-Click patent. In September Amazon also opens zShops, where any business or person can sell on its site.

  43. Four more stores open, among them software, video games and tools, with the Wish List. In 1999 Amazon has added eight distribution centres, in Fernley, Coffeyville, Campbellsville, Lexington, McDonough, Grand Forks, Bad Hersfeld in Germany and Britain, about four million square feet in all.

    Bad Hersfeld, Germany: the distribution centre for amazon.de, opened in 1999

  44. Time names Jeff Bezos its Person of the Year. In the last quarter of 1999 Amazon's shares reach $113, after three splits since the IPO; the company has shipped 20 million items to 150 countries.

  45. The year ends with 17 million customers, about 7,600 employees, sales of $1.64 billion and a loss of $720 million.

  46. 2000

  47. Amazon replaces its logo with the 'smile' arrow running from a to z.

  48. Amazon borrows again, about 690 million euros in convertible notes (PEACS); a month later the Nasdaq peaks and internet shares begin to collapse.

  49. Sales reach $2.76 billion but the loss is $1.4 billion, after write-downs of its stakes in other internet companies; the share price, $91.50 at its high in the first quarter, falls as low as $14.88 in the fourth.

  50. 2001

  51. Amazon cuts about 1,300 jobs, 15 percent of its workforce, closes its McDonough, Georgia distribution centre and a Seattle customer service centre, and promises an operating profit in the last quarter of 2001.

    McDonough, Georgia: a distribution centre opened in 1999 and closed in the restructuring of January 2001

  52. Newsweek asks 'Bedtime for Bezos?': Amazon's shares have fallen to a fraction of their peak and its losses go on.

  53. In the third quarter Amazon's shares fall as low as $5.97, their lowest since early 1998.

  54. 2002

  55. Amazon announces its first net profit: $5 million on record sales of $1.12 billion in the fourth quarter of 2001, its first billion-dollar quarter, with an operating profit of $15 million. The same day it starts free 'Super Saver' shipping on orders over $99.