Categories
Amazon.com Inc Antitrust Laws and Competition Issues Bezos, Jeffrey P e-commerce Flipkart.com India Modi, Narendra Shopping and Retail Uncategorized

Welcome to India, Mr. Bezos. Here’s an Antitrust Complaint.

MUMBAI, India — Amazon’s founder and chief executive, Jeff Bezos, is visiting India this week for the first time in over five years.

Instead of garlands, India’s government is welcoming him with a new antitrust case.

The Competition Commission of India, the country’s antitrust regulator, opened a formal investigation on Monday into the practices of Amazon and Flipkart, the Indian e-commerce giant mostly owned by Walmart.

The inquiry was prompted by complaints from an association of small traders, after several rounds of regulations failed to curb the market power of the two e-commerce platforms, particularly in the online sales of mobile phones. Indian merchants have lobbied Prime Minister Narendra Modi to take tougher action against the companies.

India requires foreign-owned e-commerce firms to be neutral marketplaces, much like eBay, to protect local retailers and distributors from deep-pocketed competition. In the United States, Amazon both operates a marketplace and sells many products — including diapers, batteries and books — like a traditional retailer, buying them wholesale and then reselling them to consumers. Under Indian law, the site is supposed to rely on independent sellers who post their products on Amazon.

But both Amazon and Flipkart give preference to some sellers, the Indian regulator said, by using affiliated companies, discounts and their global relationships with manufacturers to influence who sells what and at what price.

For example, Amazon sells its own brands, like AmazonBasics luggage and Solimo paper products, on its Indian site through companies in which it holds an equity stake. And Flipkart features a small group of preferred, high-volume sellers on its service.

The commission will investigate whether those arrangements violate India’s antitrust law.

India is one of Amazon’s fastest-growing markets as well as an important location for its customer service and research operations. But Mr. Bezos has made just three trips to the country.

On Wednesday, he is expected to discuss opportunities for small businesses on Amazon at a conference in New Delhi. He is also expected to meet Mr. Modi and plans to travel to Mumbai, home to India’s Bollywood film industry, to rub elbows with Bollywood stars like the actor Shah Rukh Khan and the director Zoya Akhtar.

In a statement, Amazon said, “We welcome the opportunity to address allegations made about Amazon; we are confident in our compliance, and will cooperate fully with C.C.I.”

Flipkart said it was complying with all laws in India governing e-commerce and noted the large number of sellers on its platform. “We take pride in democratizing e-commerce in India,” the company said in a statement.

Amazon, the world’s biggest online retailer, faces other antitrust inquiries around the world. The scrutiny in Europe and the United States has also focused on its relationship to its third-party sellers, which account for about 60 percent of sales.

The Federal Trade Commission and the House Judiciary Committee are examining whether Amazon treats unfairly sellers that do not use some of Amazon’s services, such as its fulfillment network. The European Union’s antitrust commission has opened an investigation into whether Amazon misuses information from its marketplace sellers to decide what products it sells directly to customers, including its own private-label offerings.

Amazon has maintained that it faces strong competitors, such as Walmart, and is a small player in the overall retail market, which is still dominated by physical stores.

Karen Weise contributed reporting from Seattle.

Categories
Amazon.com Inc Apple Inc Cambridge Analytica Colleges and Universities Computers and the Internet Facebook Inc Google Inc Hiring and Promotion Uber Technologies Inc Uncategorized your-feed-innovation your-feed-work

‘Techlash’ Hits College Campuses

In 2006, Google bought YouTube for more than $1 billion, Apple was preparing to announce the first iPhone, and the American housing bubble began to deflate. Claire Stapleton, then a senior at the University of Pennsylvania, faced the same question over and over: What did she plan to do with that English degree? She flirted, noncommittally, with Teach for America.

Then, a Google recruiter came to campus and, Ms. Stapleton said, she “won ‘American Idol.’” The company flew her out to Mountain View, Calif., which felt to her “like the promised land” — 15 cafeterias, beach volleyball courts, Zumba classes, haircuts and laundry on-site.

But for Ms. Stapleton, now 34, the real appeal in a job at Google was what seemed to be a perfect balance of working for income and according to one’s conscience. Naturally, she said yes to an offer in the corporate communications department.

“There was this ambient glow of being part of a company that was changing the world,” Ms. Stapleton said. “I was totally googly-eyed about it.”

More than a decade later, college seniors and recent graduates looking for jobs that are both principled and high-paying are doing so in a world that has soured on Big Tech. The positive perceptions of Google, Facebook and other large tech firms are crumbling.

Many students still see employment in tech as a ticket to prosperity, but for job seekers who can afford to be choosy, there is a growing sentiment that Silicon Valley’s most lucrative positions aren’t worth the ethical quandaries.

Image
Credit…Rafael Rios for The New York Times

“Working at Google or Facebook seemed like the coolest thing ever my freshman year, because you’d get paid a ton of money but it was socially responsible,” said Chand Rajendra-Nicolucci, 21, a senior at the University of Michigan. “It was like a utopian workplace.”

Now, he said, “there’s more hesitation about the moral qualities of these jobs. It’s like how people look at Wall Street.”

The growing skepticism of Silicon Valley, sometimes referred to as the “techlash,” has spared few of technology’s major players.

In 2019, Facebook was fined nearly $5 billion by the Federal Trade Commission for mishandling user data. Amazon canceled its plans for a New York City headquarters after residents, union leaders and local legislators contested the idea that the behemoth should receive $3 billion from the state to set up shop. Google, in 2018, faced internal protests over its plans for a censored search engine in China and handling of sexual harassment. (High-ranking Google employees have stated that the company never planned to expand search into China, but also that plans for a China project had been “terminated.”)

The share of Americans who believe that technology companies have a positive impact on society has dropped from 71 percent in 2015 to 50 percent in 2019, according to a 2019 Pew Research Center survey.

At this year’s Golden Globes, Sacha Baron Cohen compared Mark Zuckerberg to the main character in “JoJo Rabbit”: a “naïve, misguided child who spreads Nazi propaganda and only has imaginary friends.”

That these attitudes are shared by undergraduates and graduate students — who are supposed to be imbued with high-minded idealism — is no surprise. In August, the reporter April Glaser wrote about campus techlash for Slate. She found that at Stanford, known for its competitive computer science program, some students said they had no interest in working for a major tech company, while others sought “to push for change from within.”

Belce Dogru, who graduated from Stanford with a degree in computer science last year and is completing a master’s program at the university, said: “There has definitely been a shift in conversation on campus.”

Stanford is the second-biggest feeder school for jobs in Silicon Valley, according to data from HiringSolved, a software company focused on recruiting. Some companies pay as much as $12,000 to advertise at the university’s computer science job fairs; recruiters at those events didn’t always have to make a hard sell.

“It felt like in my freshman year Google, Palantir and Facebook were these shiny places everyone wanted to be. It was like, ‘Wow, you work at Facebook. You must be really smart,’” said Ms. Dogru, 23. “Now if a classmate tells me they’re joining Palantir or Facebook, there’s an awkward gap where they feel like they have to justify themselves.”

Palantir, in particular, has drawn the ire of students at Stanford for providing services to U.S. Immigrations and Customs Enforcement (also known as ICE).

Last summer, a campus activist group, Students for the Liberation of All People, visited the company’s office, a 15-minute walk from campus, and hung a banner nearby that read: “Our software is so powerful it separates families.” Similar protests took place at the University of California, Berkeley, Brown and Yale, according to Recode. The protests, and the attitudes they reflected, were also covered in The Los Angeles Times.

Audrey Steinkamp, a 19-year-old sophomore at Yale, which sends about 10 percent of each graduating class into tech, said that taking a job in Silicon Valley is seen as “selling out,” no different from the economics majors going into consulting who are “lovingly and not-so-lovingly called ‘snakes.’”

That is especially true, some of the students said, when a classmate chooses to work for Facebook, whose products have spread disinformation and helped influence a presidential election.

“The work you do at a place like Facebook could be harmful at a much larger scale than an investment bank,” Ms. Dogru said. “It’s in the pockets of millions of people, and it’s a source of news for millions of people. It’s working at a scary scale.”

Many students still believe that technology can help change the world for good. As Ms. Glaser put it for Slate, some of them are opting out of the Big Tech pipeline and trying, instead, “to use technical skills as an insurance policy against dystopia.”

“Students have an opportunity to look at where they can have the most impact that’s in line with their values,” said Leslie Miley, a former director of engineering at Google and Slack. “The fact of the matter is Google, Facebook, Twitter are not in line with those values because they’re huge companies beholden to a lot of different masters.”

Anna Geiduschek, a software engineer who graduated from Stanford in 2014, was working at Dropbox last year when she received an email from an Amazon Web Services recruiter. She replied that she wouldn’t consider a job with the company unless Amazon cut its contract with Palantir.

“These companies go out of their way to try and woo software engineers, and I realized it would send a powerful message for me as a potential employee to tell them no,” Ms. Geiduschek, 27, said, noting that top tech companies sometimes spend roughly $20,000 to recruit a single engineer. “You could basically cut them off at their supply.”

Her recruiter responded: “Wow I honestly had no idea. I will run this up to leadership.” Days later, Ms. Geiduschek received another template email from an Amazon hiring manager, so she scheduled a call and aired her grievances by phone.

Some engineers are sharing screenshots of their protest emails on Twitter with the hashtag #TechWontBuildIt. Jackie Luo, an engineer, sent an email to Google saying that she wouldn’t consider a job there given its plans to re-enter China with a censored search engine.

Kelly Carter, a web developer, emailed a Tesla recruiter with her concerns about the company’s anti-union tactics. Craig Chasseur, a software engineer, emailed the H.R. department at Salesforce to critique the company’s contract with ICE.

These protests echo mounting public concerns about the power of these corporations. But it’s not clear whether they have moved the needle for prospective hires.

Former recruiters for Facebook told CNBC in May that the acceptance rate for full-time engineering job offers at the company had dropped precipitously, as much as 40 percent.

After the article’s publication, Facebook disputed the figure; the company “regularly ranks high on industry lists of most attractive employers,” a spokesman said. Data published the same month by LinkedIn showed that tech firms continued to hire at high rates, especially for entry-level employees.

But at campus career centers, students are struggling with the dual, and sometimes dueling, desires for prestige and purpose.

“It started with millennials, but now Gen Z-ers are getting educated because they want to do good in the world,” said Sue Harbour, the senior associate director of the career center at the University of California, Berkeley, which is Silicon Valley’s top feeder, according to HiringSolved. “And as we’ve seen tech companies grow, we’ve also seen the need for more tech oriented to social responsibility.”

Some recent graduates are taking their technical skills to smaller social impact groups instead of the biggest firms. Ms. Dogru said that some of her peers are pursuing jobs at start-ups focused on health, education and privacy. Ms. Harbour said Berkeley offers a networking event called Tech for Good, where alumni from purpose-driven groups like Code for America and Khan Academy share career opportunities.

Ms. Geiduschek said she recently left Dropbox for Recidiviz, a nonprofit that builds technological tools for criminal justice reform.

But those so-called passion jobs are more challenging to come by, according to Amy Binder, a sociologist at the University of California, San Diego, and the lead author of a 2015 paper about elite colleges “funneling” graduates into certain kinds of “prestigious” careers.

“For other sectors like tech it’s easier to get on the conveyor belt and fill these positions,” Dr. Binder said. “I graduated from Stanford in the ’80s, and even back then there was talk on campus about people selling out and going to investment banks, but those jobs are still getting filled. The self-incrimination hasn’t stopped the juggernaut.”

Dr. Binder said elite schools have long steered students toward certain “high-status” industries — the C.I.A. in the 1950s, finance and consulting in the aughts and tech today. It’s a “prestige system,” she said, that universities enable.

“As tech firms get more negative reviews in the media and it becomes clear what their political toll can be, students may have more circumspection about taking these jobs,” she said. “At the same time, they’ll continue taking these jobs because of the security and reputation that comes with them. And universities will keep sponsoring all this recruitment.”

For years, students were told they could tackle ethical concerns about technology from the inside, working within the mammoth structures of companies like Google. Ms. Stapleton said that was part of the company’s allure: its ostensible commitment to empowering even its youngest employees to weigh in on critical problems.

She spent 12 years at Google and YouTube on various teams, including internal communications, where she wrote company talking points. Her weekly emails to staff, she said, were the stuff of corporate legend. At a 2012 all-hands, Larry Page, one of the company’s founders, called her onstage to celebrate her work as colleagues presented her with a wooden plaque that read: “The Bard of Google.”

Then, in 2018, Ms. Stapleton helped organize a Google walkout, after reporting in The New York Times revealed that the company gave a $90 million severance package to the Android creator Andy Rubin, who was accused of sexual misconduct.

Twenty-thousand workers left their desks in protest. Within six months, Ms. Stapleton said, she was demoted and pushed to resign. In December, she wrote about her experience in an essay for Elle.

Google maintained that Ms. Stapleton was not sidelined for her role in the walkout. “We thank Claire for her work at Google and wish her all the best,” a Google spokesperson responded. “To reiterate, we don’t tolerate retaliation. Our employee relations team did a thorough investigation of her claims and found no evidence of retaliation. They found that Claire’s management team supported her contributions to our workplace, including awarding her their team Culture Award for her role in the Walkout.”

But Ms. Stapleton said her story should give bright-eyed students pause about whether Big Tech and altruism are aligned.

“I don’t know if Google can credibly sell young people on the promise of doing good in the world anymore,” she said. “That’s not to say there aren’t wonderful people there and interesting things to work on. But if you care about a company’s values, ethics and contributions to society, you should take your talents elsewhere.”

Mr. Miley, who left Google in 2019, echoed her sentiment: “It’s hard to change a system from within when the system doesn’t think it needs to be changed.”

A spokeswoman for Google said the company continues to see job application numbers grow annually, and noted that the practice of having employees raise concerns about policies, whether on data privacy or human rights reviews, is part of the corporate culture.

The outside attention those concerns may draw is a reflection of Google’s growth and evolution from a search company to a larger entity with many products and services, the spokeswoman said.

But even companies with a market cap of over $970 billion (Google’s parent company, Alphabet) or over $614 billion (Facebook) aren’t immune to the punches of potential talent. John Sullivan, a professor of management at San Francisco State University who also advises companies on recruitment, estimated that criticisms of Uber’s sexual harassment and discrimination policies cost the company roughly $100 million, largely because of talent lost to competitors.

Sarah Soule, a professor and senior associate dean at the Stanford Graduate School of Business, said in an email that there is a long history of students protesting questionable corporate ethics, with several cases of protest directed toward recruiters, yielding powerful effects.

Take the case of Dow Chemical Company, which in 1965 accepted a $5 million Department of Defense contract to manufacture the flammable gel napalm during the Vietnam War. When recruiters turned up at New York University, they were met with hundreds of angry student demonstrators, The Times reported.

Brendon Sexton, the student government president at N.Y.U. at the time, demanded a moratorium on Dow’s campus recruitment efforts in 1968. “They don’t care that a sin is being committed here,” he told protesters near the job interview site.

Public pressure continued to mount, fueled largely by young activists. The company halted its production of napalm a year later.

Ms. Geiduschek said the behavior of tech companies is especially difficult to challenge because their products are ubiquitous.

“It’s hard to avoid spending your money at Amazon. I sometimes do it, especially in that Christmas-season binge,” she said. “If you want to sway this company to do the right thing, you have to attack it at places that are higher leverage, where it hurts.”

Categories
Amazon.com Inc Antitrust Laws and Competition Issues Computers and the Internet e-commerce Google Inc Inventions and Patents Regulation and Deregulation of Industry Sonos Inc Speakers (Audio) Suits and Litigation (Civil) Uncategorized

Sonos, Squeezed by the Tech Giants, Sues Google

SANTA BARBARA, Calif. — In 2013, Sonos scored a coup when Google agreed to design its music service to work easily with Sonos’s home speakers. For the project, Sonos handed over the effective blueprints to its speakers.

It felt like a harmless move, Sonos executives said. Google was an internet company and didn’t make speakers.

The executives now say they were naïve.

On Tuesday, Sonos sued Google in two federal court systems, seeking financial damages and a ban on the sale of Google’s speakers, smartphones and laptops in the United States. Sonos accused Google of infringing on five of its patents, including technology that lets wireless speakers connect and synchronize with one another.

Sonos’s complaints go beyond patents and Google. Its legal action is the culmination of years of growing dependence on both Google and Amazon, which then used their leverage to squeeze the smaller company, Sonos executives said.

Sonos advertises its speakers on Google and sells them on Amazon. It built their music services and talking virtual assistants directly into its products. Sonos workers correspond via Gmail, and run the business off Amazon’s cloud-computing service.

Then Google and Amazon came out with their own speakers, undercutting Sonos’s prices and, according to Sonos executives, stealing its technology. Google and Amazon each now sell as many speakers in a few months as Sonos sells in one year.

Like many companies under the thumb of Big Tech, Sonos groused privately for years. But over the past several months, Patrick Spence, Sonos’s chief executive, decided he couldn’t take it anymore.

Image
Credit…Adam Amengual for The New York Times

“Google has been blatantly and knowingly copying our patented technology,” Mr. Spence said in a statement. “Despite our repeated and extensive efforts over the last few years, Google has not shown any willingness to work with us on a mutually beneficial solution. We’re left with no choice but to litigate.”

Sonos executives said they had decided to sue only Google because they couldn’t risk battling two tech giants in court at once. Yet Mr. Spence and congressional staff members have discussed his testifying to the House antitrust subcommittee soon about his company’s issues with them.

Jose Castaneda, a Google spokesman, said Google and Sonos had discussed both companies’ intellectual property for years, “and we are disappointed that Sonos brought these lawsuits instead of continuing negotiations in good faith.”

“We dispute these claims and will defend them vigorously,” he added.

A spokeswoman for Amazon, Natalie Hereth, said the company did not infringe on Sonos’s technology. “The Echo family of devices and our multiroom music technology were developed independently by Amazon,” she said.

Sonos sued Google in Federal District Court in Los Angeles and in front of the United States International Trade Commission, a quasi-judicial body that decides trade cases and can block the import of goods that violate patents. Sonos sued Google over only five patents, but said it believed Google and Amazon had each violated roughly 100. Sonos did not say how much it sought in damages.

The evolving relationship between Sonos and the tech giants reflects an increasingly common complaint in the corporate world: As the biggest tech companies have become essential to reach customers and build businesses, they have exploited that leverage over smaller companies to steal their ideas and their customers.

After mostly keeping those grievances private for years because they feared retaliation, many smaller companies are now speaking out, emboldened in an age of growing scrutiny of America’s largest tech firms.

Credit…Adam Amengual for The New York Times
Credit…Adam Amengual for The New York Times

Mr. Spence and other Sonos executives said they had agonized over the decision to sue Google, largely because Google still underpins their business. Sonos executives suspect that their pressure on the patent issue has complicated other areas of the relationship, though they can’t say for sure.

After Sonos intensified its demands that Google license its technology, Google pushed Sonos to comply with stricter rules for using Google’s virtual assistant. Those proposed rules included a mandate to turn over the planned name, design and targeted start date of its future products — which Google would compete directly against — six months in advance, up from 45 days in the current deal, Sonos executives said.

“The fear of retaliation is a real fear. Any of these companies could bury them tomorrow. Google could bury them in their search results. Amazon can bury them in their search results,” said Sally Hubbard, a former assistant attorney general in New York’s antitrust bureau who now works at Open Markets Institute, a think tank. “It’s really hard to find any industry where corporations are not dependent on one of the big tech giants.”

Fifteen years ago, home sound systems typically meant a tangled network of wires and speakers and complicated instructions on how to make it all work. Then Sonos came along in 2005, promising wireless sound throughout a house, seamlessly controlled from a hand-held device. Its early ads boasted: “Any song. Any room.

Sonos quickly began patenting its innovations, a stockpile of intellectual property it now proudly displays on its website.

Its devices made life a bit more comfortable for consumers who could afford them, and they made for a nice little business for Sonos, which is based a few miles from the Southern California coast in Santa Barbara. Sales of its devices took off after the advent of the smartphone and music streaming. Sonos now employs about 1,500 people and sells more than $1 billion in speakers a year.

When Sonos teamed up with Google in 2013, it gave Google engineers detailed diagrams on how its speakers interacted wirelessly with one another. At the time, Google was not a competitor.

Two years later, Google released a small device that could turn an old speaker into a wireless one, much like Sonos’s original product. A year after that, Google released its own wireless speaker, the Google Home. The device, marketed around Google’s talking virtual assistant, quickly began outselling Sonos’s offerings.

Sonos bought the Google devices and used a technique called packet sniffing that monitored how the speakers were communicating. They discovered that Google’s devices used Sonos’s approach for solving a variety of technological challenges. Sonos executives said they had found that Amazon’s Echo speakers also copied Sonos technology.

In August 2016, Sonos told Google that it was infringing. Google had little response. As Google released more products, it violated more patents, Sonos executives said. Over the next three years, Sonos told Google four more times, eventually handing over a list of 100 patents it believed Google had violated. Google responded that Sonos was also infringing on its patents, Sonos executives said, though it never provided much detail.

When Sonos delivered a proposed model for Google to pay licensing fees, Google returned its own model that resulted in its paying almost nothing, Sonos executives said.

Sonos executives said their complaints were hardly just about patents, however. They are concerned that Google and Amazon are flooding the market with cheap speakers that they subsidize because they are not merely conduits for music, like Sonos’s devices, but rather another way to sell goods, show ads and collect data.

Sonos’s entry-level speaker is about $200. Amazon and Google’s cheapest speakers are $50, and they often offer them at much steeper discounts.

In the third quarter of 2019, Amazon shipped 10.5 million speakers and Google six million, according to Strategy Analytics. For the 12 months ending in September, Sonos said it had sold 6.1 million speakers.

“Amazon and Google are making it a mass-market product at a price point that Sonos can’t match,” said Jack Narcotta, a Strategy Analytics analyst.

Amazon said that it was focused on creating the best experience for customers and that its virtual assistant had generated “billions of dollars” for developers and device makers.

To compete, Sonos has had to yield even more power to the companies. When consumers became hooked on Google’s and Amazon’s virtual assistants, Sonos also built them into its speakers.

But Sonos had a strategy to still stand out on store shelves. Instead of being locked into using just one of the assistants, Sonos customers could use both simultaneously. Sonos engineers patented the technology to enable the assistants to work side by side, and executives lobbied Amazon and Google to let it happen.

At first, the companies hated the idea. Hours before a New York news conference in October 2017, Sonos was preparing to unveil its first speaker with virtual assistants when the Amazon product chief Dave Limp called Mr. Spence. Mr. Limp had just found out that Google would also be onstage, and he said Amazon was now pulling out of the event as a result, according to two people familiar with the conversation. After negotiations, Amazon relented.

Sonos executives said Google and Amazon had ultimately forced them to make users select one assistant when setting up their speaker. Amazon said it had never asked Sonos to force users to choose its assistant or Google’s version.

Amazon later changed its position and joined an alliance with Sonos and other companies to make virtual assistants like Alexa function together. Google, along with Apple and Samsung, did not join the alliance.

Google has maintained, Sonos executives said, that it will pull its assistant from Sonos’s speakers if it works alongside any assistant from Amazon, Apple, Microsoft or Baidu, the Chinese internet company. Sonos has followed Google’s orders.

Categories
Amazon.com Inc Apple Inc Computers and the Internet Facebook Inc Google Inc Hudson Yards (Manhattan, NY) Labor and Jobs Real Estate (Commercial) Relocation of Business Renting and Leasing (Real Estate) Uncategorized

Silicon Valley’s Newest Rival: The Banks of the Hudson

When Facebook was searching for another New York office, one big enough to fit as many as 6,000 workers, more than double the number it currently employs in the city, it had one major demand: It needed the space urgently.

So after the company settled on Hudson Yards, the vast mini-city taking shape on Manhattan’s Far West Side, existing tenants were told to move and a small army of construction workers quickly began to revamp the building even before a lease had been signed.

Facebook’s push to accommodate its booming operations is part of a rush by the West Coast technology giants to expand in New York City. The rapid growth is turning a broad swath of Manhattan into one of the world’s most vibrant tech corridors.

Four companies — Amazon, Apple, Facebook and Google — already have big offices along the Hudson River, from Midtown to Lower Manhattan, or have been hunting for new ones in recent months, often competing with one another for the same space.

In all, the companies are expected to have roughly 20,000 workers in New York by 2022.

Cities across the United States and around the world have long vied to establish themselves as worthy rivals to Silicon Valley. New York City is certainly not anywhere close to overtaking the Bay Area as the nation’s tech leader, but it is increasingly competing for tech companies and talent.

New York’s rise as a tech hub comes as industries that have long dominated the city’s economic landscape are transformed by technology, and are themselves increasingly reliant on software engineers and other highly skilled workers.

The growth in New York is occurring largely without major economic incentives from the city and state governments. Officials are mindful of the outcry last year over at least $3 billion in public subsidies that Amazon was offered to build a corporate campus in Queens.

The retail behemoth, stung by the backlash, canceled its plans abruptly in February. It is continuing to add jobs in the city, although at a slower pace.

Still, Amazon’s announcement last month that it would lease space in Midtown for 1,500 workers renewed a debate over whether incentives should be used to woo huge tech companies to New York.

Opponents of the earlier deal, including Representative Alexandria Ocasio-Cortez, Democrat of Queens, said Amazon’s decision to expand in Manhattan showed that New York was so attractive that tax breaks were unnecessary.

Others responded that the Hudson Yards space the company was leasing paled next to the campus proposed for Long Island City, Queens, and to the 25,000 people Amazon had pledged to employ there.

Tech companies are choosing New York to tap into its deep and skilled talent pool and to attract employees who prefer the city’s diverse economy over technology-dominated hubs on the West Coast. New York is also closer to Europe, an important market.

“For a long time, if you lived in the broader tech sector, there was inertia that brought you to Silicon Valley,” said Julie Samuels, executive director of Tech: NYC, a nonprofit industry group. “So many people wanted to live here and move here, but felt the jobs weren’t here. Now the jobs are here.”

Google has grown so quickly and is so squeezed for space that it is temporarily leasing two buildings until a much larger development in Manhattan near the Holland Tunnel, St. John’s Terminal, is ready in 2022.

The big tech firms started in New York with small outposts. Google’s first New York employee, a sales worker, arrived in 2000, and worked out of a Starbucks in Manhattan. It was the company’s first office outside California.

Tech industry offices were once mostly filled with sales and marketing employees who needed to be closer to their customers and to industries like fashion, finance, media and real estate that power the city’s economy.

Over the past five years, though, the makeup of the companies’ combined New York work force has come to resemble the West Coast version: a mix of engineers and others involved in software development.

The New Tech Corridor

Four big technology companies will have a combined 20,000 workers in the city by 2022, mostly concentrated along Manhattan’s West Side. Squares on the map show where Facebook, Google and Amazon have leased space, or are planning to.

The New York Times

At Google’s New York office, highly skilled workers now outnumber their colleagues in sales and marketing. Of the nearly 800 job openings that Amazon has in the city, more than half are for developers, engineers and data scientists.

“Every line of business and every platform is represented quite healthfully,” said William Floyd, Google’s head of external affairs in New York, the company’s largest office except for its Mountain View, Calif., headquarters. “Not everyone wants to be in California.’’

Oren Michels, a tech adviser and investor who sold Mashery, a company based in San Francisco, to Intel in 2013, said that New York City had become a refuge for tech workers who did not want to be surrounded solely by those working in the same industry.

“You have younger engineers and those sorts of people who frankly want to live in New York City because it’s a more interesting and fun place to live,” he said. “San Francisco is turning into a company town and the company is tech, both professionally and personally.”

Mr. Michels said that his family had bought a home in Manhattan in 2014 with a plan to split their time between San Francisco and New York. They soon decided to live full time in New York, where Mr. Michels is on the boards of four tech firms.

The number of tech jobs in New York City has surged 80 percent in the past decade, to 142,600, from 79,400 in 2009, according to the New York State Comptroller’s office. (The business services industry, which includes accountants and lawyers and is the largest private sector, employed 762,000 people in 2018, according to the comptroller’s office.)

Since 2016, the number of job openings in the city’s tech sector has jumped 38 percent, an analysis for The Times by the jobs website Glassdoor found. In November, New York had the third-highest number of tech openings among United States cities, 26,843, behind just San Francisco and Seattle.

It is not only the biggest tech firms that are growing in New York. From 2018 through the third quarter of 2019, investors pumped more than $27 billion into start-ups in the New York City region, the second most in that time for any area outside San Francisco, according to the MoneyTree Report by PwC-CB Insights. (Nearly $100 billion was invested in start-ups in the Silicon Valley area in that period.)

Industries like finance, retail and health care provide more jobs, but the tech sector, with an average salary of $153,000, has become one of New York City’s main economic drivers.

That has raised concerns about whether the industry is intensifying income inequality and making New York unaffordable for more people.

The four big tech companies “attract thousands of out-of-state employees with advanced degrees and work experience, and drive unprecedented influxes in luxury rentals, rent hikes, and the flipping of buildings and private homes,” said Kiana Davis, a policy analyst at the Urban Justice Center.

“It should go without saying,’’ she added, “that middle-income, low-wage, poor and unemployed residents in these cities cannot access the luxury housing market nor the rising rents and have been driven out of their communities as a result.”

Jonathan Miller, president of Miller Samuel, a real estate appraisal firm, said that the residential market in Manhattan had been strong in areas where the tech firms had grown.

“I speak to brokerage groups twice a week, and the conversation is always peppered with questions about the tech sector,” Mr. Miller said. “If you have 20,000 employees coming in who are high-wage earners, that can have a pronounced impact.”

The major tech firms are expected to grow to the point that they are among the largest private tenants in New York in the coming years, rivaling longtime leaders like JPMorgan Chase.

Among companies in the technology, advertising, media and information industries, Google and Facebook are now the largest tenants, beating out legacy companies like Condé Nast, News Corp. and Warner Media, according to an analysis performed for The Times by the real estate company Cushman & Wakefield.

Facebook employs 2,900 people in New York, and recently signed the lease at Hudson Yards for 1.5 million square feet in three buildings. In addition to providing space for 6,000 workers, the deal gives the company an option to take over another several hundred thousand square feet in the development.

Facebook executives initially set their sights on a marquee building on Madison Avenue in the Flatiron district, not far from the company’s existing offices, according to a person familiar with Facebook’s plans.

But then Facebook executives toured Hudson Yards and were impressed with the amenities, including shops and restaurants, and with the short walk to major subway lines.

A deal was struck in November, but with a requirement on Facebook’s part that about 300,000 square feet in two buildings, 30 and 55 Hudson Yards, be ready very soon.

Workers were immediately brought in to begin preparing the space and to move out existing tenants.

Two blocks east, Facebook is close to signing a lease for about 700,000 square feet in the 107-year-old James A. Farley Building across from Pennsylvania Station, according to three people familiar with the deal. The property, also known as the Farley Post Office, is being renovated by the Related Companies and another developer, Vornado Realty Trust.

More than 2,500 employees could eventually work there. (The Wall Street Journal first reported on the potential lease.)

“It’s hard to predict future growth, but we believe New York is a vibrant market with a tremendous pool of talent,” a Facebook spokeswoman, Jamila Reeves, said. She declined to comment on the company’s specific plans.

Just north of the Farley building, Amazon said recently that it had signed a lease for 350,000 square feet in a building on 10th Avenue near Hudson Yards, enough space for 1,500 employees. The social media company LinkedIn, whose New York offices are not far away, in the Empire State Building, recently said it would expand to four additional floors in the landmark property.

The tech titan whose intentions in New York are probably least known is Apple.

Executives at the company, which has had an office in the Flatiron area, have toured buildings in that neighborhood and in the Hudson Yards area but a deal has not yet been signed. Apple has inquired about leasing much less space than other big tech companies, roughly 50,000 square feet.

Apple declined to comment.

For every West Coast company with a household name that has expanded in New York, there are many large but lesser-known firms with headquarters in the city.

One, Datadog, which provides cloud-based software for businesses, went public in September and is valued at $10.5 billion. The company has 480 employees in its New York offices, up from 125 three years ago.

Categories
Amazon.com Inc Campbellsville (Ken) Corporate Social Responsibility e-commerce Factories and Manufacturing Fruit of the Loom Inc Labor and Jobs Relocation of Business Shopping and Retail Tax Credits, Deductions and Exemptions Uncategorized Wages and Salaries

Prime Anchor: An Amazon Warehouse Town Dreams of a Better Life

Image
Credit…Andrew Spear for The New York Times

In Campbellsville, Ky., the tech giant’s influences abound. The profits, not so much.


CAMPBELLSVILLE, Ky. — In the late 1990s, the town of Campbellsville in central Kentucky suffered a powerful jolt when its Fruit of the Loom textile plant closed. Thousands of jobs making underwear went to Central America, taking the community’s pride with them.

Unemployment hit 28 percent before an unlikely savior arrived as the century was ending: a madly ambitious start-up that let people buy books, movies and music through their computers.

Amazon leased a Fruit of the Loom warehouse about a mile from the factory and converted it into a fulfillment center to speed its packages to Indianapolis and Nashville and Columbus. Its workers, many of them Fruit veterans, earned less than what the textile work had paid but the digital excitement was overwhelming.

Twenty years later, Amazon is one of the world’s most highly valued companies and one of the most influential. Jeff Bezos, Amazon’s founder, has accumulated a vast fortune. In Seattle, Amazon built a $4 billion urban campus, redefining a swath of the city.

The outcome has been different in Campbellsville, the only sizable community in Taylor County. The county population has stalled at 25,000. Median household income has barely kept pace with inflation. Nearly one in five people in the county lives in poverty, more than in 2000.

Over the last 20 years, Amazon’s stock price has soared. But household income in Taylor County has barely kept pace with inflation.

Taylor Co., Ky.

median income

Amazon

stock price

National

median income

Cumulative changes since 2000

Taylor County, Ky.

median income

Amazon

stock price

National

median income

Cumulative change since 2000

Cumulative change since 2000

Taylor County, Ky.

median income

Amazon

stock

price

National

median income

Cumulative change since 2000

Cumulative change since 2000

Income figures are adjusted for inflation.

Sources: Census Bureau, via Federal Reserve (income data); Refinitiv (stock prices)

By Karl Russell

The divergent fates offer a window into what towns can give to tech behemoths over decades — and what exactly they get in return. Campbellsville’s warehouse was among the first of what are now an estimated 477 Amazon fulfillment centers, delivery stations and other outposts around the country. That makes Campbellsville, with 11,415 inhabitants, a case study for what may happen elsewhere as Amazon continues expanding.

Brenda Allen, Campbellsville’s mayor, said: “Amazon has had a really good business here for 20 years. They haven’t been disappointed at all. And we’re glad they’re here.”

But, she added, “I really would feel better if they would contribute to our needs.”

In central Kentucky, Amazon has reaped benefits, including a type of tax break that critics label “Paying Taxes to the Boss.” In the arrangement, 5 percent of Amazon workers’ paychecks, which would ordinarily be destined for the county and the state, go to Amazon itself. The company netted millions of dollars from this incentive over a decade.

While that tax break has run out, Campbellsville itself still gets no tax money from Amazon. The warehouse is just outside the town limits. The city school system, which is its own taxing authority, does get revenue from Amazon. Both the city and the county school systems recently raised their tax rates because of revenue shortfalls. (The city increase had to be rescinded for procedural reasons.)

No one wants Amazon to leave, though. It is Campbellsville’s largest private employer. Its online mall has given the town’s shoppers access to a paradise of goods.

Less visibly, Amazon shapes the local economy, including which businesses survive and which will not be coming to town at all. It supplies small-screen entertainment every night, influences how the schools and the library use technology and even determined the taxes everyone pays.

“We were a company town with Fruit of the Loom, and we’re becoming a company town again,” said Betty J. Gorin, a local historian.

Amazon said it was not solely responsible for Campbellsville’s vitality. It pointed out other big local employers, including a hospital and a Baptist university. “Amazon is not the only barometer,” it said.

The company said it had spent $53 million remodeling its warehouse “to benefit employees.” The facility now includes a classroom for training workshops and, it said, “on-site college classes.” Amazon declined a request for a tour.

Some cities and towns are now weighing the costs of Amazon versus the benefits. The nationwide total of all state and local subsidies for the company over 20 years is $2.8 billion, according to Good Jobs First, which tracks tax breaks for corporations.

Activists protested New York’s plan to give Amazon billions of dollars in tax breaks, causing the company to abandon its plans this year to move into Queens. (Amazon began opening new offices in Manhattan this month without any incentives.) Maryland residents rejected a proposed warehouse last summer, citing concerns about noise pollution, traffic and safety.

In Campbellsville, the relationship between Amazon and the citizens is facing some questions as it enters middle age.

“The needle has not moved in the last two decades on the quality of life in Kentucky, especially in places like Campbellsville. What does that tell you?” said Jason Bailey of the Kentucky Center for Economic Policy, a research and advocacy group.

He called the state “a fiscal mess because of tax giveaways to Amazon and other companies.” Kentucky has had 20 rounds of budget cuts since 2008, he said.

In 1948, a Kentucky underwear company set up an outpost in the basement of the old Campbellsville armory with five employees. This eventually became the largest single male-underwear plant in the world, with 4,200 workers producing 3.6 million garments a week.

The money was good, especially for women and African-Americans who had few other opportunities. Fruit, as it was eventually called, built the first public tennis courts and paid the city $250,000 in 1965 to expand the wastewater disposal plant. Factory executives spurred the creation of a country club and the public swimming pool.

The easy times ended with the North American Free Trade Agreement, which took effect in 1994. Amazon’s arrival five years later offered a second chance. Campbellsville was more than 40 miles from the nearest interstate, but it had a 570,000-square-foot modern warehouse and thousands of eager workers who knew how to hustle.

To woo Amazon, the local fiscal court passed the payroll tax measure, which opened up the state coffers. Amazon’s workers, like other employees in the county, would pay a 1 percent payroll tax and a 4 percent state income tax. But that money went directly to Amazon as a reward for bringing in jobs.

This type of tax break was first developed in Kentucky and is now widespread. Amazon’s incentives totaled $19 million over 10 years, including exemption from the state’s corporate income tax. The company said it had ultimately received “less than half” that amount, though it declined to explain the discrepancy.

The enthusiasm with which yesterday’s workers embraced tomorrow’s economy was a big story that drew national attention. Making underwear was not sexy. Selling things online was.

Arlene Dishman began working at Fruit in 1970. She said she had earned as much as $15 an hour — the equivalent of about $100 now — sewing necklines on V-neck T-shirts. “You can’t hardly turn that money down,” she said.

Her starting rate at Amazon was just $7.50 an hour, but she relished creating a digital outpost in Campbellsville. “We felt responsible for a lot of the success of Amazon,” she said. “We were just so proud.”

She became a trainer, worked with Mr. Bezos himself when he came to town, was promoted to management. These were years of turmoil at Amazon, as the dot-com bubble burst in the early 2000s. Pressure ramped up.

“I worked on the third floor,” Ms. Dishman said. “No air-conditioning. I would have people on the line pass out, constantly.”

As a manager, she said, she was too understanding, which was her undoing.

“I had worked with these people for so many years at Fruit that when a situation came up that management was not liking, I had a tendency to take the workers’ side,” she said. She left after three years.

David Joe Perkins, who worked for Fruit for 24 years and then for Amazon, said he also took pride in being part of the e-commerce start-up.

“We treated it like our company,” he said. “I have personally worked with Jeff Bezos. I actually liked the guy.”

What Mr. Perkins did not like were Amazon’s managers.

“My manager called me into the office one day and said, ‘Dave, your performance is not what it needs to be.’ I said, ‘How can I improve?’ He said, ‘You don’t fire enough people.’”

Several months later, Mr. Perkins was let go with little explanation.

Both Mr. Perkins, 64, and Ms. Dishman, 71, have Amazon Prime accounts. Ms. Dishman’s daughter works for Amazon as a data analyst. Ms. Dishman even thought about returning to the warehouse during last year’s holidays to earn a little Christmas money. She did not follow through.

Just about everyone in Campbellsville remains grateful to Amazon for coming and hiring people. Those workers take their paychecks and spend at least some of the money around town.

There are not as many workers as people think, though.

When Amazon arrived, it said it would employ 1,000 people full time within two years. That’s still the official total from the Kentucky Cabinet for Economic Development, a state agency, and in Mrs. Gorin and Jeremy Johnson’s two-volume history of the town, published this year. Team Taylor County, which solicits new industries for the community, puts the number of workers at 1,350.

Amazon said in October that the total was 655 full-time workers.

“I’m shocked,” Mrs. Gorin said.

Kelly Cheeseman, an Amazon spokeswoman, said the “head count started to shift” at the warehouse “around 2016 to 2017.” She said automation — the deepest fear of every community with an Amazon warehouse — had nothing to do with it.

“We regularly balance capacity across the network,” Ms. Cheeseman said. In November, Amazon said full-time workers had risen to 700.

Amazon said that the money it paid in wages was an investment in Campbellsville and that it had contributed “$15 million in taxes to Taylor County” over the last 20 years. It declined to break down the numbers further.

Records and interviews indicate that Amazon paid to the city school system about $350,000 in taxes this year. The company paid the county an additional $410,000 in property taxes.

Good Jobs First, the group that analyzes tax benefits for corporations, thinks that is not enough.

“What has Amazon really done for the community?” asked Greg LeRoy, the center’s executive director. “It’s not like it’s a tech lab, diffusing intellectual property or spinning off other businesses. It’s a warehouse.”

Ms. Allen, the mayor, wants more money to pay the town’s bills.

“The people in Seattle are getting rich,” she said. “They don’t care what happens to the people in Campbellsville, not really.”

In the 1970s and 1980s, life in Campbellsville revolved around Fruit. Townspeople learned not to be near downtown when the plant let out at 4 p.m. and traffic briefly became overwhelming. When Fruit shut down for the first two weeks in July every year, the town was so dead that other industries in the area scheduled their vacations for the same time. Fruit officials were active in the Chamber of Commerce, civic clubs and associations.

Amazon is not like that.

“Amazon is everywhere and nowhere,” Mrs. Gorin said. “This town runs on Amazon, but their employees are not in positions of political power.”

Amazon is linked into the community in other ways that often end up benefiting Amazon. In 2016, the company donated 25 Kindle Fire tablets to Campbellsville kindergarten and first grade classrooms. It also donated $2,500 in “content.” The town schools are increasingly buying supplies from Amazon for a total of about $50,000 in the last fiscal year, records show.

“We want to do business with those in our community, those paying local taxes,” said Chris Kidwell, finance director for Campbellsville Independent Schools. “It’s kind of a good-neighbor policy.”

The county school system, with 2,800 students, is dealing with state budget cuts. One way it has made up some of the shortfalls is by selling corporate sponsorships. Taylor Regional Hospital bought the naming rights to the health services room; Campbellsville University did the same for an education center. Amazon is not a corporate sponsor.

“We’re proud to have them in our community, and we would be proud to have them as a corporate sponsor,” said Laura Benningfield, the assistant superintendent.

Last spring, the local library was the recipient of a $10,000 gift from Amazon for science and technology education. Amazon planned to supply whatever the library wanted by ordering the material through its own site. As this article was being reported and Amazon was emphasizing what it had done for the town, the company just sent the library the cash.

“We’re on the receiving end of a blessing,” said Tammy Snyder, the town librarian. The library, like other public institutions in Kentucky, is dealing with the state’s largely unfunded pension system. Proposed changes that involve the library’s paying significantly more “will bankrupt us,” she said.

Justin Harden, 35, said he had no illusions about Amazon. He and his wife, Kendal, recently opened Harden Coffee, a popular meeting spot, on Main Street.

“If they can figure out a way to cut me out and take my business, they’ll totally do it,” he said. “They would destroy me, absolutely. But I am a 100 percent supporter of Amazon. I have five kids. We get stuff from Amazon almost every day.”

He paused, acknowledging his own contradictions. “That’s why they’re winning,” he said.

A pile of rubble on Campbellsville’s southern approach marks the ruins of the Fruit plant.

The property is owned by Danny and Sandy Pyles, commercial contractors who run an excavating company in nearby Columbia. They bought the textile factory with other investors a decade ago with the goal of building a retail complex called Campbellsville Marketplace.

The graffiti-covered shell was torn down, and a Louisville developer, Hogan Real Estate, cobbled together a deal. Kroger, the country’s largest supermarket chain, would close its two Campbellsville stores. It would then become the Marketplace anchor tenant with a 123,000-square-foot superstore.

Work was supposed to start within weeks. Then, on June 16, 2017, Amazon announced that it was buying the upscale grocery chain Whole Foods. Kroger shares slumped. Its deal in Campbellsville was put on hold, then abandoned. Hogan chased other possible anchors — Menards, Meijer, Home Depot — but none were interested. (Kroger declined to comment.)

“We used to talk about the Walmart Effect when you saw vacant storefronts in these small towns,” said Justin Phelps of Hogan. “Now it’s the Amazon Effect.”

Pyles Excavating is a good Amazon customer. The company needed a muffler recently for a track hoe. It would have cost $1,200 from a dealer. On Amazon, it was half that.

“The internet has brought the world to our fingertips,” Mr. Pyles said.

The Pyleses recently bought out the other investors in the Fruit site. Their investment is now more than $2 million.

“It really is a great piece of property, but right now it’s a reminder of the day Campbellsville literally shut down,” said Sandy Pyles, the daughter of a Fruit worker and relative of many others. “It’s a sadness.”

They would like a Whole Foods there, but know the town is too small to support it. Mr. Pyles has another idea: an Amazon Go store. These are experimental outlets with no cashiers.

That would put local competitors who still needed humans at a disadvantage while adding hardly any jobs. But it would be an investment by one of the world’s richest companies in one of the towns where it began.

“Amazon is the future,” he said. “We’d like to be part of that.”

Categories
Amazon.com Inc Shopping and Retail Uncategorized

The Week in Tech: What 5 Billion Means to Amazon

Each week, we review the week’s news, offering analysis about the most important developments in the tech industry.

Hi, This is Karen Weise, the tech correspondent for The New York Times in Seattle. Since the holiday shopping season is ending, it’s not a bad time to talk about Amazon.

Let me start with a single, large number critical to the shopping experience on Amazon: five billion. Each day, Amazon gets five billion submissions to edit descriptions and details about the products for sale on its site. The edits come from the companies that fill Amazon’s Everything Store.

That’s 1.8 trillion edits a year that Amazon needs to sort through. Are they accurate or misleading? Do they follow Amazon’s rules or even the law?

Some of the edits are simple updates to a product, or a company trying out new marketing. Others are tactics used to sabotage a competitor’s products or add a certification, like Food and Drug Administration approval, that an item does not have.

If shopping on Amazon can feel a little chaotic — duplicate listings, weird variations, descriptions that don’t quite match a product — this daily edit is a big reason.

I learned the importance of five billion from Amazon when I was reporting on what has happened in the two decades since Amazon began letting outside companies list goods on its site. The move sharply increased the selection customers can find when they type in Amazon.com, and now about 60 percent of Amazon’s sales come from these outside merchants.

My article detailed how Amazon has squeezed more out of these suppliers over the years, making Amazon’s services, like advertising and fulfillment, essential to succeeding on the site, often in ways that make it harder to do business elsewhere.

I heard so much about how companies scramble to respond when Amazon changes its rules, which it does to present customers with a coherent, consistent experience even as the selection and number of sellers have grown so large.

Amazon’s decision to open its doors to outside sellers has been essential to its ability to get us almost anything in a matter of days, if not hours. It’s what lets us turn to it with the random, near stream-of-consciousness list of things that pop into our heads. Though my memory is hazy, I’m pretty sure one of my family’s first Prime Now orders came soon after my son was born: We got diapers, chocolate — and vermouth for Negronis.

Like Facebook in its effort to sort out fake news, Amazon has turned to algorithms to organize and police its site, and said it was spending $400 million a year to do so. On Thursday, the company said that it had record holiday sales and that “billions of items were ordered worldwide.”

Jeff Wilke, the chief executive of Amazon’s consumer business, told me that the company’s long-term future depended on patrolling the site without harming well-meaning merchants.

“We have a strong incentive to be as accurate as possible in identifying bad actors, make very few mistakes when we’re wrong,” he said, adding that Amazon also wants to give people second chances when they make an honest mistake.

People who have worked at Amazon’s marketplace debate whether the company can build systems fast enough, and accurate enough, to keep up. Some say the gap is closing; others fear the rot may grow too fast to catch.

I find myself thinking of a conversation I had toward the beginning of the year with Juozas Kaziukenas, founder of Marketplace Pulse, a research company. “If the chaos continues, I don’t know how long a consumer will be willing to put up with it,” he said. “They are a marketplace of trust, and if you cannot trust it, the whole premise of Amazon completely evaporates.”

That trust comes down to big decisions and little details, like those changes submitted five billion times a day.

  • It’s the end of an Uber era. The ride-hailing company’s founder, Travis Kalanick, stepped down from its board after weeks of selling down his stake in Uber stock.

  • Delivery, at a cost. Amazon is adding to its army of delivery drivers in a way that puts a priority on speed and cost over safety, ProPublica and BuzzFeed News found, citing internal documents and interviews. Amazon said that safety was a top priority and that last year it invested $55 million in “safety improvement projects.”

  • When a chat app is a tool for spying. ToTok, a popular messaging app, is secretly a surveillance tool run by the government of the United Arab Emirates, Mark Mazzetti, Nicole Perlroth and Ronen Bergman found. This was not a hack, but by design: Companies affiliated with Emirati intelligence created the app. (The Emirati government declined to comment for the article.)

  • R.I.P., “Antennagate.” The 2010 iPhone’s struggle to make calls was No. 42 in The Verge’s list of the top 84 tech flops of the decade. No. 1 was Ajit Pai, the chairman of the Federal Communications Commission, who undid net neutrality.

How are we doing?

We’d love your feedback on this newsletter. Please email thoughts and suggestions to bits_newsletter@nytimes.com.

Like this email?

Forward it to your friends, and let them know they can sign up here.

Categories
Amazon.com Inc Antitrust Laws and Competition Issues Computers and the Internet Delivery Services e-commerce Federal Trade Commission House Committee on the Judiciary Innovation Online Advertising Prices (Fares, Fees and Rates) Storage Uncategorized

Prime Power: How Amazon Squeezes the Businesses Behind Its Store

Image
Credit…Andrea Chronopoulos

Twenty years ago, Amazon opened its storefront to anyone who wanted to sell something. Then it began demanding more out of them.


SEATTLE — For tens of millions of Americans, it is so routine that they don’t think twice.

They want something — a whisk, diapers, that dog toy — and they turn to Amazon. They type the product’s name into Amazon’s website or app, scan the first few options and click buy. In a day or two, the purchase appears on their doorstep.

Amazon has transformed the small miracle of each delivery into an expectation of modern life. No car, no shopping list — no planning — required.

But to make it all work, Amazon runs a machine that squeezes ever more money out of the hundreds of thousands of companies, from tiny start-ups to giant brands, that put the everything into Amazon’s Everything Store.

In more than 60 interviews, current and former Amazon employees, sellers, suppliers and consultants detailed how Amazon dictates the rules for those businesses, sometimes changing those rules with little warning. Many spoke on the condition of anonymity, for fear of retaliation by Amazon.

Amazon punishes the businesses if their items are available for even a penny less elsewhere. It pushes them to use the company’s warehouses. And it compels them to buy ads on the site to make sure people see their products.

All of that leaves the suppliers more dependent on Amazon, by far the nation’s top online retailer, and scrambling to deal with its whims. For many, Amazon eats into their profits, making it harder to develop new products. Some worry if they can even survive.

“Every year it’s been a ratchet tighter,” said Bernie Thompson, a top seller of computer accessories who Amazon has highlighted in its marketing to other merchants. “Now you are one event away from not functioning.”

Tumi, the luxury bag maker, sold its products at wholesale prices to Amazon for years. But executives said Amazon sometimes misjudged consumer demand, keeping too few bags in stock, and regularly demanded more in marketing and other fees. Last year, Tumi decided to sell its bags to another company, which then listed the items on Amazon. The arrangement gave Tumi more control over inventory and better sales data.

A few months later, Amazon gave Tumi an ultimatum: Stop selling through the middleman, or do not sell to the retailer’s 150 million customers at all.

“Some guy we had never talked to gave us a call and was like, ‘We have changed the rules,’ ” said Charlie Cole, who runs Tumi’s online business. He pushed back, but wasn’t successful.

“It was like talking to a brick wall,” he said. “They want to be able to control everything.”

Companies struggling to navigate Amazon’s growing chaos fill Facebook groups, private message boards and industry conferences. One session at a leading retail meeting next year is called “The Big Question: Is Selling on Amazon Worth the Hassle?” More than 12,000 people signed a petition on Change.org asking Amazon to alter an arcane rule on counterfeit products that they said could “destroy” an entire business.

Many sellers and brands on Amazon are desperate to depend less on the tech giant. But when they look for sales elsewhere online, they come up short. Last year, Americans bought more books, T-shirts and other products on Amazon than eBay, Walmart and its next seven largest online competitors combined, according to eMarketer, a research company.

“The secret of Amazon is we’re happy to help you be very successful,” said David Glick, a former Amazon vice president who left the company last year. “You just have to kiss the ring.”

Amazon says that its operation is so massive, the rules are necessary to give customers a quality experience. The company said the health of sellers was a top priority, and that it had invested billions of dollars to support them. It said that about 200,000 sellers surpassed $100,000 in sales in 2018, roughly a 40 percent increase from the year before.

“If sellers weren’t succeeding,” said Jeff Wilke, the chief executive of Amazon’s consumer business, “they wouldn’t be here.”

Jack Evans, a spokesman for the company, said that Amazon only succeeded when sellers succeed, “and claims to the contrary are wrong.” Merchants can choose the products they sell, how they are priced and how they fulfill the orders, he said.

The policy change that affected Tumi, Mr. Evans said, was to make sure that Amazon had the best prices and availability for popular products. He said that Tumi’s prices were high when it sold through the middleman.

Amazon has faced harsh criticism in the past for displacing Main Street brick-and-mortar retailers. Now, the diverging fortunes of Amazon and many of the companies selling products on its own site are at the heart of the antitrust scrutiny Amazon faces in Washington and Europe. Investigators at the Federal Trade Commission and the House Judiciary Committee are examining whether Amazon abuses its position as the central online connection between people making products and those buying them.

Amazon collects 27 cents of each dollar customers spend buying things its merchants sell, a 42 percent jump from five years ago, according to Instinet, a financial research firm. That does not include what companies pay to place ads on Amazon, a business that Wall Street considers as valuable as Nike.

The pennies add up. Last year, the profit from retail was so high that it surprised even some senior leaders close to the business, according to two of the people involved.

Thanks to the retail success, the company’s profit exceeded its own Wall Street projections by more than $3 billion.

Jeff Bezos, Amazon’s founder and chief executive, lumps the many parts of the company into two buckets, according to the two people close to the business. One bucket is investments, or bets on the future like Alexa, its virtual assistant. The other is contributors, or the profitable businesses that provide money for Amazon’s investments.

To him, the retail operation is a contributor that can be squeezed for cash.

Billions of dollars generated from selling products online go into investments like Alexa, which has 10,000 employees working on it, and the company’s expensive Hollywood productions. And still, Amazon’s consumer businesses, including Alexa and other pricey projects, produced $5 billion in operating profit last year.

The financial success stems from a big strategy shift that was underappreciated when Mr. Bezos made it two decades ago.

From the day the company started shipping orders in 1995, Amazon offered customers products the same way as traditional retailers like Target, buying them at wholesale and reselling them at a higher price. Four years later, Mr. Bezos and his team decided that Amazon would also let companies list items on the site for a cut of the sale, more like eBay and Alibaba. The change allowed Amazon to offer a wider variety of products.

“We want to try and build a place where people can come to find and discover anything that they might want to buy online,” Mr. Bezos said that year.

The decision eventually turned Amazon into the one-stop shop it’s known as today. Shoppers could find not only well-known brands like Tide detergent, but also obscure Christmas ornaments.

Initially, the move empowered sellers and gave them access to millions of customers. They could ship their products however they wanted. And they could set their own price.

Bit by bit, the sellers lost control.

When Amazon opened its doors to sellers, the fulfillment industry — for storing, packing and shipping online orders — was in its infancy. Many top sellers on Amazon ran their own warehouses.

Seeing a competitive advantage in offering faster delivery times, Amazon opened cavernous warehouses near major cities. Inside, workers navigated endless rows to pick products from bins and pack them into boxes.

The expansion left Amazon with extra space to fill, and the company turned to sellers. It pitched them on the idea of paying Amazon to store and ship their products, even those sold on other sites.

James Thomson, a Canadian with a doctorate in marketing, managed a team responsible for signing up sellers, leading them on tours of Amazon’s facilities near Reno, Nev., Phoenix and elsewhere. “Look how vast this is,” he recalled telling sellers. “Look at how we can easily absorb your 10,000 orders a month.”

“You do have a bigger warehouse than mine,” Mr. Thomson remembered them saying, “but I have good rates.”

Several years later, Amazon’s focus changed, and so did its pitch.

In early 2011, only a few million people were Prime members, paying $79 a year for unlimited two-day shipping. But Amazon knew those members spent far more on the site. Executives wanted more people to sign up for Prime, and they wanted to sell those customers even more stuff.

That year, Amazon began adding more perks to Prime. Most notable was unlimited video streaming of TV shows like “Mister Rogers’ Neighborhood” and movies like “The Girl With the Dragon Tattoo.”

As more people became members, products eligible for Prime shipping became more popular. Amazon reminded sellers that if they used the company’s warehouses, their items would be Prime eligible, too.

“That is what we were selling,” Mr. Thomson said.

It worked. The number of sellers using Amazon’s warehouses increased by 65 percent in 2013, according to a letter sent to investors. The company has since spent billions of dollars to continue building out its fulfillment network.

Mr. Bezos noted how intertwined sellers, warehouses and Prime had become in a note to investors in 2015. “At this point, I can’t really think about them separately,” he wrote.

Amazon has since flipped back and forth over whether outside sellers must use Amazon’s warehouses to sell Prime products. But for most types of goods, like pet supplies, cameras and baby gear, more than 85 percent of the top-selling items ship out of Amazon’s warehouses, according to Jungle Scout, which provides data to Amazon sellers.

Amazon handles packing and shipping for the most popular products sold on its site, even for products sold by outside sellers.

The 1,000 top-selling

products in each category

Orders sold and fulfilled

by outside sellers

Kitchen/dining

Pet supplies

Camera/photo

Beauty/personal care

Computers/accessories

Orders sold

and fulfilled

by Amazon

Orders fulfilled

by Amazon

for outside

sellers

Clothing, shoes/jewelry

Video games

Home/kitchen

Toys/games

Musical instruments

Cell phones/accessories

Tools/home improvement

Industrial/scientific

Patio, lawn/garden

Grocery/gourmet food

Sports/outdoors

Automotive

Arts, crafts/sewing

Health/household

Appliances

Electronics

Office products

Percentage of total

sales within each group

The 1,000 top-selling products in each category

Kitchen/dining

Pet supplies

Camera/photo

Beauty/personal care

Computers/accessories

Orders fulfilled

by Amazon

for outside

sellers

Orders

sold and

fulfilled

by outside

sellers

Orders sold

and fulfilled

by Amazon

Clothing, shoes/jewelry

Video games

Home/kitchen

Toys/games

Musical instruments

Cell phones/accessories

Tools/home improvement

Industrial/scientific

Patio, lawn/garden

Grocery/gourmet food

Sports/outdoors

Automotive

Arts, crafts/sewing

Health/household

Appliances

Electronics

Office products

Percentage of total sales within each group

Source: JungleScout

By Karl Russell

Amazon has surpassed DHL to become the largest provider of fulfillment and other logistics services in the world, according to The Journal of Commerce, a trade publication.

Many sellers say that the company charges fair rates to fulfill Amazon orders. But they say Amazon is charging them higher prices for other services. For example, because the warehouses operate near capacity, the company charges several times more than competitors to store items before they ship out.

The costs can be several times higher for sellers who use Amazon to ship orders made on other websites. Amazon charges $13.80 for one-day shipping on a T-shirt bought on a site other than Amazon, versus $3.68 when bought on Amazon.

In addition, Amazon had let sellers pay $1 to ship an order in a plain brown box without the company’s smile logo. But in 2016, the company said it would use only Amazon boxes. Sellers were told they could take their product back from Amazon’s warehouses if they wanted. “Return or disposal fees will apply,” it wrote to sellers.

Amazon says that its logistics services are optional and a great value. Sellers who choose to use it “enjoy high-quality fulfillment services that customers want,” the company told Congress’s investigators this year.

The company says it offers lower costs on Amazon orders because it makes other money from them, including commissions and advertising, that it does not get for sales made on other websites.

Shoppers on other sites turn away when products are not available in two days or less, said Karl Siebrecht, co-founder of Flexe, a start-up that connects retailers with a network of fulfillment centers.

“It’s new browser,” he said. “Amazon.com. Click. Buy. Done.”

This summer, Brandon Fishman, the founder of VitaCup, a start-up that infuses coffee with vitamins and nutrients, saw a promising opportunity.

Zulily, an e-commerce site that offers low prices in exchange for slower shipping, wanted to list VitaCup’s products 30 percent off for a short time. It was a chance for Mr. Fishman, whose 35-employee company gets the majority of its sales through Amazon and its own site, to reach new customers.

But Amazon’s software noticed the lower price and removed the bright “Buy Now” and “Add to Cart” buttons from its site. When those buttons are gone, shoppers get a bland text link that says, “Available from these sellers” and they must make more clicks to purchase an item. Those extra clicks are often the difference between success and failure for a seller.

Mr. Fishman’s Amazon sales tumbled, and he emailed Zulily to quickly take down the listing.

“I have told them about my rage many times,” Mr. Fishman said of Amazon. “It has not changed them.”

Amazon has pushed to keep prices low since the day it opened. That has become trickier as more sales came from outside sellers. According to antitrust law, each seller of goods should determine what to charge on its own. To avoid problems, an in-house lawyer is typically present when internal Amazon teams discuss pricing, according to two former employees.

In 2017, Amazon began reducing prices to match competitors; if the new price was lower than the one requested by the sellers, Amazon paid the difference. The company also alerted companies if their products were cheaper elsewhere.

Still concerned about news reports that prices on Amazon weren’t always the lowest, the company tried another approach, the one that hit VitaCup: removing the Buy Now and Add to Cart buttons when its software detected lower prices. When those buttons disappear, sales tumble as much as 75 percent, sellers say.

Executives at Amazon intended this as a tool to lower prices. The company has told Congress that the buttons amount to an endorsement, saying it only displays them on “offers that it is confident will present a great experience for its customers.”

But many brands raise their prices elsewhere to avoid losing the buttons. Or they decide to list their product only on Amazon. That is what happened to a health care supply company that worked with Jason Boyce, who advises online sellers.

“My client cut off Walmart — Walmart! — because it was hurting their Amazon business,” Mr. Boyce said. “If that’s not monopoly power, I don’t know what is.”

Amazon said in statement that sellers “have full control of their own prices both on and off Amazon,” and that the company helps them maximize sales by advising them how to earn the Buy Now and Add to Cart buttons.

The Zulily experience frustrated Mr. Fishman. But he boiled over after another move by Amazon.

One morning in June, Mr. Fishman opened his Amazon app and typed “VitaCup” into the search bar at the top of the screen. On the results page was an ad for Amazon’s own line of coffee.

He had been paying Amazon almost $200,000 a month for ads. Mr. Fishman posted a screenshot on LinkedIn and raged.

“I have a major problem with this!!!” he wrote.

For years, the question of whether Amazon should push ads on its site generated fierce debate among senior managers and executives inside the company, according to eight current and former Amazon employees. In memos and fiery meetings, they disagreed on what was best for a company that preached obsession with serving customers.

One camp believed that ads would erode customer trust, because shoppers expected Amazon to show them popular products with strong reviews and a good price.

The other camp saw ads as a cash machine Amazon could tap to drive down prices and fund new innovations for customers. The financial potential was obvious. When people shop online, they more often turn to Amazon than Google to start their search, according to multiple studies. And every brand wants to get in front of them.

Workers eventually got word that Mr. Bezos had settled the debate, according to two senior employees. Mr. Bezos said that Amazon had two options: Sell ads, and use the cash for investments. Or shun ads, and get beaten by competitors.

Ads soon appeared at critical locations, in particular on the page that pops up after a customer types a product into Amazon’s search bar. Some ads were rectangular blocks across the top of the page, and the top several products listed in the search results were ads disguised as a regular listing, aside from the word “Sponsored” in light gray. Combined, they have at times filled almost the entire first screen.

Mr. Wilke said the internal hesitation to ads was overcome by the results.

“It turned out they worked,” he said. “And by worked, I mean the ads help customers find what they’re looking for. And the reason we know that is cause they buy more stuff.”

But it added another cost for companies. Ranking high is essential to driving sales on the site. Competitors raced to place ads to ensure a prominent spot.

Out of antitrust concerns, company lawyers prohibit employees and advertising companies it works with from bragging that Amazon is where most people search for products online, according to two people who were warned about this.

Quartile, among the largest of a new breed of companies that help brands navigate Amazon advertising, tested the importance of the ads last year. It stopped running ads for 750 popular products. Immediately, sales shrank by 24 percent.

The effect then cascaded. That’s because the fewer recent sales a product has, including sales driven by ads, the lower it ranks on the site. At the end of 10 weeks, sales of the products without ads had tumbled 55 percent.

“It’s increasingly pay-to-play,” said Melissa Burdick, a 10-year Amazon veteran who now advises major consumer brands.

Amazon said its ads were optional and the majority of sellers built their businesses without them.

John Denny, who ran e-commerce for the drink company Bai, said brands used to believe that if they had a great product, it would show up in the search results, and sales would follow.

“Those days are over,” Mr. Denny said. “There are no lightning strikes on Amazon any more.”

A decade ago, Mr. Thompson, a former Microsoft software developer, recognized a big market for computer accessories like computer docking stations and cables. He started Plugable and betted big that depending on Amazon would turn his idea into a business.

It worked. In 2016, Mr. Bezos highlighted Mr. Thompson when talking about the success of sellers in his annual letter to investors. Amazon posted a video about Plugable on its website to attract new sellers.

“He has a history of good performance metrics, and an absence of things like safety and authenticity complaints,” Chris McCabe, a former Amazon fraud investigator, said in an interview.

But in the last couple of years, as rules shifted and his profit shrank, Mr. Thompson began warning people that working with Amazon had become increasingly difficult.

He took his concerns to Amazon this summer, giving a 20-slide presentation to a senior executive at the company’s Seattle headquarters. On slide No. 6, Mr. Thompson laid out his nightmare: Amazon cutting off sales of his best seller, a laptop docking station that is frequently one of the 100 most popular electronics products on the site.

His plea to the executive was simple. “No surprises,” he said.

He got surprised.

One Sunday in July, he got an email saying that Amazon had removed the docking stations. Amazon said it was because of complaints that Plugable’s products had not matched the condition described on the site.

Other docking stations, including one made by Amazon, filled the void online.

Mr. Thompson scrambled, contacting two high-level managers he knew and his account manager, who Amazon charges him $5,000 a month to have. None of them could fix it.

He and other staff members dug through customer feedback and returns. They found only outstanding reviews, said Gary Zeller, one of Mr. Thompson’s deputies.

“There was nothing borderline about it,” Mr. Zeller said.

After four days and at least $100,000 in lost sales, the listing went back up. Mr. Thompson said he still did not understand what ignited the problem.

Amazon declined to comment on Plugable. Mr. Wilke said that the company’s future depended on policing the site without harming well-meaning merchants.

“We have a strong incentive to be as accurate as possible in identifying bad actors, make very few mistakes when we’re wrong, on giving second chances to people who make an honest mistake,” he said.

Mr. Thompson is now looking for new ways to make money. But Amazon accounts for roughly 90 percent of electronics sales online, according to market research. His business at Walmart and eBay, the next largest online retailers, are less than 5 percent of his revenue.

In September, Plugable hired two people to sell directly to corporations.

“We really built the company on Amazon,” Mr. Thompson said. “We have no regrets about doing that. But today our focus has to be getting diversification off Amazon.”

He said he understood what he was up against.

“We are dealing with a partner,” he said, “who can and will disrupt us for unpredictable reasons at any time.”

Categories
Amazon.com Inc Antitrust Laws and Competition Issues Cloud Computing Computers and the Internet Elastic NV Innovation Open-Source Software Regulation and Deregulation of Industry Start-ups Suits and Litigation (Civil) Uncategorized

Prime Leverage: How Amazon Wields Power in the Technology World

Image
Credit…Nolan Pelletier

Software start-ups have a phrase for what Amazon is doing to them: ‘strip-mining’ them of their innovations.


SEATTLE — Elastic, a software start-up in Amsterdam, was rapidly building its business and had grown to 100 employees. Then Amazon came along.

In October 2015, Amazon’s cloud computing arm announced it was copying Elastic’s free software tool, which people use to search and analyze data, and would sell it as a paid service. Amazon went ahead even though Elastic’s product, called Elasticsearch, was already available on Amazon.

Within a year, Amazon was generating more money from what Elastic had built than the start-up, by making it easy for people to use the tool with its other offerings. So Elastic added premium features last year and limited what companies like Amazon could do with them. Amazon duplicated many of those features anyway and provided them free.

In September, Elastic fired back. It sued Amazon in federal court in California for violating its trademark because Amazon had called its product by the exact same name: Elasticsearch. Amazon “misleads consumers,” the start-up said in its complaint. Amazon denied it had done anything wrong. The case is pending.

Not since the mid-1990s, when Microsoft dominated the personal computer industry with Windows, has a technology platform instilled such fear in competitors as Amazon is now doing with its cloud computing arm. Its feud with Elastic illustrates how it brandishes power in that technical world.

While cloud computing may appear obscure and geeky, it underlies much of the internet. It has grown into one of the technology industry’s largest and most lucrative businesses, offering computing power and software to companies. And Amazon is its single-biggest provider.

Amazon has used its cloud computing arm — called Amazon Web Services, or A.W.S. for short — to copy and integrate software that other tech companies pioneered. It has given an edge to its own services by making them more convenient to use, burying rival offerings and bundling discounts to make its products less expensive. The moves drive customers toward Amazon while those responsible for the software may not see a cent.

Even so, smaller rivals say they have little choice but to work with Amazon. Given the company’s broad reach with customers, start-ups often agree to its restrictions on promoting their own products and voluntarily share client and product information with it. For the privilege of selling through A.W.S., the start-ups pay a cut of their sales back to Amazon.

Some of the companies have a phrase for what Amazon is doing: strip-mining software. By lifting other people’s innovations, trying to poach their engineers and profiting off what they made, Amazon is choking off the growth of would-be competitors and forcing them to reorient how they do business, the companies said.

All of this has fueled scrutiny of Amazon and whether it is abusing its market dominance and engaging in anticompetitive behavior. The company’s tactics have led several rivals to discuss bringing antitrust complaints against it. And regulators and lawmakers are examining its clout in the industry.

“People are afraid that Amazon’s ambitions are endless,” said Matthew Prince, chief executive of Cloudflare, an A.W.S. competitor that protects websites from attacks.

A.W.S. is just one prong of Amazon’s push to dominate large swaths of American industry. The company has transformed retailing, logistics, book publishing and Hollywood. It is rethinking how people buy prescription drugs, purchase real estate and build surveillance for their homes and cities.

But what Amazon is doing through A.W.S. is arguably more consequential. The company is the unquestioned market leader — triple the size of its nearest competitor, Microsoft — in the seismic shift to cloud computing. Millions of people unknowingly interact with A.W.S. every day when they stream movies on Netflix or store photos on Apple’s iCloud, services that run off Amazon’s machines.

Jeff Bezos, Amazon’s chief executive, once called A.W.S. an idea “no one asked for.” The service began in the early 2000s when the retailer struggled to assemble computer systems to start new projects and features. Once it built a common computer infrastructure, Amazon realized other companies needed similar capabilities.

Now companies like Airbnb and General Electric essentially rent computing from Amazon — otherwise known as using the “cloud” — instead of buying and running their own systems. Businesses can then store their information on Amazon machines, pluck data from them and analyze it.

For Amazon itself, A.W.S. has become crucial. The division generated $25 billion in sales last year — roughly the size of Starbucks — and is Amazon’s most profitable business. Those profits enable the company to plow money into many other industries.

In a statement, Amazon said the idea that it was strip-mining software was “silly and off-base.” It said it had contributed significantly to the software industry and that it acted in the best interest of customers.

Some tech companies said they had found more customers through A.W.S.; even some companies that have tangled with Amazon have grown. Elastic, for instance, went public last year and now has 1,600 employees.

But in interviews with more than 40 current and former Amazon employees and those of rivals, many said the costs of what the company was doing with A.W.S. were hidden. They said it was hard to measure how much business they had lost to Amazon, or how the threat of Amazon had turned off would-be investors. Many spoke on the condition of anonymity for fear of angering the company.

In February, seven software chief executives met in Silicon Valley and discussed bringing an antitrust lawsuit against the giant, said four people with knowledge of the gathering. Their grievances echoed a complaint by vendors who use Amazon’s shopping site: Once Amazon becomes a direct competitor, it is no longer a neutral party.

The C.E.O.s did not press forward with a legal action, partly out of concern that the process would take too long, the people said.

Now regulators are approaching some of Amazon’s software rivals. The House Judiciary Committee, which is investigating the big tech companies, asked Amazon in a September letter about A.W.S.’s practices. The Federal Trade Commission, which is also investigating Amazon, has questioned A.W.S. competitors, according to officials at two software companies who were called in but were not authorized to discuss the matter.

What Amazon is doing to software start-ups is unsustainable, said Salil Deshpande, founder of Uncorrelated, a venture capital firm.

“It has intercepted their monetization, it has forcibly wrestled control of software from their owners and it has siphoned customers to its own proprietary services,” he said.

When Amazon Web Services began last decade, Amazon was struggling to turn a consistent profit. A service to provide computing power seemed like a distraction.

Yet start-ups embraced A.W.S. They saved money because they did not need to buy their own computing equipment, while spending only on what they used. Soon more companies flocked to Amazon for computing infrastructure and, eventually, the software that ran on its machines.

In 2009, Amazon established a template for accelerating A.W.S.’s growth. That year, it introduced a service for managing a database, which is critical software to help companies organize information.

The A.W.S. database service, an instant hit with customers, did not run software that Amazon created. Instead, the company plucked from a freely shared option known as open source.

Open-source software has few parallels in business. It is akin to a coffee shop giving away coffee on the hopes that people spend on milk or sugar or pastries.

But open source is a tried and true model nurtured by the software industry to get technology to customers quickly. A community of enthusiasts often springs up around the shareable technology, contributing improvements and spreading the word about its benefits. Traditionally, open-source companies later earn money for customer support or from paid add-ons.

Technologists initially paid little attention to what Amazon had done with database software. Then in 2015, Amazon repeated the maneuver by copying Elasticsearch and offering its competing service.

This time, heads turned.

“There was a company that built a business around an open-source product that people like using and, suddenly, they have a competitor using their own stuff against them,” said Todd Persen, who started a non-open-source software company this year so there was “zero chance” that Amazon could lift his creations. His previous start-up, InfluxDB, was open source.

Again and again, the open-source software industry became a well that Amazon turned to. When it copied and integrated that software into A.W.S., it didn’t need permission or have to pay the start-ups for their work, creating a deterrent for people to innovate.

That left little recourse for many of these companies, which could not suddenly start charging money for what was free software. Some instead changed the rules around how their wares could be used, restricting Amazon and others who want to turn what they have created into a paid service.

Amazon has worked around some of their changes.

When Elastic, now based in Silicon Valley, shifted the rules for its software last year, Amazon said in a blog post that open-source software companies were “muddying the waters” by limiting access to certain users.

Shay Banon, Elastic’s chief executive, wrote at the time that Amazon’s actions were “masked with fake altruism.” Elastic declined to make Mr. Banon available for an interview.

Last year, MongoDB, a popular technology for organizing data in documents, also announced that it would require any company that manages its software as a web service to freely share the underlying technology. The move was widely viewed as a hedge against A.W.S., which does not openly share its technology for creating new services.

A.W.S. soon introduced its own technology with the look and feel of MongoDB’s older software, which did not fall under the new requirements.

That experience was top of mind this year when Dev Ittycheria, MongoDB’s chief executive, attended the dinner with the heads of six other software companies. Their conversation, held at the home of a Silicon Valley venture capitalist, shifted to something drastic: whether to publicly accuse Amazon of behaving like a monopoly.

At the meal, which included the heads of the software firms Confluent and Snowflake, some of the C.E.O.s said they faced an uneven playing field, according to the people with knowledge of the gathering. No complaint has materialized.

“A.W.S.’s success is built on strip-mining open-source technology,” said Michael Howard, chief executive of MariaDB, an open-source company. He estimated that Amazon made five times more revenue from running MariaDB software than his company generated from all of its businesses.

Andi Gutmans, an A.W.S. vice president, said some companies wanted to be “the only ones” to make money off open-source projects. He said Amazon was “committed to making sure that open-source projects remain truly open and customers get to choose how they use that open-source software — whether they choose A.W.S. or not.”

By the time A.W.S. held its first developer conference in 2012, Amazon was no longer the only big player in cloud computing. Microsoft and Google had introduced competing platforms.

So Amazon unveiled more software services to make A.W.S. indispensable. In a speech at the event, Andy Jassy, the head of A.W.S., said it wanted to “enable every imaginable use case.”

Amazon has since added A.W.S. services at a blistering pace, going from 30 in 2014 to about 175 as of December. It also built in a home-field advantage: simplicity and convenience.

Customers can add new A.W.S. services with a single click and use the same system to manage them. The new service is added to the same bill and requires no extra permission from a finance or compliance department.

In contrast, using a non-Amazon service on A.W.S. is more complicated.

Today when a customer logs onto A.W.S., they see a home page called the management console. At the center is a list of about 150 services. All are A.W.S.’s own products.

When someone types “MongoDB,” the search results do not fetch information for MongoDB’s service on A.W.S.; it instead suggests an offering from Amazon that is “compatible with MongoDB.”

Even after a customer has selected a non-Amazon option, the company sometimes continues pushing its own product. When someone creates a new database, they are presented an ad for Amazon’s own technology called Aurora. If they pick something else, Amazon still highlights its option as “recommended.”

Mr. Gutmans said A.W.S. worked closely with many companies to integrate their offerings “as seamlessly as possible.”

Amazon’s A.W.S. developer conference is now one of the world’s biggest technology events, drawing tens of thousands of people to Las Vegas every year.

The highlight is a speech from Mr. Jassy where he showcases new services. Because a new A.W.S. feature often spells hardship for some start-up, the presentation has earned the nickname “The Red Wedding,” a bloody event in a “Game of Thrones” episode.

“Nobody knows who is going to get killed next,” said Corey Quinn of the Duckbill Group, who helps companies manage their A.W.S. bills and writes a newsletter called “Last Week in A.W.S.

At last year’s conference, Amazon unveiled a new tool — Amazon CloudWatch Logs Insights — to help customers analyze information about its services.

Daniel Vassallo, a former A.W.S. software engineer who helped develop the product, said executives wanted to go after the market, but were worried it would look like Amazon was targeting a company called Splunk, which offers a similar tool and is also a major spender with A.W.S.

So Amazon previewed its new product to Splunk before the conference and agreed not to announce it during Mr. Jassy’s speech, Mr. Vassallo said.

“They weren’t particularly happy. Who would be?” Mr. Vassallo, who left Amazon in February, said of Splunk. “But we still went ahead and did it anyway.”

Splunk said it had a “strong partnership” with A.W.S. and declined to comment further.

Amazon has also created rules for its developer conference. Companies that pay tens of thousands or hundreds of thousands of dollars for a booth said they must submit their banners, pamphlets and news releases to Amazon for approval.

According to an A.W.S. document from August explaining marketing guidelines for companies it works with, Amazon bans certain words or phrases, such as “multi-cloud,” the concept of using two or more cloud platforms. An Amazon spokesman said it had stopped this practice.

Companies are also instructed to strike claims about being “the best,” “the first,” “the only,” “the leader,” unless substantiated by independent research.

Redis Labs was founded in 2011 in Tel Aviv, Israel, to build a business around managing a free software called Redis, which people use to organize and update data quickly. Amazon soon offered a competing paid service.

While that created a formidable rival to Redis Labs, Amazon’s move also validated Redis technology. The start-up has since raised $150 million, exemplifying the can’t-live-with-can’t-live-without relationship that many software companies have with Amazon.

Former Redis Labs employees estimate that Amazon generates as much as $1 billion a year from Redis technology — or at least 10 times more revenue than Redis Labs. They said Amazon also tried to poach its staff and undercut it with hefty discounts.

A.W.S. offers a discount to customers who commit to spending at least a certain amount with it, but it does not treat money spent on A.W.S.’s own services and rival services equally. Spending on outside services counts as only 50 cents on the dollar toward the balance. And discounts do not apply to non-Amazon products, according to A.W.S. customers.

If a customer still chooses Redis Labs through A.W.S., Redis Labs is required to kick back around 15 percent of its revenue to Amazon.

At one point, Amazon’s attempts to hire Redis Labs employees became so aggressive that executives removed some online biographies of its technical staff, said the former employees. A Redis Labs spokesman said the start-up had no recollection of that.

Some Redis Labs executives considered bringing an antitrust action against Amazon this year, the former employees said. Others balked because 80 percent of the start-up’s revenue came from customers on A.W.S.

“It was a love-hate relationship,” said Leena Joshi, a former vice president of marketing at Redis Labs. “On one hand, most of our customers ran on A.W.S. so it was in our interest to be tightly integrated with them. At the same time, we knew they were taking away our business.”

Redis Labs declined to comment on its revenues or A.W.S. actions. It said Amazon offered “important services.”

Not every company views A.W.S. as a threat. Ali Ghodsi, chief executive of Databricks, a San Francisco start-up that uses artificial intelligence to analyze data, said A.W.S. salespeople have lifted sales of his company’s products.

“I don’t see them using shenanigans to stop us,” he said.

But Saket Saurabh, chief executive of Nexla, a 14-person start-up in Millbrae, Calif., said he had reservations about Amazon.

In August, Amazon began a service for processing and monitoring data that competes with Nexla. Investors warned him about sharing too much information with the giant.

Mr. Saurabh went ahead anyway and signed his company up to work with Amazon in September. The reason? Amazon’s giant sales teams can give Nexla access to a vast audience.

“What choice do we have?” he said.