Market leaders may iterate and experiment with less risk of customer churn than upstarts working to establish market position. Amazon Prime is a good example.
I am toying with the idea of grouping some of our TEK2day writings as an Amazon Kindle book. While playing with the Kindle direct publishing feature I noticed a new Amazon Prime feature – “watch this movie free with commercials.” This particular movie had a tiny audience with limited reviews. Normally the cost to view a movie with a narrow audience would have been included in the Amazon Prime subscription fee (as was the case with this movie when I watched it two years ago). Amazon had figured a way to monetize this movie beyond the subscription fee without forcing me to pay an additional rental or purchase fee. I could make those advertisements disappear for $3.99 (I did not re-watch the movie but counted eight advertising slots in the playback area). Amazon is slowly but surely becoming an advertising juggernaut given its e-commerce leadership position. Amazon’s advertising business feels similar to AWS in that it too was spawned out of Amazon’s online retail success.
Amazon has greater leverage with its Prime offering today (video and otherwise) versus a year ago thanks in large part to the COVID pandemic. The wonderful thing about online platforms such as Amazon Prime, YouTube, DisneyPlus, Netflix and Apple TV+ is that those platforms capture, store and analyze customer usage patterns in real-time powered by robust machine learning back ends at scale. Those machine learning-based back ends do not tire, will forever remain on the learning curve and will only do a better job of anticipating our behavior over time. Smart experimentation will only shorten those learning curves. These market leaders can afford to experiment with subtle changes to the user experience without necessarily suffering customer churn. More companies ought to take a page out of Amazon’s experimentation book.