WHAT THEY DO
The former dotcom upstart is now the elder statesman of e-commerce, the business model it pioneered. Having started as a book retailer, Amazon now boasts “Earth’s Biggest Selection,” selling and shipping 40 categories’ worth of goods—everything from tennis rackets to groceries, harmonicas to car parts.

WHERE THEY CAME FROM
In 1993, a hedge fund vice president named Jeff Bezos realized that use of the fledgling internet was growing 2,300 percent annually. He decided that the best way to make a profit using the technology was, quite simply, to sell stuff—specifically, books, which were already well cataloged but which are difficult to stock and organize in a retail store.

A few months later he moved to Seattle and founded Amazon in a converted garage. The website launched in 1995 and the company processed almost $13,000 in orders in its first week. Total sales reached $500,000 in 1995, $15.7 million in 1996, and $147.8 million in 1997. The day it went public, in May of 1997, Amazon lived up to investors’ giddy expectations: Share prices rocketed 30 percent and the company raised $54 million.

WHAT THEY GOT RIGHT
The books concept proved instantly successful, and within two years, Amazon began to sell music, movies, toys, and electronics. It purchased online booksellers in the U.K. and Germany, created a partnership with Sotheby’s to do online auctions (the partnership ended, but the auctions remain), and in 2000 began allowing retailers like Macy’s and Foot Locker to sell on Amazon in exchange for a commission. By then, it had 9,000 employees and its market capitalization had greatly surpassed that of Borders and Barnes & Noble, combined. The company’s success led many to predict the demise of the bookselling storefront, but Borders and Barnes & Noble have since become more profitable.

WHAT THEY GOT WRONG
Despite its coveted stock and skyrocketing sales, Amazon didn’t turn a profit until the last quarter of 2001. Many investors, spooked by crashing dotcom businesses and the September 11, 2001 terrorist attacks, had dumped Amazon shares: From a high of $106 in 1999, Amazon had plummeted to $6 a share at its nadir in 2001.

Even before the stock hit its low, Bezos knew Amazon’s survival would require drastic restructuring, so he cut 15 percent of the workforce, closed distribution centers, and borrowed nearly $2 billion from banks. In the meantime, Amazon continued to do business, even partnering with rival Borders to operate its online sales. Amazon finally produced a full-year profit in 2003. The stock has since hovered in the thirties and forties, as investors continue to question Bezos’ commitment to his core business (Amazon could even be losing money; it is notoriously secretive). There may be something to their concerns: While the 2006 holiday season was the company’s strongest ever in terms of sales, profits were about half the previous year’s (Amazon blamed taxes and tech expenses).

WHAT’S NEXT
There is perpetual and growing competition from new Web discounters and brick-and-mortar shops moving online. And, of course, there’s the G-word: Online shoppers increasingly begin their search for a product by using Google. But Amazon’s e-commerce systems are among the world’s biggest and most reliable, and the company continues to spend hundreds of millions of dollars modernizing their data centers and software.

In late 2006, Bezos announced that the company will open up its infrastructure to customers. The idea is to let individuals and small companies bypass the hefty startup costs associated with getting into the retailing business by giving them access to Amazon’s warehousing, computing, and transaction capabilities. The online giant released some test slots to the public at 2 a.m. in August of 2006. They were snatched up within five hours.

The general business plan, it seems, is optimism. Ignoring analyst doomsaying and zigzagging stock prices, Bezos continues to move ahead. In an I-told-you-so move, he had his 1997 letter to shareholders reprinted in Amazon’s 2005 annual upbeat report. The letter read, “It’s all about the long term.”  —Julia Ramey