If he’s right, Amazon will be the first $1 trillion U.S. company…
Alex Moazed is the founder of Applico—a business transformation advisory firm.
His company has created apps for Disney, DirecTV, and Google, and has advised dozens of clients on business transformation.
Not long after starting Applico in 2009, Moazed worked on a project for Google.
While working on that project, Moazed realized the tech giant was changing the way companies did business.
He set out with colleague Nicholas Johnson to find out what that was.
What the two found was that Google doesn’t make its money from selling goods or services.
It simply connects people with information… and keeps them coming back.
Moazed and Johnson call businesses like Google “platform” companies. And they’re revolutionizing how people buy and sell goods and services.
As we showed you in yesterday’s Palm Beach Daily, the top five biggest U.S. companies are now platform businesses.
Apple is the biggest based on market capitalization ($750 billion). That means it’s already three-fourths of the way to $1 trillion.
But Moazed believes Amazon will surpass Apple and be the first U.S. company to reach the 13-digit mark.
If he’s right, the company’s market cap will more than double by 2020. And Amazon’s stock would grow 120% in three years…
But let’s not get ahead of ourselves.
First, we’ll explain why platform companies are disrupting all sorts of industries. Then we’ll show you why Amazon will likely be head and shoulders above the rest.
A New Business Model Is Born
The growing trend in platform companies is the latest big idea we’re sharing with our readers. It’s part of our mission to help you grow richer every single day.
That’s why we reached out to Moazed. He is one of the foremost experts in this field.
He and Johnson wrote Modern Monopolies: What It Takes to Dominate the 21st Century Economy. It’s the definitive book about platform companies.
Modern Monopolies is one of the rare business books that entertains you with true stories while teaching you concepts. It’s the best business book we’ve read this past year.
We recommend you pick up a copy.
The book defines a platform company as one that allows “consumers and producers to connect with each other and exchange goods, services, and information.”
Google was one of the first platform companies in the new information age. It started out in 1998 as a search engine.
But as Moazed and Johnson show in their book, Google underwent some radical changes. It started adding apps such as Gmail, Google Maps, Google Docs, YouTube, and others. Each app is like a plank in a platform.
Google’s platform created an entire ecosystem that attracted consumers, and more importantly developers, who drove innovation.
This platform model is destroying the old ways of doing business. And Amazon is leading the charge…
Humble Origins, Bright Future
Amazon started out small as well. In 1994, it was just an online bookstore.
But founder Jeff Bezos did something different from every other book store—he didn’t keep an inventory.
Instead, he connected publishers with readers. Amazon took orders for the publishers, who shipped the books to customers.
According to Moazed, that was the key to Amazon’s growth. It didn’t have to open new locations to add customers.
It went on to build a consumer marketplace that leveraged third-party sellers and offered them value-added services for rapid growth.
Amazon also applied its platform to other products. Today, you can buy everything from gardening tools to high-end computers on Amazon.
Now compare that to Wal-Mart’s model.
In order for Wal-Mart to expand its inventory or customer base, it needs to open new stores. And it costs about $37 million for each new location.
But Amazon doesn’t have to build any new locations to expand.
This ability to scale at little or no cost is one reason why Amazon is on track to be the biggest company in the United States.
But Moazed says there’s an even bigger tailwind behind the company.
On Its Way to $1 Trillion
According to Moazed, the newest opportunity for Amazon is the business-to-business (B2B) distribution market. This is where businesses sell products and services to other businesses.
At $6 trillion, the B2B distribution market is twice the size of the retail market.
Right now, Amazon mainly sells to consumers, controlling about 10% of the retail market. And it’s responsible for more than half of all U.S. e-commerce for 2016.
If Amazon can control just 10% of that B2B market, it will triple its sales. That’s why the company started Amazon Business.
Moazed said Amazon Business is making around $300 million in gross sales per month… And it’s reportedly growing over 20% every month.
“If Amazon hits on this B2B opportunity, it will easily hit the trillion-dollar mark before anyone else,” he said.
If Amazon can build a centralized B2B platform on top of its already existing retail platform, it could easily top $1 trillion. (Applico shows how Amazon can reach this mark right here.)
That would take its stock from about $950 today to $2,100 in 2020. That’s a 120% gain.
If you want to take advantage of the trend in platform companies, consider adding Amazon to your portfolio.
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. Tomorrow we’ll tell you which businesses will get “Amazon’d”—the term we’re using to describe companies that get steamrolled by the juggernaut.
Amazon is crushing its retail competition…
According to Morgan Stanley, Amazon is the second-biggest apparel retailer by market share.
Last year, 7.4% of all retail apparel sales went through the Amazon platform. And this is just the beginning. Soon it will surpass Wal-Mart as the biggest apparel retailer in the world.
Amazon has already knocked out retailers like Circuit City and Virgin Megastores. But it’s not stopping there.
Read tomorrow’s Daily to learn which sector Amazon will trample next.
Bitcoin has broken out to all-time highs. As of Tuesday, it was trading at more than $1,450. It’s up more than 220% since we recommended it last year.
But many people think they’ve missed the boat on bitcoin’s rise.
Teeka says bitcoin reminds him of the early years of Microsoft. Microsoft’s market cap in 1986 was about $500 million. By 1991, it had grown to $21 billion.
Some investors thought Microsoft’s rise was a flash in the pan and its run was over. Today, Microsoft’s market cap is $530 billion.
Teeka says bitcoin’s underlying technology could be bigger than the technology that propelled Microsoft. So bitcoin is just in the first inning of its rise.
If you haven’t gotten into bitcoin yet, now’s the time. It still has plenty of room to run…
From Chuck W.: I paid for Palm Beach Confidential last week but there was no Q&A as promised for subscribers. I clicked on the email link you sent for April 27 webinar and could never get on—the page was blank. I worked with customer service and still couldn’t get anything. I am upset and feel I am owed a copy of the Q&A by email. If I don’t receive it in four days, I’ll cancel my subscription.
From James M.: I missed Teeka’s Q&A on April 27. I was away from my office and could not log in. Will a recording of that event be posted?
Nick’s Reply: Our customer service team informs us that Teeka’s crypto Q&A for subscribers has been posted on the Palm Beach Confidential website. If you are a PBC subscriber, you can log in and watch it right here…
Longtime PBRG friend Bill Bonner has extended a special invitation to our readers…
He’s investing $5 million of his family trust’s money into a special portfolio. And he’s giving you a chance to invest alongside him…
And to keep things fairer than fair, Bill will give you 48 hours to invest in each recommendation before he does. To take him up on his offer, click here…