The Washington Post's Turnaround Shows Amazon's Success Is No Accident
When Amazon (NASDAQ: AMZN) founder and CEO Jeff Bezos bought The Washington Post in 2013 for $250 million, he turned a lot of heads.
Many asked: "What could Bezos want with one of the nation's foremost broadsheets in an era when the newspaper business is saddled with losses? Would it lead to mass layoffs, or distract him from Amazon?"
Nearly four years after the deal was first announced, the answers to those questions are clear. Bezos has turned the Post into a healthy, growing business, and instead of laying off employees, the company has expanded. And as the explosion in Amazon stock -- up around 220% in that time -- clearly shows, Bezos's first concern hasn't suffered.
The Amazon chief had long held a fascination with the printed word, having built the initial Amazon business on books before branching into e-books and e-readers. Though he had no background in newspapers, the Post seemed to fit with his interests and business acumen, especially as the news business increasingly relies on technology. In 2015, the Post topped the New York Times (NYSE: NYT) in web traffic for the first time ever, though the Times recently passed it again -- the two publications are engaged in a classic newspaper war unlike any the industry has seen in decades.
Now that the paper is privately held its financial results aren't known, but all indications show that business is growing. The company said it would report its third straight year of double-digit revenue growth and has seen record digital subscriber growth.
Let's take a closer at what Bezos has done to drive the Post's impressive turnaround.
1. Focus on the internet as a strength
The advent of the internet has leveled the print publishing industry. Amid the rise of free online content, hundreds of newspapers and magazines have folded, and the ones that haven't have almost all seen print subscriptions decline and a valuable print ad revenue stream dry up.
But rather than see the internet as a weakness for the Post, Bezos saw it as an opportunity. The web gave the paper the chance to reach an audience around the world for free, and it adjusted its news-gathering accordingly. The Post scaled back on local news coverage, which was only of interest to readers in the D.C. area, and instead focused on national news, especially politics, aiming for scoops that would generate interest across the country and go viral.
2. Becoming a tech company
Nearly all of the business improvements since Bezos took over have come from investments in technology. When he bought the company, the Post's tech team was little more than a help desk. But under Bezos, the IT team has nearly doubled to 250, and it developed its own software, which has sped up load times, improved the customer experience, and boosted advertising and customer-targeting by giving the company more data.
The software, which utilizes A/B testing and other kinds of tools to optimize the customer experience, has been so successful that the Post now sells it to 22 other newspapers, making it a revenue stream in and of itself.
Studying customer preferences has made the company's ads much more successful, and user engagement has increased five times over. Bezos' reputation has also made the Post an attractive place to work for engineers, assisting in the hiring and recruiting process.
3. Bundling with Prime
This move only Amazon could have done, and it may have been obvious considering how many other benefits come with an Amazon Prime membership. The Washington Post app now comes pre-loaded on all Kindle Fire tablets, and a Prime membership gives Prime members a generous six-month free subscription, which costs only $3.99/month to renew.
Since there's still a cost to subscribe to the Post, each benefit seems to mutually reinforce the other one. Post subscribers get a discount on the newspaper if they join Prime, and Prime members get a generous free trial on the newspaper.
With the announcement of Amazon's acquisition of Whole Foods Market (NASDAQ: WFM) last week, Bezos is set to tackle his next big project. Like The Washington Post deal, the Whole Foods deal closed quickly as the companies seemed to share a mutual admiration.
Bezos' success with both the Post and Amazon shows that he is a master strategist who understands better than arguably any other businessman how to harness the power of technology to reach new customers and drive revenue growth. Expect him to implement more of those tactics, including using technology to improve the customer experience, once Amazon takes over Whole Foods. Its grocery invasion may be the company's boldest move yet, but Bezos has proven many times before it's foolish to bet against him.
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John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Whole Foods Market. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.
