So, if Walmart didn't sign up, then this product is so much potential and is so important to Facebook that they would probably need to cut a deal with Walmart or Amazon and figure out what's the way. Like basically, Amazon and ChatGPT have cut a deal where Amazon held out. They never went into ChatGPT's failed instant checkout thing. And what ended up happening, because what's Amazon's problem? Amazon shows ads. Without ads, they lose money on their retail business. And they are the worst. Their ads — every single product on an Amazon page, like 80% of them are ads. It's out of control. It's actually why earlier in the podcast, when you said I was wrong about antitrust and aggregators and whatnot, they do abuse their position. And when I said earlier in the podcast, it's a tax on both businesses and consumers.
No, no, I didn't say you're wrong on antitrust. The antitrust people are wrong by focusing on supply.
Yeah, no, I know what you meant.
[laughter] Just clarifying that I'm directly correct in a lot of ways here.
I'm going to go see if like FedEx has merchandise. I'm going to buy a hat. I'm going to mail it to you and make you wear it next podcast. But anyway, let's continue. [laughter]
I can't wait. No, but the Amazon — it is interesting because I think a lot of normies might not appreciate how important the advertising business is to Amazon's bottom line. And it's a tax on consumers because when I go on Amazon, if I don't know exactly what product I want, like brand and exactly what I need — which I'll still do because Amazon's logistics is so unbelievable that I'll use the shipping and take advantage of the shipping — but if you're just searching for a product, you don't know how much it... there's so much crap that's bought and paid for in the search results that it's genuinely difficult as a consumer to feel confident in what you're getting. And that's... or Rufus.
Yeah, it's taking over now that Rufus has been renamed to Alexa. It takes over the screen and it's terrible.
Yeah, but that's their business at this point, and that's the business that they're trying to protect because it is so much of their profit.
Right. So in the short to medium term, it doesn't matter how crappy their business is, to your point. Why?
Logistics.
Spent billions and billions of dollars in the real world. Remember that part of the world all the doomers forget about — actual physical stuff? That's where Amazon actually spends their money. That is a real moat.
Yeah.
Like at the end of the day, like doing lots of research — like I was building a rack, you might have heard about it. ChatGPT or Claude will recommend... they'll put links to go buy it.
Mhm.
And I'm like, I want that from Amazon, and like, well, I can't do that, but here's a link. They'll give you the Amazon, like a weird search parameter. So you click it, it will do a search on Amazon, and you can hopefully click on the right thing.
Right.
That's how it's useful. If you know exactly what you need.
Work. I just go and I find it myself on Amazon and I buy it, and I just buy it on Amazon because it's going to show up in a... I don't want to deal... By the way, I don't want to deal with FedEx or UPS, the worst companies in the history of the world.
Thank God for the Amazon logistics department. It's true.
Despite like it seems ramshackle, people putting it on their personal cars and stuff, it actually gets there and works. They put it in the right spot where I'm supposed to. Another thing, my house is on a corner. So I put every time go to the side door because no one uses the front door. UPS and FedEx always go to the front door. It drives [laughter] me freaking crazy. Amazon will put it on the side door. It's great. They do a great job.
Anyhow, I despise these companies so much right now. The perfect thing, I hope the doorbell rings while we're recording this podcast. It will leave it in. We're not going to edit it out. Just for the sake... [laughter]
You'll have to go up there and receive your server.
I want stuff from Amazon. I want to buy from Amazon because of the investments they've made, not because the website's great, because the investments they've made in the real world. That is real and meaningful, and Muse would be so much better if it could go to Amazon. Amazon has all my purchase history. Why is it so easy for me to reorder the stuff from that when it runs out? I just go to my recent orders. I can get the exact same one that I had, and I can order it again. It's great. I do it all... like my most... actually, one of my biggest complaints about the Amazon app is it takes like three taps to get to your recent orders. A huge number of my orders are recent orders. I want that top level. I want the search directly to my recent orders. I'm going to get it. I'm going to get it again. And I'm going to keep doing that for quite a while.
But the problem is that to the extent you start using Muse... So, Muse needs an answer to this, and Walmart's going to provide it. Number one, Walmart's awesome. Like I'm not... Did I say this last week? I can't re-
We went over it a week ago. Sure.
They're delivering... fan here.
If you want stuff for this kind of stuff, by the way, the stuff that's in a Walmart store, you will get it in an hour from Walmart because they will just go to the store and they'll deliver it. It's like it's faster than Amazon. And they... the... it's just... it's already really good. Number two, they can... All the stuff that agents are good for is the boring stuff. Walmart has the boring stuff. Amazon has the boring stuff. Walmart is arguably better at the boring stuff again because it's down the road in a store, and you can get it in an hour.
The issue for Amazon is right now everything they spent on the physical world is a moat, and it's a real moat. It's one of the most powerful moats that exist.
Yeah.
The problem with building in the real world is depreciation.
Okay.
They spent real money on this. That money has... like that money is out the door, and they need to earn a return on that money. Now, if you built a data... or if you built a fulfillment center down the road that say cost a million dollars — they cost more than that, we're just... just for analogy — say it cost a million dollars and you sell 10 million items out of that distribution center. Again, these numbers are way too small because you're doing them just for liquidity. So, of the 10 million dollars, the 1 million dollars you spent has to be spread over that 10 million dollars, right? So the... Now, the way the money's out the door early, but often it depends... well, sometimes it is. Sometimes they're financed, sometimes they're leases, whatever it might be. But at the end of the day, the more stuff you sell — if you sell 10 million things from that distribution center or you sell 100 million — that has a massive impact on your profitability. Because the more stuff you sell, you already did the fixed upfront cost. So it is in your... you have to maximize volume. The more... if you have a fixed cost, you want to maximize volume. That spreads out your cost, you get more leverage on your cost. And by the way, if you took on debt to build these things, which you should — the whole point of debt is you're going to get a long-term benefit from this asset, you want to build it now, so you pull forward via debt to build it and then you pay back the debt as the asset's generating revenue, right? The asset's generating revenue, you pay back debt. Debt is a good thing because of this. It matches the... If you had to save up to buy your super expensive thing and only then could make money from it, you wouldn't build anything because you don't have the money to get it because you couldn't build the thing. It's like debt is amazing. Debt is critical to economic growth because you get the money to build the thing to make money and then you can pay it back over time.
However, debt goes sideways when you don't make enough money to make it back, and then... sorry, game over. That's the problem with debt. The end game... the end state is game over.
The problem for Amazon is if Muse really, really takes off. And right now, there's no point... like agents go there because Amazon's not... like not necessarily losing money, but in the grand scheme losing money because they're not showing ads. The ads actually make their business profitable. So there's no money.
Don't see ads and there's no uplift.
So in the long run, Muse is small. It's not a big deal, but it does have Walmart. If Muse takes off and Muse actually starts peeling away sufficient volume, Amazon — that whole moat that is real because they spent real money in the real world — becomes a millstone.
I was just going to say.
They have around their neck. Yep.
Around their neck. And that's why if like Meta... it's a big deal that... That's why Walmart coming in is huge. Like Meta doesn't need Amazon now, I don't think.
Mhm.
You're a customer, you don't care. You're just going to go buy... You might buy a Walmart subscription, which you didn't before.
You might discover how great Walmart is and become a Walmart evangelist thanks to Muse.
Interesting second-order effect. Stuff Amazon... The reason why Amazon only makes money through ads is because they're super optimized, like that's how you can have the lowest possible prices. Same thing with like Walmart has a burgeoning ad business. And this all makes... That's what... If all ad businesses get killed, stuff's going to cost more.
Stuff gets more expensive.
[laughter] The actual answer is to charge more for stuff. It's the same thing as a subscription thing. A very like... if the only advertiser in the world ends up being Meta, everything else is going to cost more.
Okay. Well, I do want to read this note we got from Dave who says, 'I'm a brand owner and one of the rebels that Toby says Shopify is arming, but unfortunately, we still willingly do a lot of business with the empire. Ben, your latest Amazon and Facebook Muse piece gets it mostly right. Amazon still has the demand. The problem is that Amazon is abusive toward third-party sellers who accounted for 61% of paid units last quarter and help fund the $68 billion ad business you described. Amazon doesn't have loyal sellers, they have captive sellers. We can and do already get many direct orders to customers in one or two days. For independent brands, the harder thing to match is the confidence that makes you pass over their website and search Amazon instead. Amazon has spent decades earning and reinforcing that expectation. I sometimes pay Amazon $5 more just to knowingly get it tomorrow with Prime when the same brand Shopify store might take two to six days. My question...
The captive set... like he just described Aryanism theory. This is the whole point. But it is... Yes, Amazon is abusive. Why are they abusive? Because they can be. Why can they be? Because there's no alternative. They own demand.
[laughter] Right.
Like this is one of the rebels doing business with the empire.
Products, you need demand. Amazon gates it.
Right. Well, and so he asked, could Muse, ChatGPT, or Gemini help shoppers trust the buying process without having to trust each unfamiliar store separately as Amazon already does for marketplace sellers? If a good purchase from one Shopify store makes the next store feel less risky, merchants get more demand and more reason to invest in that experience. How much protection does Amazon's logistics network provide its advertising business when Amazon's troll ads have destroyed the customer experience, and when the sellers it has spent years squeezing push their resources into reaching customers via personal agents? I feel like that lays out the question that will be answered over the next four or five years pretty clearly.
I think you got it totally backwards. I think the risk to the agents is, 'Oh, I can find these products elsewhere. And then, where's my product? Where's the tracking number? Where can I find it? Why didn't it get delivered?' And customers are like, 'You know what?'
Easier to just buy it all on Amazon. Yeah.
Like the problem with this is the challenge of being like an aggregator. You're not actually down in the weeds. You're not actually in the physical world. You are assuming a lot of responsibility and dependence, which by the way, this is the other part, brilliant part of Google. Google sends you to another website. It was clear that you weren't buying from Google. You were buying from... Google helped you find the website, and they took a toll with an ad, but to the customer, the customer expectation is I'm dealing with this other website, this other company. When they screw it up, when something doesn't work, when I need to process a return, I'm not going to call Google. It doesn't even occur to me to call Google. I'm going to go to the website and complain about it, and that's going to be that.
Yeah.
The problem with... it's tremendously powerful to assume being the front door. No one needs to go to a website anymore. You've also assumed responsibility and accountability in the minds of your customers. That's going to be extremely difficult. This is where this can all go sideways.
Like one of the reasons why Amazon for ages, they did the Fulfillment with Amazon with Shopify, and which is a super interesting like how that all played out. Another like, you know, just... In that case, Shopify was trying to keep Amazon out when Amazon was like, 'Oh, you just add this little plug-in. You can do this sort of thing.' But as I understand it, one of the big issues in that deal was Amazon actually... I can't remember if it was this deal or something else, but there was some deal with Amazon where Amazon took a long time to do their part of the bargain. And as I understand it, they didn't care about the money. I think it was Shopify. Basically, Shopify is like, 'Just let us use Shop Pay. Fulfillment with Amazon's great. What we care about is owning the transaction because that's where we actually make our money.' And that's why Shopify, by the way, is all on board with all this sort of stuff. They work great with Views as long as you use Shop Pay. Like everyone has their... You can tell what actually matters to the business. That's right. And so as I understand it, the big hang-up is not that Amazon needed to have the payment. The reason why it took a while for that deal to come together is Amazon was worried about returns. Like that's just a core part of what they provide is... and if you do a return, you have to accept it, you have to verify it, you have to issue the credit or issue the money. It's comp... If you don't own the transaction, but you're on the hook for the product, that was... that's a problem.
This is going to show up in spades for these agents. It is like again, if I'm doing it on my computer, it does it, it's my problem, I have to deal with it. Meta in making a play for this is making a play for a tremendous amount of revenue. Now,
[laughter] Yeah.
The agents can help process the returns, all right? They can do some of this, but there's going to... they're going to run into so much complexity and problems that Google skated around by not getting into this world. And this is sort of the pushback I have to Dave is like, the best way for Views to stop getting traction is it ordered paper towels and it took two weeks to show up, and in the meantime I had to get in my car and drive to the store.
Yeah. No, I mean, it makes sense, and honestly, reading his question, I root against Amazon for reasons that have been laid out in the past on this podcast. There's something in...
Just for clarity, I love Amazon.
I know you do.
Love them. Love [laughter] them. I won't complain about them, but there is no company that has a greater impact on my regular quality of life than Amazon.
I think some of the ways that you see Apple with its ATT policy where...
Windows to surf Amazon. It's fine.
Okay. Great.
[laughter] It offends my sensibilities and my idea of right and wrong and where the value should accrue in the economy. However,
It's also why you don't use agents. You don't even want to use Amazon. You just... you really do not care about...
I use Amazon and I'm smart enough to not bet against Amazon and its logistics. And the returns is a really good point, and the purchase history is another really good point where it's very useful to have a product that worked and then be able to go back and find that product and buy the exact same product. And the Amazon returns, the amount of returns that they process at scale and how easy they make it relative to every other return experience you're going to have with e-commerce.
No, that's the number one thing about Amazon. That's... like I will... I'm like Dave, I go and find stuff on Amazon, and actually the big thing for me is the returns.
Yeah.
It's just like I just assume if I'm buying from someone else, I have it forever.
[laughter] Like it's just...
Right? Because it's too much of a pain in the ass. But Amazon has all kinds of places you can drop off the returns off, and they make it very easy and seamless. So Amazon's position may be more defensible than one might think in the face of all these agents.
