Prime Video: Prime Video continues to drive Prime member adoption and retention. In the last year we made Prime Video even better for customers by adding new, award-winning Prime Originals to the service, like The Marvelous Mrs. Maisel, winner of two Critics’ Choice Awards and two Golden Globes, and the Oscar-nominated movie The Big Sick. We’ve expanded our slate of programming across the globe, launching new seasons of Bosch and Sneaky Pete from the United States, The Grand Tour from the United Kingdom, and You Are Wanted from Germany, while adding new Sentosha shows from Japan, along with Breathe and the award-winning Inside Edge from India. Also this year, we expanded our Prime Channels offerings, adding CBS All Access in the United States and launching channels in the United Kingdom and Germany. We debuted NFL Thursday Night Football on Prime Video, with more than eighteen million total viewers over eleven games. In 2017, Prime Video Direct secured subscription video rights for more than three thousand feature films and committed over $18 million in royalties to independent filmmakers and other rights holders. Looking forward, we’re also excited about our upcoming Prime Original series pipeline, which includes Tom Clancy’s Jack Ryan starring John Krasinski; King Lear, starring Anthony Hopkins and Emma Thompson; The Romanoffs, executive-produced by Matt Weiner; Carnival Row starring Orlando Bloom and Cara Delevingne; Good Omens starring Jon Hamm; and Homecoming, executive-produced by Sam Esmail and starring Julia Roberts in her first television series. We acquired the global television rights for a multiseason production of The Lord of the Rings, as well as Cortés, a miniseries based on the epic saga of Hernán Cortés from executive producer Steven Spielberg, starring Javier Bardem, and we look forward to beginning work on those shows this year.

  Amazon Music: Amazon Music continues to grow fast and now has tens of millions of paid customers. Amazon Music Unlimited, our on-demand, ad-free offering, expanded to more than thirty new countries in 2017, and membership has more than doubled over the past six months.

  Fashion: Amazon has become the destination for tens of millions of customers to shop for fashion. In 2017, we introduced our first fashion-oriented Prime benefit, Prime Wardrobe—a new service that brings the fitting room directly to the homes of Prime members so they can try on the latest styles before they buy. We introduced Nike and UGG on Amazon along with new celebrity collections by Drew Barrymore and Dwyane Wade, as well as dozens of new private brands, like Goodthreads and Core10. We’re also continuing to enable thousands of designers and artists to offer their exclusive designs and prints on demand through Merch by Amazon. We finished 2017 with the launch of our interactive shopping experience with Calvin Klein, including pop-up shops, on-site product customization, and fitting rooms with Alexa-controlled lighting, music, and more.

  Whole Foods: When we closed our acquisition of Whole Foods Market last year, we announced our commitment to making high-quality, natural and organic food available for everyone, then immediately lowered prices on a selection of best-selling grocery staples, including avocados, organic brown eggs, and responsibly farmed salmon. We followed this with a second round of price reductions in November, and our Prime member exclusive promotion broke Whole Foods’ all-time record for turkeys sold during the Thanksgiving season. In February, we introduced free two-hour delivery on orders over $35 for Prime members in select cities, followed by additional cities in March and April, and plan continued expansion across the United States throughout this year. We also expanded the benefits of the Amazon Prime Rewards Visa Card, enabling Prime members to get 5 percent back when shopping at Whole Foods Market. Beyond that, customers can purchase Whole Foods’ private label products like 365 Everyday Value on Amazon, purchase Echo and other Amazon devices in over a hundred Whole Foods stores, and pick up or return Amazon packages at Amazon Lockers in hundreds of Whole Foods stores. We’ve also begun the technical work needed to recognize Prime members at the point of sale and look forward to offering more Prime benefits to Whole Foods shoppers once that work is completed.

  Amazon Go: Amazon Go, a new kind of store with no checkout required, opened to the public in January in Seattle. Since opening, we’ve been thrilled to hear many customers refer to their shopping experience as “magical.” What makes the magic possible is a custom-built combination of computer vision, sensor fusion, and deep learning, which come together to create Just Walk Out shopping. With JWO, customers are able to grab their favorite breakfast, lunch, dinner, snack, and grocery essentials more conveniently than ever before. Some of our top-selling items are not surprising—caffeinated beverages and water are popular—but our customers also love the Chicken Banh Mi sandwich, chocolate chip cookies, cut fruit, gummy bears, and our Amazon Meal Kits.

  Treasure Truck: Treasure Truck expanded from a single truck in Seattle to a fleet of thirty-five trucks across twenty-five US cities and twelve UK cities. Our bubble-blowing, music-pumping trucks fulfilled hundreds of thousands of orders, from porterhouse steaks to the latest Nintendo releases. Throughout the year, Treasure Truck also partnered with local communities to lift spirits and help those in need, including donating and delivering hundreds of car seats, thousands of toys, tens of thousands of socks, and many other essentials to community members needing relief, from those displaced by Hurricane Harvey, to the homeless, to kids needing holiday cheer.

  India: Amazon.in is the fastest growing marketplace in India, and the most visited site on both desktop and mobile, according to comScore and SimilarWeb. The Amazon.in mobile shopping app was also the most downloaded shopping app in India in 2017, according to App Annie. Prime added more members in India in its first year than any previous geography in Amazon’s history. Prime selection in India now includes more than forty million local products from third-party sellers, and Prime Video is investing in Indian original video content in a big way, including two recent premiers and over a dozen new shows in production.

  Sustainability: We are committed to minimizing carbon emissions by optimizing our transportation network, improving product packaging, and enhancing energy efficiency in our operations, and we have a long-term goal to power our global infrastructure using 100 percent renewable energy. We recently launched Amazon Wind Farm Texas, our largest wind farm yet, which generates more than one million megawatt hours of clean energy annually from over one hundred turbines. We have plans to host solar energy systems at fifty fulfillment centers by 2020 and have launched twenty-four wind and solar projects across the United States with more than twenty-nine additional projects to come. Together, Amazon’s renewable energy projects now produce enough clean energy to power over 330,000 homes annually. In 2017 we celebrated the ten-year anniversary of Frustration-Free Packaging, the first of a suite of sustainable packaging initiatives that have eliminated more than 244,000 tons of packaging materials over the past ten years. In addition, in 2017 alone our programs significantly reduced packaging waste, eliminating the equivalent of 305 million shipping boxes. And across the world, Amazon is contracting with our service providers to launch our first low-pollution last-mile fleet. Already today, a portion of our European delivery fleet is comprised of low-pollution electric and natural gas vans and cars, and we have over forty electric scooters and e-cargo bikes that complete local urban deliveries.

  Empowering small business: Millions of small and medium-sized businesses worldwide now sell their products through Amazon to reach new customers around the globe. SMBs selling on Amazon come from every state in the United States, and from more than 130 different countries around the world. More than 140,000 SMBs surpassed $100,000 in sales on Amazon in 2017, and over a thousand independent authors surpassed $100,000 in royalties in 2017 through Kindle Direct Publishing.

  Investment and job creation: Since 2011, we have invested over $150 billion worldwide in our fulfillment networks, transportation capabilities, and technology infrastructure, including AWS data centers. Amazon has created over 1.7 million direct and indirect jobs around the world. In 2017 alone, we directly created more than 130,000 new Amazon jobs, not including acquisitions, bringing our global employee base to over 560,000. Our new jobs cover a wide range of professions, from artificial intelligence scientists to packaging specialists to fulfillment center associates. In addition to these direct hires, we estimate that Amazon Marketplace has created 900,000 more jobs worldwide, and that Amazon’s investments have created an additional 260,000 jobs in areas like construction, logistics, and other professional services.

  Career Choice: One employee program we’re particularly proud of is Amazon Career Choice. For hourly associates with more than one year of tenure, we prepay 95 percent of tuition, fees, and textbooks (up to $12,000) for certificates and associate degrees in high-demand occupations such as aircraft mechanics, computer-aided design, machine tool technologies, medical lab technologies, and nursing. We fund education in areas that are in high demand and do so regardless of whether those skills are relevant to a career at Amazon. Globally more than sixteen thousand associates (including more than twelve thousand in the United States) have joined Career Choice since the program launched in 2012. Career Choice is live in ten countries and expanding to South Africa, Costa Rica, and Slovakia later this year. Commercial truck driving, health care, and information technology are the program’s most popular fields of study. We’ve built thirty-nine Career Choice classrooms so far, and we locate them behind glass walls in high traffic areas inside our fulfillment centers so associates can be inspired by seeing their peers pursue new skills.

  The credit for these milestones is deserved by many. Amazon is 560,000 employees. It’s also two million sellers, hundreds of thousands of authors, millions of AWS developers, and hundreds of millions of divinely discontent customers around the world who push to make us better each and every day.

  Path Ahead

  This year marks the twentieth anniversary of our first shareholder letter, and our core values and approach remain unchanged. We continue to aspire to be Earth’s most customer-centric company, and we recognize this to be no small or easy challenge. We know there is much we can do better, and we find tremendous energy in the many challenges and opportunities that lie ahead.

  A huge thank-you to each and every customer for allowing us to serve you, to our shareowners for your support, and to Amazonians everywhere for your ingenuity, your passion, and your high standards.

  It remains Day 1.

  Intuition, Curiosity, and the Power of Wandering

  2018

  SOMETHING STRANGE AND remarkable has happened over the last twenty years. Take a look at these numbers:

  1999 3 percent

  2000 3 percent

  2001 6 percent

  2002 17 percent

  2003 22 percent

  2004 25 percent

  2005 28 percent

  2006 28 percent

  2007 29 percent

  2008 30 percent

  2009 31 percent

  2010 34 percent

  2011 38 percent

  2012 42 percent

  2013 46 percent

  2014 49 percent

  2015 51 percent

  2016 54 percent

  2017 56 percent

  2018 58 percent

  The percentages represent the share of physical gross merchandise sales sold on Amazon by independent third-party sellers—mostly small and medium-sized businesses—as opposed to Amazon retail’s own first party sales. Third-party sales have grown from 3 percent of the total to 58 percent. To put it bluntly:

  Third-party sellers are kicking our first-party butt. Badly.

  And it’s a high bar too because our first-party business has grown dramatically over that period, from $1.6 billion in 1999 to $117 billion this past year. The compound annual growth rate for our first-party business in that time period is 25 percent. But in that same time, third-party sales have grown from $0.1 billion to $160 billion—a compound annual growth rate of 52 percent. To provide an external benchmark, eBay’s gross merchandise sales in that period have grown at a compound rate of 20 percent, from $2.8 billion to $95 billion.

  Why did independent sellers do so much better selling on Amazon than they did on eBay? And why were independent sellers able to grow so much faster than Amazon’s own highly organized first-party sales organization? There isn’t one answer, but we do know one extremely important part of the answer:

  We helped independent sellers compete against our first-party business by investing in and offering them the very best selling tools we could imagine and build. There are many such tools, including tools that help sellers manage inventory, process payments, track shipments, create reports, and sell across borders—and we’re inventing more every year. But of great importance are Fulfillment by Amazon and the Prime membership program. In combination, these two programs meaningfully improved the customer experience of buying from independent sellers. With the success of these two programs now so well established, it’s difficult for most people to fully appreciate today just how radical those two offerings were at the time we launched them. We invested in both of these programs at significant financial risk and after much internal debate. We had to continue investing significantly over time as we experimented with different ideas and iterations. We could not foresee with certainty what those programs would eventually look like, let alone whether they would succeed, but they were pushed forward with intuition and heart, and nourished with optimism.

  Intuition, Curiosity, and the Power of Wandering

  From very early on in Amazon’s life, we knew we wanted to create a culture of builders—people who are curious, explorers. They like to invent. Even when they’re experts, they are “fresh” with a beginner’s mind. They see the way we do things as just the way we do things now. A builder’s mentality helps us approach big, hard-to-solve opportunities with a humble conviction that success can come through iteration: invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again. They know the path to success is anything but straight.

  Sometimes (often actually) in business, you do know where you’re going, and when you do, you can be efficient. Put in place a plan and execute. In contrast, wandering in business is not efficient—but it’s also not random. It’s guided—by hunch, gut, intuition, curiosity, and powered by a deep conviction that the prize for customers is big enough that it’s worth being a little messy and tangential to find our way there. Wandering is an essential counterbalance to efficiency. You need to employ both. The outsized discoveries—the “nonlinear” ones—are highly likely to require wandering.

  AWS’s millions of customers range from start-ups to large enterprises, government entities to nonprofits, each looking to build better solutions for their end users. We spend a lot of time thinking about what those organizations want and what the people inside them—developers, dev managers, ops managers, CIOs, chief digital officers, chief information security officers, etc.—want.

  Much of what we build at AWS is based on listening to customers. It’s critical to ask customers what they want, listen carefully to their answers, and figure out a plan to provide it thoughtfully and quickly (speed matters in business!). No business could thrive without that kind of customer obsession. But it’s also not enough. The biggest needle movers will be things that customers don’t know to ask for. We must invent on their behalf. We have to tap into our own inner imagination about what’s possible.

  AWS itself—as a whole—is an example. No one asked for AWS. No one. Turns out the world was in fact ready and hungry for an offering like AWS but didn’t know it. We had a hunch, followed our curiosity, took the necessary financial risks, and began building—reworking, experimenting, and iterating countless times as we proceeded.

  Within AWS, that same pattern has recurred many times. For example, we invented DynamoDB, a highly scalable, low latency key-value database now used by thousands of AWS customers. And on the listening-carefully-to-customers side, we heard loudly that companies felt constrained by their commercial database options and had been unhappy with their database providers for decades—these offerings are expensive, proprietary, have high-lock-in and punitive licensing terms. We spent several years building our own database engine, Amazon Aurora, a fully managed MySQL and PostgreSQL-compatible service with the same or better durability and availability as the commercial engines, but at one-tenth of the cost. We were not surprised when this worked.

  But we’re also optimistic about specialized databases for specialized workloads. Over the past twenty to thirty years, companies ran most of their workloads using relational databases. The broad familiarity with relational databases among developers made this technology the go-to even when it wasn’t ideal. Though suboptimal, the data set sizes were often small enough and the acceptable query latencies long enough that you could make it work. But today, many applications are storing very large amounts of data—terabytes and petabytes. And the requirements for apps have changed. Modern applications are driving the need for low latencies, real-time processing, and the ability to process millions of requests per second. It’s not just key-value stores like DynamoDB, but also in-memory databases like Amazon ElastiCache, time series databases like Amazon Timestream, and ledger solutions like Amazon Quantum Ledger Database—the right tool for the right job saves money and gets your product to market faster.

  We’re also plunging into helping companies harness machine learning. We’ve been working on this for a long time, and, as with other important advances, our initial attempts to externalize some of our early internal machine learning tools were failures. It took years of wandering—experimentation, iteration, and refinement, as well as valuable insights from our customers—to enable us to find SageMaker, which launched just eighteen months ago. SageMaker removes the heavy lifting, complexity, and guesswork from each step of the machine learning process—democratizing AI. Today, thousands of customers are building machine learning models on top of AWS with SageMaker. We continue to enhance the service, including by adding new reinforcement learning capabilities. Reinforcement learning has a steep learning curve and many moving parts, which has largely put it out of reach of all but the most well-funded and technical organizations, until now. None of this would be possible without a culture of curiosity and a willingness to try totally new things on behalf of customers. And customers are responding to our customer-centric wandering and listening—AWS is now a $30 billion annual run rate business and growing fast.