“Build something 100 people love, not something 1 million people kind of like.” — Brian Chesky.

Photo by Sean Pollock on Unsplash

14 Years. That is the amount of time it took Amazon to be called a Profit Making business. The year was 1997, and Jeff Bezos openly writes to his new investors a letter stating the importance of Market Share.

It’s All About the Long Term

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.

That year Amazon’s sales increased by 838%, and their new customer accounts grew by 738%. Despite this insane level of growth, they were still a loss-making entity for another six years after 1997.

From 2003 onwards the company has been showing an increase in its profits at a rate of 15% or more. In 2019 they reported a net profit of over USD 11 Billion.

This business model of focusing on Market Share rather than Profit Share seemed to have paid off so well in the Long Term for Bezos and his company that almost every Startup in the world began following the same approach. What made this strategy come to life apart from the thriving example of Amazon was the belief that financiers and investors had in it.

They believed that if a business has a unique business proposition and founders who understand the market and niche they want to operate in, then the only help it needs is financing it with a little bit of touch up in execution and publicity.

Before we get into discussing the pros and cons of whether the Market Share Approach will work for businesses today, let’s take a look at a company which focuses solely on the Profit Share model.

Apple — The Profit Share Approach

Anybody who knows anything about Apple, understand that the company will never try and sell the most of any of their products. This holds about their Computers, iPods and their iPhones. Steve Jobs ensured that the pricing of his products only tried to capture less than 5% of