Shopping for the Web

  |  Command Line Heroes Team   Histoire de la technologie

Command Line Heroes • • Shopping for the Web | Command Line Heroes

Shopping for the Web | Command Line Heroes

About the episode

We put a lot of trust into online shopping: sharing our names, addresses, and handing over money. In return, we have faith that the purchased item appears at our doorstep in a few days or weeks. That trust didn’t come easily. In 1995, we took our first steps out of the brick and mortar store to load our digital shopping cart.

Robert Spector reveals how Amazon.com’s business foundations are in data—and being early to the internet. Sandeep Krishnamurthy recounts the rise of eBay. Angela Robinson describes the technology that makes secure transactions and trustworthy e-commerce possible. Kartik Shastri shares how difficult it was to store and process consumer data. And Katie Wilson explains how some big tech companies are different from previous monopolies, but are following many of the same paths.

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Transcription

It's the summer of 1995. And computer scientist John Wainwright just received a book that he ordered online. It's a pretty technical read–but it arrived with relative ease. A couple months earlier, he was given a beta invite to a brand new startup, a company that was trying to sell books on the internet. And now he opens his package, pulls out the receipt, and reads these words: Thanks for shopping at Amazon. John Wainwright was their very first customer. Today, Amazon's headquarters has a John Wainwright building. And every year around the world, we spend more than $3.5 trillion U.S. dollars making online purchases of books and groceries and clothing and... well, everything. And not just on Amazon. An entire ecosystem of online retail has taken hold in the 25 years since that fateful book delivery. The COVID pandemic only pushed us further toward e-commerce. More and more people adopted digital buying habits. Billions of us now shop from our sofas. I'm Saron Yitbarek and this is Command Line Heroes, an original podcast from Red Hat. This season, we've been unpacking the longest year in tech history–1995. The year our future began. So much started in that time. But few changes were more consequential than the advent of online shopping. In just a couple of decades, it's grown from a handful of startups to a team of Goliaths–and we couldn't live without them. But as we'll see, the dominance of certain online shops is only partly due to brilliant business maneuvers. Now, like I said, Amazon is not the entirety of e-commerce. But it is the big fish in the pond. So let's begin there. Why, in 1995, did Amazon start delivering packages? What made it possible, and what set founder Jeff Bezos on a path towards shipping billions of packages every year? He immediately understood the whole idea of transferring currency and making trades with this new use of this relatively new technology, the internet. Robert Spector wrote the first book on Amazon. It's called Amazon.com: Get Big Fast. And that should tell you something about the Amazon origin story. It's a story about capitalizing on a particular moment. Seizing the day. In the early 90s, Bezos lived in Manhattan. He was making more than a million bucks a year working at a hedge fund that relied on algorithms. Cutting-edge stuff at the time. And it speaks to the sort of business Bezos believed in. A data-driven business. An automated business. Meanwhile, the hedge fund's founder, David Shaw, asked Bezos and a few others to look into this newfangled internet thing. See what kind of opportunities were there. So Jeff and a few other people looked at various product categories and of all things, books rose to the top as the most obvious product category. Why books? For starters, the biggest bookstores at the time—Barnes and Noble and Borders–only had 25% of the market. So, you had a lot of smaller players in the field. And one other thing: there was already something called "Books In Print," a digital catalog of, you guessed it, every book in print. Those 2 pieces of information didn't get David Shaw super excited. But Jeff Bezos saw an opening. Jeff decided that he was going to leave D. E. Shaw, and he was going to start a company that sold books online. And so, a legend was born. And this is the early days of the internet when people are starting to get used to the notion of something called a dot-com. He always referred to it as Amazon.com, never as just plain Amazon. That was part of his branding. If you missed it, check out the first episode of the season to learn about the creation of the domain name system, and how it fed into the dot-com mania in 1995. Okay: so Bezos saw his opening and he's setting up Amazon. He headquarters the company in Seattle because it's close to the biggest book distributor, but what really made it different from all the other dot-com hustles out there? If you look at how Amazon succeeded, even in those early days, it's that Jeff Bezos understood the technology. He understood what could be done and what couldn't be done at that time. He understood the financials. He had worked in banking, so lots of zeros and commas did not intimidate him. He was a visionary, and finally he understood the value of public relations. So he made himself the face of internet commerce. In other words, while some book suppliers were planning to use the internet, Jeff Bezos was a creature of the internet, ready to use book suppliers. He had flipped the focus. Amazon officially launched July 16th, 1995. And by early 1996, they were on a course for an annual revenue of $5 million. So they took hold very, very quickly. Kleiner Perkins, the venture capital firm, had already been looking at the emerging online retail space. They invested $8 million in Amazon in 1996, giving the company the resources it needed to scale rapidly. But Amazon wasn't the only game in town when it came to e-commerce in 1995. Around the same time, another company was taking a very different approach to online commerce. Instead of selling products directly to consumers, they were creating a platform where anyone could sell anything to anyone else. eBay started as AuctionWeb in 1995, founded by Pierre Omidyar. The idea was simple: create an online auction platform where people could buy and sell items directly to each other. Sandeep Krishnamurthy is the founding dean of the UW Bothell School of Business. He's studied the rise of e-commerce platforms like eBay and seen how they've transformed retail. What made eBay revolutionary was that it wasn't just a store. It was a marketplace. Anyone could become a seller, and the platform provided the tools and trust mechanisms to make transactions possible between strangers. eBay's approach was fundamentally different from Amazon's. While Amazon focused on inventory, logistics, and customer service, eBay focused on creating a platform and letting the community handle the rest. The genius of eBay was recognizing that there was enormous value in connecting buyers and sellers, even if you never touched the actual products being sold. They created the infrastructure for commerce, not the commerce itself. But whether you were shopping on Amazon, bidding on eBay, or trying any other form of e-commerce in 1995, there was one major barrier that had to be overcome: trust. How do you convince people to hand over their credit card information to a website? In the early days of e-commerce, security was the number one concern. People were understandably nervous about typing their credit card numbers into a computer and sending them over the internet. Angela Robinson is a research mathematician at the National Institute of Standards and Technology. She's an expert on the cryptographic technologies that made secure online transactions possible. The breakthrough that made e-commerce possible was public key cryptography, specifically the RSA algorithm. This allowed websites to encrypt sensitive information like credit card numbers so that even if someone intercepted the data, they couldn't read it. Public key cryptography works by using two related keys: a public key that anyone can see, and a private key that only the website owner knows. When you enter your credit card information, it's encrypted with the public key. Only the private key can decrypt it. The beauty of this system is that you don't need to exchange secret keys in advance. The website can publish its public key openly, and anyone can use it to send secure information to that website. But encryption was just part of the puzzle. E-commerce also required new ways of handling and storing massive amounts of customer data. In 1995, this was a significant technical challenge. In the early days of e-commerce, data storage was expensive and limited. Companies had to be very careful about what customer information they collected and how they stored it. Kartik Shastri is the founder and CEO of Shrood, a company that helps businesses manage their data infrastructure. He's seen how data storage technologies have evolved to support the growth of e-commerce. Back in 1995, if you wanted to store customer data, you needed expensive servers and database software. The cost of storage was so high that companies had to make tough decisions about what data to keep and what to throw away. These storage limitations meant that early e-commerce sites couldn't do the kind of sophisticated data analysis and personalization that we take for granted today. They could process orders and track inventory, but they couldn't do much more than that. The real transformation came with the rise of cloud computing and big data technologies. Suddenly, companies could store virtually unlimited amounts of customer data and analyze it in real-time to personalize the shopping experience. This evolution in data storage and analysis capabilities gave e-commerce companies a significant advantage over traditional brick-and-mortar retailers. They could track customer behavior, predict preferences, and optimize their operations in ways that physical stores couldn't match. Today, companies like Amazon can analyze billions of data points to predict what you might want to buy before you even know you want it. That level of personalization and prediction simply wasn't possible in the early days of e-commerce. But this technological advantage hasn't come without consequences. As e-commerce companies have grown larger and more sophisticated, they've begun to dominate entire sectors of the economy. By 2020, Amazon alone accounted for nearly 40% of all e-commerce sales in the United States. The company that started by selling books had become a retail giant that sells everything from groceries to cloud computing services. What's remarkable about Amazon's growth is how it's expanded far beyond retail. Amazon Web Services, their cloud computing division, is now one of the most profitable parts of the company. They've used the infrastructure they built for e-commerce to become a major player in business computing. This expansion into cloud services wasn't accidental. It was a natural extension of the data storage and processing capabilities that Amazon had developed to support its e-commerce operations. Amazon realized that the infrastructure they had built to handle their own data could be offered as a service to other companies. This created a new revenue stream and helped establish Amazon as a technology company, not just a retailer. The success of companies like Amazon and eBay has transformed not just how we shop, but how we think about business and technology. But it's also raised questions about market concentration and competition. What we're seeing with companies like Amazon is a new kind of monopoly power. It's not just about controlling a single market, but about using dominance in one area to expand into others. Katie Wilson is a columnist for Crosscut who has written extensively about tech monopolies and antitrust issues. She argues that the current approach to antitrust regulation isn't equipped to deal with the new realities of digital commerce. Traditional antitrust law focused primarily on consumer prices. If a company wasn't raising prices, it was generally considered to be competing fairly. But companies like Amazon have built their strategy around offering low prices while gaining market power in other ways. This approach to competition has allowed e-commerce giants to grow largely unchecked. They've been able to use their scale and technological advantages to outcompete smaller rivals and expand into new markets. The concern isn't just about competition, but about the broader economic and social impacts. When a few large companies dominate e-commerce, it affects everything from employment to innovation to the health of local communities. The COVID-19 pandemic accelerated many of these trends. As people stayed home and shopped online, e-commerce sales surged. Companies that were already dominant became even more powerful. The pandemic was like a massive natural experiment in e-commerce adoption. People who had never shopped online before were suddenly doing all their shopping on the internet. This accelerated trends that might have taken years to develop otherwise. But the pandemic also highlighted some of the vulnerabilities in our e-commerce-dependent economy. Supply chain disruptions, delivery delays, and inventory shortages showed that our online shopping infrastructure isn't as robust as it might appear. The pandemic exposed how dependent we've become on complex global supply chains and sophisticated logistics networks. When those systems are disrupted, the effects ripple through the entire e-commerce ecosystem. Despite these challenges, e-commerce continues to grow and evolve. New technologies like artificial intelligence, virtual reality, and blockchain are creating new possibilities for online commerce. We're seeing new developments in payment technologies, from contactless payments to cryptocurrencies. The cryptographic principles that made early e-commerce possible are still evolving and adapting to new challenges. At the same time, there's growing interest in alternative models of e-commerce that prioritize different values than just efficiency and scale. We're seeing the rise of platforms that focus on supporting small businesses, local communities, or specific values like sustainability or fair trade. These platforms may not have the scale of Amazon, but they serve important niches. The future of e-commerce will likely be shaped by how we balance the benefits of scale and efficiency with the need for competition, innovation, and community support. There's growing recognition that we need new approaches to regulating digital markets. This might involve changes to antitrust law, new rules about data privacy and portability, or support for alternative business models. As we look back at the origins of e-commerce in 1995, it's remarkable to see how far we've come. Technologies that seemed experimental and risky 25 years ago are now fundamental to how we live and work. What's striking about the early days of e-commerce is how uncertain everything was. Nobody knew if people would actually want to shop online, or if the technology would be reliable enough to support it. But entrepreneurs like Jeff Bezos and Pierre Omidyar were willing to bet that the internet would transform commerce. They were right, but probably even they didn't anticipate how profound that transformation would be. The technologies that made e-commerce possible – public key cryptography, database systems, networking protocols – were all developed for other purposes originally. But when they came together in the context of online commerce, they created something entirely new. The speed at which the information comes in is just super fast. So people are still struggling with trying to get the data from all these different advertising systems, marketing systems, analytic systems, put it all together and figure out what the systems are telling them. In the same way that public key encryption evolves alongside retail, storage tech has been growing to meet demands, too. But here's the thing about all those improvements: together, encryption and storage tech have been giving e-commerce an enormous advantage over older, brick-and-mortar shops. And some are asking whether the advantage has gone too far. At a congressional hearing on October 29, 2020, U.S. Senator Roger Wicker noted that the tech industry's enormous success was largely due to... A light-touch regulatory framework. In other words, those online businesses had been left alone. Government had stayed out of the way while they grew. But when companies like Amazon grew to unheard-of sizes, that sparked questions. The U.S. House Judiciary Committee's antitrust subcommittee released a report about competition in digital markets, and they found that companies like Amazon and Facebook simply had too much power. The digital economy had been dominated by monopolies. The confusing part: these new monopolies didn't behave the way railroad monopolies or oil monopolies had in the past. We asked Katie Wilson, a columnist at the Crosscut news site, to explain the difference. In the late 1970s under the influence of the Chicago School of economic thought, antitrust really narrowed to a laser-like focus on consumer welfare, and in particular prices. And in general, the Supreme Court stopped upholding antitrust actions unless it could be demonstrated that what was at stake was higher prices for consumers. So, being a huge online retailer wasn't necessarily enough to inspire government regulation. They'd only step in if your customers were being forced to pay higher prices. How could you pin a charge on a company like Facebook or Google that offers most of their services to individuals for free? Or a company like Amazon that built an empire by offering the very lowest prices? So these big tech companies were able to grow with very little antitrust scrutiny because their model is so different from the idea of a traditional business that sells widgets or whatever. Congress moves a lot slower than Silicon Valley. And so, thanks largely to public key encryption and advances in storage, online retailers had in a quarter century made the world of shopping over in their own image. Wilson reminds us that when Congress looked at monopolies in the past, they worried about more than just cheap prices. People saw the social impacts of eliminating small and mid-sized businesses, right? As we saw happen with Standard Oil where all of these smaller oil refineries were just gobbled up. What does that do to the people who worked for those companies? To the people who owned those companies? To the communities that they were in? The free-market approach, where cheap prices were all a monopoly had to provide, may have allowed companies like Amazon to avoid scrutiny up till now. But some argue that we can demand more from these companies than just cheap prices. What we're seeing now is that perhaps the pendulum may be swinging back the other way to a broader conception of the goals of antitrust. We've reached a tipping point where those amazing tools–encryption tech and data storage–have allowed e-commerce businesses to become Goliaths. Tens of thousands of brick-and-mortar stores are expected to close this decade while online shopping continues to grow. The question is, can we take the benefits that our tech provides to companies like Amazon and eBay, and find ways to get them supporting every business, whether they're on the web or just down the block? In 1995, the earliest days of online shops, the cost of starting up might be hundreds of thousands of dollars. But infrastructure costs have dropped, and I could start an online boutique for 30 bucks this weekend if I felt like it. Those encryption and storage technologies have trickled down so that everybody, even a new indie store, can use them to superpower their business. We know the marketplace is going to continue to rely on advances in encryption, in data storage, and so much more. But the question is: how are we going to use those technologies to make room for everybody? For more details on the rise of e-commerce, or any part of this season's journey into 1995, you can visit RedHat.com/CommandLineHeroes. We've loaded up our site with fascinating bonus material. Next time, it's a search for the origins of search engines. We're rediscovering that pioneering navigation tool: AltaVista. I'm Saron Yitbarek, and this is Command Line Heroes, an original podcast from Red Hat. 'Til next time: Keep on coding!

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About the show

Command Line Heroes

During its run from 2018 to 2022, Command Line Heroes shared the epic true stories of developers, programmers, hackers, geeks, and open source rebels, and how they revolutionized the technology landscape. Relive our journey through tech history, and use #CommandLinePod to share your favorite episodes.