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Good news for those of you who like, and use, the 1-click purchase tool provided by Amazon.com, Inc. (NASDAQ: AMZN ) — the company’s patent on the utility is set to expire this year, meaning other companies will soon be able to make it super-easy to buy pretty much anything on the web.
Source: Via Amazon
It’s superficially bad news for owners of AMZN stock, of course, as the tool facilitated revenue that may not have otherwise materialized if a shopper was forced to work through a two-stage (or more) process to make said purchase.
Although no empirical evidence of the benefit of 1-click has been offered, many say the technology has facilitated billions of dollars worth of incrementally more business for the e-commerce giant.
That said, while Amazon’s impending loss of patent protection on the business process could be troubling to AMZN stock owners, a closer, critical look at 1-click suggests it’s not just the function/feature that kept Amazon.com’s digital competitors at a disadvantage.
AMZN: E-commerce Made Easy
The value of 1-click is mostly an arbitrary one. A few years back CEO and Co-Founder of Rejoiner Mike Arsenault used a working figure that suggested the technology was responsible for 5% of the company’s sales, while Forbes contributor Ian Morris recently came up with a more specific suggested value of $2.4 billion.
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Although there’s no great way of quantifying its value and impact, the patent does lend itself to a qualified assessment.
Anyone who has ever made a purchase of any kind on the web knows it can be a bit of a pain. Not only must payment details be entered at the time of purchase, but shipping instructions must also be added. Too much hassle during the procedure (called “friction”), and would-customers abandon their efforts to buy something online before the transaction is completed. Specifically, a collection of tech companies estimate the “abandoned” web-based shopping-cart rate to be about 68%.
What if, however, a consumer could simply click one button in their browser, and boom — it’s done? That’s what 1-click does.
And it matters, if the rise of the iTunes store from Apple Inc. (NASDAQ: AAPL ) is any indication.
The growth of iTunes has largely been credited to its license to use Amazon’s 1-click platform. Steve Jobs knew years ago the key to the digital content site’s success was making it stunningly easy for consumers to spend. Apple licensed Amazon’s technology in 2000, after the patent was issued to Amazon in 1999, and saw its digital content business soar from practically nothing to a $6.3 billion business by 2011 .
Sure, the advent of the iPhone helped, but one could argue that 1-click also helped popularize the iPhone as a way to consume digital content.
There’s a subtle-but-significant fly in the ointment of the theory that Amazon’s smashing success relied on 1-click and that competitors will eat its lunch once its patent protection is gone, however. AMZN stock owners should be thrilled.
1-Click Is Only Part of the Amazon Stock Success Story
As difficult as it may be to determine how much of the 4,800% gain Amazon stock has dished out since the end of 2000 is solely attributable to 1-click, it would be short-sighted to ignore another key fact of the matter. That is, all of those users were or became AMZN customers for reasons other than 1-click.