He revealed how they "failed miserably" at first, but eventually found the key to turn it into an engine that now drives a staggering 65% of all units sold by Amazon.

What started at Amazon as a contentious internal debate has now become a blueprint for the trajectory of marketplaces

Initially met with resistance, the 3rd party marketplace idea faced concerns about upsetting existing relationships and maintaining customer experience.

But Amazon ultimately sided with it, believing it would give customers what they wanted most: broader selection and lower prices.

However, the path to success wasn't straightforward. Amazon's first several attempts failed.

The turning point? A simple but game-changing decision: integrating third-party selections onto the same pages as Amazon's first-party offerings.

This "aha" moment transformed their business, with marketplace items now accounting for 2/3 units sold by Amazon.

Same Playbook to Grow Cloud Marketplaces 10X?

Fast forward to today, and we're seeing the same story unfold in cloud marketplaces.

Amazon Web Services (AWS), now a $105B annual run rate business, is applying the same playbook to software.

With Andy Jassy at the helm of Amazon, after leading AWS for 18 years, it's clear this strategy is top of mind.

Current estimates place AWS marketplace sales in the high single-digit billions.

But if it follows the same trajectory as Amazon's e-commerce, where 2/3 of products sold come from 3rd party sellers, we could see a remarkable 📍 10X expansion of the AWS marketplace in the coming years.

Power of Marketplaces

This shift isn't just about revenue.

Marketplaces are powerful generators of network effects, particularly for customers leveraging cloud commits.

The stakes are high. Not only hyperscaler revenue continues to rapidly grow, but their customer backlog is also growing at an impressive >20% YoY.

Across the big 3, cloud commits are projected to reach a staggering $500B in just 18 months (see my previous post).

All three hyperscalers - AWS, Microsoft Azure, and Google Cloud - aim to make their marketplaces the primary online distribution channel for both first-party and third-party solutions (Ofcom).

So, as you navigate the cloud that is now massively accelerated by AI, take a cue from Amazon's playbook.

Embrace the marketplace mindset, and you'll be well-positioned to ride the wave of transformation.

The question is, how are you adapting your partnerships to align with this shift?

Full video is here.