It's simply not as easy for Amazon to double revenue again at the current scale as it was when Amazon's revenue was half the magnitude it is presently. Amazon's real hope for a fairy-tale ending depends on expanding margins and profitability. Unfortunately, the magic Amazon needs is hard to find outside of children's books. Amazon sells more digital books than physical books. This should concern investors to no end. Because Amazon doesn't own content and is only a reseller, what will prevent margin-compression in digital sales distribution? Publishers including Wiley Finance already have the ability to distribute content to consumers directly. At a minimum, Amazon has little pricing power, and the risk of falling market share and margins is more likely a matter of when, not if.
Amazon faces competition in digital content delivery from every possible direction. The company's world-class distribution warehouse network may enjoy economies of scale and efficiency over other online retailers, but in the world of digital downloads, other competitors enjoy superior demographics in, for example, niche book sales with little barrier to entry. In short, you can forget about margin and profit growth in Amazon's large digital-product revenue stream. Don't be the last one to figure this out, or you may pay a steep price for your education. Follow @RobertWeinsteinThis article was written by an independent contributor, separate from TheStreet's regular news coverage.At the time of publication, the author had no positions in stocks mentioned.