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Amazon Hits Dry Season

The fruits the company nurtured are withering.

Has Jeff Bezos lost his mojo?

A year or two ago,


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looked poised to extend its track record for developing innovations that make the Internet more useful, our online lives more convenient and its revenue streams more robust.

At the time, the Seattle-based online retailer had been building out its A9 search engine.

No one was quite sure why Amazon needed a new search engine -- and Amazon itself wouldn't offer any explanations -- but A9 had some tantalizing new hints, like photos of storefronts that gave a real-life touch to online maps.

Meanwhile, Amazon was reaching out to develop close relationships with developers.

And, perhaps best of all, it was working on a top-secret project that many believed would allow for downloadable movies or music albums, moves that would send companies like


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Through it all, a crowd of investors was growing impatient for new areas of business. Many argued that Amazon was just another retailer that happened to start out on the Internet.

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No, no, Bezos and others would say, Amazon is a technology company, first and foremost. And the fruits of that technology would keep profit growing longer term.

But here in October 2006, it looks like the fruits that Bezos lovingly nurtured are dying on the vine.

Amazon Unbox, the company's downloadable-movie program, was released last month to scant media attention and near-universal criticism among those who tried it.

And on Tuesday, Amazon said it's scaling back the more innovative features of A9.

Gone are the maps and the storefront photos which once led analysts to envision the day when Amazon was the online presence for millions of mom-and-pop operations.

In place of the url maps, is a one-line obit. Also gone are the features that gave users a personalized diary and a stored history of their searches.

A9 was never perfect, but what it lacked in elegance it more than made up for in promise. It was the messy, eccentric adolescent that you hoped would grow up into a genius.

In February, A9 CEO Udi Manber left to join


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as a vice president of engineering. And today, his orphaned eccentric child is looking more like a Google clone than a promising new search engine.

Should investors be concerned? After all, Amazon made clear that A9 was never a big revenue generator.

But in a larger context, A9 is more evidence that Amazon is not so much at the forefront of Internet innovation, but is lost in the woods.

Much more troubling from an investment standpoint is the apparently stillborn Unbox. An Amazon spokesman said the company didn't have any figures to show how many movies had been downloaded through the new service, but judging from the initial reactions, it has to be disappointingly few.

A Google News search for "Amazon Unbox" pulls up nearly uniformly negative coverage of the service.

"Unbox is a horror show," reads a brutal review in


magazine. "Of all the smart and talented people at Amazon, did no one dare say, 'Wait, our new service bites!"

Two weeks after the product was unveiled, Amazon updated the movie player to fix some bugs, but the bigger complaints remain: hours required to download a movie, poor resolution, frustrating restrictions on when and where the movies can be played and more.

Now, this isn't your normal lead balloon. It was a top-secret project that Amazon watchers were expecting to return the company to the cutting edge.

It was probably the reason that Amazon's technology and content costs were rising over the past few quarters -- to 7.8% of revenue in the second quarter, up from 6.1% a year earlier -- and pushing down operating profit.

Above all, it's a far cry from the kind of intuitive, customer-friendly technology that made Amazon an Internet leader in the first place.

Bezos' genius was turning the browser into a remote application that made the Internet a more pleasant shopping destination than the mall. His insights inspired other companies, like

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, to replicate that strategy in other industries.

But now Bezos seems unable to replicate that success. Meanwhile, technology costs remain high, revenue growth continues to slow and investors are going to be watching operating margins more closely than ever.

Bezos has a knack of pulling off the unexpected at the darkest hour.

Well, it's looking dark now. Let's hope he comes up with something truly stunning that could return Amazon to its glory days.