How does Amazon make money?

Amazon’s scale is hard to overstate. With over $500 billion in annual revenue and operations in more than 100 countries, it’s one of the most dominant and diversified companies in the world. But at its core, Amazon is still a marketplace. And it didn’t start out this big.

Understanding how Amazon makes money is especially useful if you’re building your own marketplace. Its strategy shows how powerful even a basic marketplace model can become over time, and how layering new revenue streams and services can unlock long-term growth.

In this guide, we’ll break down Amazon’s business model through the lens of its marketplace. You’ll learn how it monetizes transactions, supports sellers, and grows across industries. And more importantly, we’ll explain how these lessons apply at any stage of your marketplace, whether you’re just validating an idea or scaling a fast-growing platform.

In 1994, Jeff Bezos started Amazon with one vertical, one storefront, and a belief that people would buy books online. But it didn’t stay in that one lane for long.

Over the last three decades, Amazon has grown into one of the most powerful technology companies in the world, operating across industries such as:

• E-commerce
• Logistics
• Cloud computing
• Entertainment streaming
• Artificial intelligence

However, at its core, Amazon is a diversified marketplace with several interconnected revenue engines:

• First-party (1P) retail sales: Amazon sells products it buys and stocks, like books, electronics, groceries, and apparel, through its storefront. These are sold directly by Amazon and fulfilled through its logistics network.
• Third-party (3P) marketplace: Independent sellers list and sell their products on Amazon’s platform. In exchange, Amazon charges referral fees and offers optional services like Fulfillment by Amazon (FBA), advertising, and analytics tools.
• Amazon Web Services (AWS): Amazon’s cloud services provider, AWS, offers hosting, storage, databases, and AI tools to millions of businesses and developers. It’s one of Amazon’s most profitable segments.
• Subscription services: Amazon generates recurring revenue from offerings like Amazon Prime (which includes fast shipping, video streaming, and exclusive deals), Kindle Unlimited, Audible, and Amazon Music.

This blend of business models is what makes Amazon so unique—and so instructive for marketplace founders. It’s not just a retailer, marketplace, or tech company. It’s all three, layered into a powerful ecosystem.

Amazon is a complex two-sided marketplace that serves both buyers and sellers. Its platform handles everything from discovery and delivery to payments, subscriptions, and even physical retail. While most founders won’t operate at this scale, learning how Amazon’s marketplace works will reveal the most important parts of its user journey so you can discover which ones might matter most as your own platform grows.

Here’s a breakdown of Amazon’s core features.

• Search and filtering tools: Shoppers can browse by category, brand, price, customer ratings, and more. Amazon also highlights deals, bundles, and trending items.
• Personalized recommendations: Based on previous purchases and browsing behavior, Amazon surfaces suggestions under sections like “Buy it again,” “Inspired by your browsing history,” and “Customers who bought this also bought.”
• Prime eligibility filtering: Customers can narrow search results to items that offer fast, free shipping for Prime members.

• Marketplace access: Third-party sellers can list and sell their products on Amazon’s platform and reach hundreds of millions of customers.
• Flexible fulfillment options: Sellers can use Fulfillment by Amazon or handle fulfillment themselves.
• Revenue-boosting tools: Amazon offers in-platform advertising, promotions, real-time analytics, and customer messaging tools to help sellers grow their business.

• Fulfillment by Amazon (FBA): Sellers can outsource inventory storage, packaging, shipping, and returns to Amazon to boost delivery speed and customer satisfaction.
• Warehousing and delivery: Amazon runs one of the largest logistics networks in the world, with regional fulfillment centers, sorting hubs, delivery stations, and its own fleet of planes, vans, and cargo bikes.
• Fast shipping infrastructure: Same-day or next-day delivery is available in many metro areas to reinforce Prime member loyalty.

• Amazon Prime and other subscriptions: Subscribers get perks like free shipping, Prime Video, exclusive discounts, and early access to deals.
• Hardware devices: Amazon sells its own tech products, including Kindle e-readers, Echo smart speakers, and Fire TV devices.
• Brick-and-mortar stores: These include Whole Foods, Amazon Go, Amazon Fresh, and Amazon Books, which extend Amazon’s e-commerce experience into the physical world.

Content and media services: The company earns additional revenue from entertainment and digital consumption through Prime Video, Audible, Kindle Unlimited, and Amazon Music.

Amazon has built a remarkably effective revenue model from which platform founders can learn. The company earns money at multiple points in its ecosystem across retail, infrastructure, digital media, and services. Let’s examine each major revenue stream.

Amazon’s marketplace is powered by third-party sellers, or individuals and businesses who list and sell their products on the platform. In fact, over 60% of all physical units sold on Amazon now come from these sellers.

Amazon earns revenue from these sales by collecting referral fees (a.k.a. commission) on each sale. These fees vary by category and can range from 6% to 45%. Many sellers also use FBA, which means they pay Amazon to store, pack, and ship their orders. Add in sponsored product ads, seller subscriptions, and other upsells, and you’ve got a highly profitable, multi-layered revenue engine.

This is the core of Amazon’s marketplace model: create the infrastructure and visibility sellers need, then monetize the tools that help them succeed.

For marketplace founders, this is an important takeaway. You don’t need to sell products yourself to generate revenue. Instead, build the platform others use to sell, and charge for access, logistics, exposure, or services that add value.

Amazon’s ad business has grown quietly into a multibillion-dollar powerhouse. Brands pay to feature their products at the top of search results or in promoted slots across Amazon’s ecosystem. Because shoppers on Amazon are already looking to buy, these ads convert at high rates.

Advertising is one of Amazon’s highest-margin businesses because it requires little physical infrastructure and has enormous scale. In 2022, Amazon’s ad revenue exceeded $37 billion, putting it among the top digital advertising companies in the world.

This is a prime example of how advertising is more than just another source of revenue for your business. It also gives your sellers more ways to succeed. As your marketplace grows, offering paid visibility through featured listings or promoted spots can create a win-win: sellers get more traffic, and you gain a scalable, low-overhead revenue stream.

Recurring subscriptions are another powerful way Amazon earns money. Amazon Prime, the company’s flagship subscription, includes free two-day shipping, access to Prime Video, exclusive discounts, and more. With hundreds of millions of members globally, it brings in a reliable stream of income.

Other subscription offerings include Kindle Unlimited, Audible, and Amazon Music. Each provides additional value to Amazon’s ecosystem while generating consistent, predictable revenue. In total, Amazon’s subscription services brought in more than $44 billion in 2024.

Amazon generates much of its revenue by selling physical products directly to customers. This includes everything from books and electronics to groceries and household essentials. The company purchases inventory at wholesale prices and resells it under its own name, which is known as first-party retail.

Amazon also operates physical stores like Whole Foods, Amazon Go, and Amazon Fresh. These brick-and-mortar locations give the company a physical footprint that complements its online retail dominance.

While the profit margins in the retail segment are razor thin, the enormous volume of transactions makes it a consistent source of revenue.

AWS is the engine behind much of Amazon’s profitability. It powers everything from startups and mobile apps to enterprise workloads and AI models.

In 2023 alone, AWS generated over $90 billion in revenue, accounting for most of Amazon’s operating profit. AWS has a sticky business model: once customers build on it, they tend to stay for the long haul, which makes it a highly predictable source of income.

While Amazon dominates e-commerce in the United States, its growth strategy offers valuable lessons far beyond its size. Amazon has continually reinvested in its strengths, made strategic acquisitions, and expanded thoughtfully into new markets to build a resilient business.

Your marketplace’s scale may be different, but this mindset is still useful. You don’t need to copy Amazon’s moves. Instead, look at how it identifies what’s working, doubles down on it, and finds adjacent ways to grow.

Amazon’s investment in technology is central to how its marketplace scales. Behind the scenes, the company deploys robots and machine learning in its warehouses to improve fulfillment speeds and accuracy.

On the seller side, Amazon’s marketplace is powered by tools that use AI to suggest pricing, forecast demand, and optimize listings. These include automated pricing tools and the Brand Analytics suite, which gives sellers access to real-time performance data. These systems help sellers succeed while making the marketplace more efficient and profitable overall.

Don’t take this as a lesson to automate everything immediately. Instead, pay close attention to repeatable seller needs (like pricing help and listing optimization) early on. There’s a lot to be learned by talking to your sellers directly and helping them hands-on at first. Identifying patterns will help you figure out where and how to invest in automation as your platform grows.

Rather than building everything in-house, Amazon uses acquisitions to enter new sectors fast. The $13.7 billion acquisition of Whole Foods in 2017 gave it immediate scale in grocery retail, and the $8.5 billion purchase of MGM in 2022 bolstered Prime Video with a massive content library.

Each deal supports a larger play in sectors like logistics or entertainment, where Amazon can create defensible advantages and deepen customer loyalty.

Amazon operates marketplaces in more than 20 countries, with customized logistics and payments in each. In India, one of its largest growth markets, the company has invested more than $6.5 billion since its launch. In 2024, it announced plans to open three new fulfillment centers in the country to improve delivery speeds.

The company’s Global Store and FBA Export programs allow Amazon sellers to reach customers internationally without navigating the complexities of global shipping. These efforts reflect Amazon’s broader push to become a global infrastructure provider for e-commerce.

Amazon’s growth strategy reflects a simple but powerful principle: build what scales, buy what accelerates, and localize everything else. For marketplace founders, it’s a model worth studying closely.

Let’s take a clear-eyed look at the strengths and weaknesses of Amazon’s business model. These insights reveal the opportunities and challenges of operating a global, multi-vertical marketplace.

Pros

• Global reach and trust: Amazon serves hundreds of millions of customers and enjoys near-universal brand recognition. Prime membership deepens this loyalty by offering convenience and perceived value that few competitors can match.
• Operational excellence: With one of the most advanced logistics networks in the world, Amazon consistently delivers faster and more reliably than its peers. Its warehousing, fulfillment, and last-mile infrastructure are a core strategic advantage.
• Revenue diversification: Unlike many marketplaces that rely on transaction fees alone, Amazon’s business spans advertising, cloud computing, subscriptions, and retail. This mix smooths out seasonal swings, supports long-term growth, and generates revenue from consumers, sellers, and developers alike.

Cons

• Thin retail margins: Amazon’s first-party retail business often operates at break-even or even at a loss. These slim margins require high volume and can mask underlying profitability challenges.
• Platform tension with sellers: While third-party sellers account for most of Amazon’s product volume, many have voiced concerns over high referral fees, sudden policy changes, and competition from Amazon’s private-label products.
• Regulatory pressure: Amazon faces ongoing scrutiny from regulators worldwide. Antitrust investigations in the U.S. and EU examine whether Amazon unfairly favors its own products or exploits third-party seller data.

Even though Amazon operates on an enormous scale, it’s a fantastic source of inspiration for the principles that will help you successfully start a marketplace business in a small niche. Here are some key takeaways that you can apply to your own platforms.

One of Amazon’s smartest long-term investments was Fulfillment by Amazon (FBA), a logistics system that handles storage, shipping, and customer service for sellers. It solves a clear operational pain point: fulfillment complexity. And it scales beautifully.

A network of logistics centers is not a realistic goal for most founders. But the principle still applies: identify a friction point in the seller experience and invest in a system to solve it at scale. You can do the same at a smaller level.

At the beginning, it’s fine (and often better) to do things manually. This will help you discover operational bottlenecks, like clunky user messaging or recurring refund questions. Once these patterns emerge, you can start gradually investing in tools that reduce friction and free up your time.

Some examples of lightweight marketplace infrastructure include:

• A simple seller dashboard that measures performance and earnings
• A centralized inbox to manage buyer-seller conversations
• An automated email notification to confirm bookings or flag issues
• A basic dispute resolution flow with clear next steps

None of these updates requires heavy engineering. But they make your online marketplace feel more trustworthy, responsive, and reliable. A solid infrastructure helps you continue to deliver a great experience, even as your user base grows.

For a marketplace to grow, people have to enjoy using it and trust it enough to come back. From one-click purchasing to fast refunds, Amazon’s user experience feels designed to save time and remove hassle. It spent decades fine-tuning its platform to meet customers’ expectations, often before they even realize what those expectations are.

But you don’t need Amazon’s scale to start delivering a great experience. The lesson here is that even small improvements to your user experience can have a big impact. Intuitive onboarding, mobile-friendly design, and a clear dispute resolution process go a long way in building user trust. With Sharetribe, you can launch quickly using the no-code features, then gradually add custom-coded components to enhance the experience as you grow.

People remember how easy—or frustrating—it is to use your platform. If you make the experience smooth, helpful, and fast, they’ll be much more likely to return and tell others about it.

Amazon’s success can also be attributed to the trust systems it has in place that make customers feel safe and confident about making purchases. Verified reviews, Prime guarantees, and seller performance ratings all work together to make people feel confident buying on the platform. These features help customers feel confident enough to transact with people they’ve never met.

As an early-stage founder, you don’t need that level of infrastructure. But you do need to show users that your platform is safe and reliable from the start.

Start with visible ratings and reviews. Add secure payment systems and clear refund policies. Make sure you have a fast, fair resolution process. These elements will protect your users and your business. You can also build trust manualy in the early days: vet your first few sellers yourself, follow up personally on early transactions, or highlight testimonials in your listings.

Trust creates momentum. When people believe they’ll have a good experience, they’re more likely to complete transactions, come back for more, and recommend your platform to others.

Amazon continually reinvests in new technology, tools, and infrastructure to stay ahead. From AWS to generative AI to cashier-less stores, Amazon’s willingness to experiment gives it an edge and opens up new business opportunities.

For early-stage marketplace founders, the scale of these innovations isn’t the main takeaway. It’s the mindset: Amazon succeeds because it treats improvement as an ongoing process. Each time its user base grows, it repeats this cycle: grow → learn → improve → grow again.

You can apply this principle from day one. Listen closely to users, spot recurring pain points, and treat them as opportunities for improvement. For example, you could simplify your onboarding process, add seller dashboards, or refine your messaging system. 

An expandable marketplace builder like Sharetribe is ideal for a process like this: you can launch fast without any coding and add custom-developed functionality on top of the essentials as you learn more about your audience.

Innovation doesn’t have to mean AI or other cutting-edge technology. It just has to make your platform better, little by little, so it’s more useful (and harder to leave).

Amazon didn’t stop at selling products. Over time, it expanded into cloud services, advertising, subscriptions, and even physical stores. Each new stream added stability and scale to its business.

Of course, your marketplace won’t spin up a cloud infrastructure or production studio anytime soon. But this principle is worth adopting early: look for natural extensions of your value that users would be willing to pay for.

You don’t need multiple monetization models on day one. Once your core marketplace is running, pay close attention to where users are getting the most value—or running into the most friction. That’s where your add-ons can come from.

These could be as lightweight as charging a small fee for premium listings or offering paid tools to your most active sellers. You could even bundle premium services into a subscription to generate recurring revenue.

The goal is to find low-lift ways to create new revenue without distracting from your core marketplace experience. And as your platform grows, these experiments can compound into something much bigger. Just like Amazon’s did.

Amazon didn’t become one of the world’s most valuable companies by trying to do everything at once. It built one solid revenue engine at a time, starting with retail. Then it reinvested what it learned into expanding with intention.

If you’re an early-stage marketplace founder, the lesson isn’t to replicate Amazon’s scale. It’s to adopt the mindset behind how it got there: focus on solving real problems, deliver clear value to users, and build from a strong foundation.

Start with a simple, focused marketplace that helps a specific group of users get something done. Then, layer in features or services that deepen that core value, such as payments, reviews, or seller tools. As you grow, you’ll discover new opportunities to serve your users, try small experiments, and evolve your platform based on what works.

You don’t need a massive engineering team or a suite of services like Amazon’s to start. With Sharetribe, you can launch a fully functional marketplace fast—no technical skills required. Our platform offers built-in tools for listings, payments, messaging, reviews, and more.

As you grow, you can customize your platform with code or hire a Sharetribe Expert to help. You can also experiment with different revenue models, from transaction fees to subscriptions, just like Amazon does.

Start a free trial of Sharetribe today and begin building your own Amazon-style marketplace.

Here are the answers to some of the most common questions about how Amazon makes money.

Third-party sellers now account for more than 60% of physical units sold on Amazon. The company collects referral fees, fulfillment fees (through FBA), advertising dollars, and subscription revenue from these sellers, making this one of its most lucrative segments.

Amazon’s success here shows how valuable it is to layer services that help sellers succeed. This is something early-stage marketplace founders can do on a smaller scale through tools like messaging, scheduling, or profile boosts.

Amazon earns ad revenue primarily through sponsored product placements and display ads. Brands pay to appear in high-visibility spots in search results or on product pages. It also offers programmatic ad buying across its own sites and third-party properties via Amazon DSP.

Amazon’s real breakthrough wasn’t selling its own products. Its success came from empowering millions of third-party sellers to do the same. By charging seller fees and offering helpful services like FBA, Amazon created a scalable, low-overhead growth engine. Early-stage founders can take a page from this by focusing on tools that help their own supply side succeed.

Yes. Amazon takes referral fees from sellers and earns additional revenue from buyers through subscriptions like Prime. Many successful marketplaces charge both sides because this aligns incentives and increases monetization flexibility.

In addition to Prime, Amazon offers subscription services like Kindle Unlimited, Audible, and Amazon Music. They provide steady recurring revenue while expanding Amazon’s role in its customers’ daily lives.

Because these subscriptions span from reading and entertainment to cloud storage, Amazon has become a one-stop shop for many digital subscriptions, which grows customer loyalty and lifetime value. If your marketplace builds a loyal user base, even small-scale subscription models, like paid memberships or premium features, can generate predictable revenue.

About 23% of Amazon’s revenue comes from international markets, according to its 2023 annual report. Localized marketplaces in countries like India, Japan, and the UK help drive this global growth.

Strategic acquisitions like Whole Foods and MGM help Amazon quickly expand into new verticals. These deals often generate new revenue streams while making Amazon’s services more useful and attractive to customers.

AWS contributes the largest share of Amazon’s operating profit despite representing a smaller portion of total revenue (about $90 billion, or 17%). In 2024, AWS generated $39.8 billion in operating income, compared to Amazon’s total operating income of $68.6 billion. That means AWS made up about 58% of Amazon’s total operating profit. With high margins and long-term customer contracts, AWS helps offset lower-margin areas like retail.