In January, Amazon.com raised US$1.25 billion in a debt offering and told investors to hold on tight while it raced to diversify into a multibillion-dollar business.
The company promptly bought into drugstore.com and launched a partnership with Dell Computer.
Monday, Amazon (AMZN) said it would enter two new businesses: net auctions and pet supplies.
The big news is the auction service. Amazon will dip into its billion-dollar cash barrel to build its own auction site that lets surfers and small merchants post and buy goods in 800 categories.
The news sent Amazon's stock up $10.31, or 8 percent, to $149.38.
"This is a wise strategic move for them, and a very logical extension of their plan to sell anything and everything online," said Derek Brown, an analyst at Volpe Brown Whelan.
Like Net auction superstar eBay (EBAY), Amazon will charge users a fee for posting items for auctions, and will take a small commission on each sale. The site will launch Tuesday.
Analysts have been bullish on Net auction sites because business can grow exponentially while overhead remains nearly static. Unlike Amazon's core book business, auctions have an extremely high profit margin -- around 85 percent.
Amazon should be able to jump-start the auction business through pitches to the 8 million surfers that have bought books or music at its site.
"It's a very effective means for them to leverage their customer base into a very high-margin business," said Brown.
The move into auctions does pose some risks for Amazon. The company, which prides itself on end-to-end customer service, won't be able to control the quality of merchandise auctioned through its site. Hucksters could damage the Amazon brand. To protect itself, Amazon will offer a $250 guarantee against fraud.
Also, Amazon has never faced a big-time established Net competitor like eBay before.
"EBay has a tremendous amount of brand and business momentum," said Brown. Because eBay has so many goods for auction every day, it attracts by far the largest number of willing buyers. That in turn attracts more sellers.
Amazon may have a hard time replicating eBay's success.
To improve its odds, Amazon has rounded up a bevy of small merchants to sell "tens of thousands of interesting, fascinating things," according to Amazon spokesman Bill Curry. Those items will be available from the moment the site opens, ensuring that users will have a reason to stick around and shop.
Separately, Amazon said it would buy a 50 percent stake in Pets.com, the largest online retailer of pet supplies. Amazon didn't disclose the amount of its investment.
Why pets? According to Amazon, consumers spent $23 billion on pet supplies last year in the United States alone.
Amazon didn't say whether it will integrate Pets.com into the Amazon.com Web site. It's a safe bet that it will promote the site through advertising banners, however, much as it does with new partner drugstore.com.
Until it bought into drugstore.com, Amazon saved every pixel of ad space on its Web site to promote its own book, CD, and video businesses.
