Lately Amazon has been introducing a raft of 'web 2.0' features to its e-commerce website. In this post we explore how Amazon has implemented tagging, Ajax, blogs and wikis - and ask whether it's made much difference to the user experience, and to the bottom line. In previous posts, we've discussed Amazon's bold and visionary Web Services Strategy - which is creating many success stories. But this post is not about Amazon's new business, it is about the continuous innovation of their core e-commerce business.

Amazon continues to refine its web site and roll out gems that no one else has. In our post on recommendation engines, we discussed how it combines sophisticated personal, social and item-based recommendation technologies to drive the user to transaction. Here is a stacked view of some of the features we now see on Amazon.com:

But these are just some of Amazon's recent innovations, many others are popping up. In this post we're going to explore some more new features that we've found.

We are still in the midst of the social bookmarking and tagging revolution - at least based on the numbers that came up in our analysis of trends using Technorati and Seth Godin's list. But when people talk about tagging we think del.icio.us and Flickr, not Amazon. Well, Amazon rolled out a tagging strategy last year and it is now working very well. Each Amazon product can now be tagged by users and a set of tags is then shown on the product pages. Here are the tags for the Dream Girls soundtrack:

Its worth noting that there are quite a lot of tags, even though the product is recent. This implies that customers are enthusiastic about tagging products.

Using Tags to power recommendations

What is Amazon going to do with all these tags? Well, to start with it already offers a search for product by tag, which is a nice feature not available on most other large ecommerce sites. But I suspect there is much more that will be done soon with Amazon tags. It is only the matter of time before we see Find similar items by tag. Here is why.... today on Amazon, if you are looking at a book, you get recommendations for similar books by content. This is an item-based recommendation - different from 'Customer who bought X also bought Y', which is a social recommendation.

Amazon's infrastructure analyses and categorizes huge volumes of text on a daily basis. The output of these algorithms is a list of key phrases that uniquely identify any item (e.g. a book). In my recent post about recommendation engines, I suggested that these key phrases can be substituted by people's tags. It looks like Amazon will soon be in position to do just that. What this means is that Amazon is going to be able to do item-based recommendations for all its products, without having to analyze music, movies and houseware in the same way. This will be another big win for Amazon and a big competitive edge, since no other retailers have this.

Ajaxification of Amazon

But tags are only one of the "web 2.0" inspirations for Amazon. The Ajaxification of Amazon is also taking place. Amazon is one of the oldest retail sites online, known for its strong brand and user interface. Making drastic changes to the site is difficult, and Amazon has always been very careful in that area. However, recently we have seen more and more features that utilize Ajax. For example, 'Today's recommendations' uses Ajax and tags in a very effective way:

Other parts of the site are also getting more Ajaxy, moving away from the click-to-reload paradigm. My only wish here is that Amazon implements Netflix-like previews of items, which would save a lot of time for user.

Plogs

So Amazon has gotten tags and Ajax. But that's not all, it also uses blogs and wikis. Amazon's spin on blogs is called plog. Lets look beyond the name, which does not sound terribly exciting, to the actual function. Plogs offer a way for you to receive personalized news from various source - like authors, manufacturers and journalists. In a way it is similar to email, except that it displays on your personal Amazon page.

Each entry in your plog is written by a real person, but it is delivered to your plog automatically - based on your Amazon purchase and browsing history, as well as the ratings of other plog posts. I found most things in my plog to be highly relevant and interesting. Amazon offers an RSS feed that I can subscribe to via my RSS reader. So this becomes a personalized news feed from Amazon - quite interesting and unique.

Amazon Wikis

The Wikis are also very recent on Amazon and not as developed as the plogs yet. I have to admit that this is the least favorite new feature for me, because of the way it is implemented. To start with, it needs to be clearly distinguished from the user reviews. The whole point of a wiki is to allow users to create a rich set of interlinked pages. The current implementation does not deliver this. Instead the wiki is embedded right into the page and kind of blends with the rest of the content.

If this is to work, it needs to be redone as a regular wiki - and it needs to deliver value beyond what is already on Amazon's webpages, or what can be done via Wikipedia.

Why is Wall St not impressed? 

So Amazon has certainly caught the web 2.0 winds and is putting those kinds of features to good use. The company continues to innovate both as a rising web services star and one of the best online shopping destinations. Its creativity, drive to innovate and ability to execute is impressive. But apparently not for Wall Street. Looking at the stock chart below, we see that its been stagnating for a the larger part of five years. So we turn to you for comments on Amazon's technology and future. Is Wall Street missing something big here, or is the fancy web 2.0 technology Amazon is introducing not going to impact their margins that much?