Nov 6, 2014 · 5 minutes

In 2014, Amazon is bigger than ever, has more customers than ever, and extends more tentacles in more markets than ever before. Its stranglehold on ecommerce is stronger than ever, so strong that many entrepreneurs are inclined to take their chances in other markets.

So why does the company seem more vulnerable than it's been in a long, long time?

In the past decade, Amazon has branched into new areas with increasing frequency. Cloud computing services. Manufacturing its own ebook readers, then tablets, then smartphones. Streaming media and then creating in-house programming. Same-day deliveries. Expanding into overseas markets, including the always perilous China.

Bezos' sterling reputation kept few questioning these initiatives, but in recent months that has started to change. A number of recent initiatives seem to be costing more money while not necessarily showing signs of sure success.

Misfires matter. Consider:

-- Kindle sales are declining. Amazon doesn't disclose Kindle sales figures, but E Ink Holdings, the Taiwan company that makes Kindle's displays, posted a $34 million loss last quarter because of slack demand for ereaders. IDC has been forecasting an 18-percent-a-year decline in ereader shipments for a while. Cheap tablets are the chief culprit, opening ebook readers to more reader-friendly ebook formats than Amazon's.

- Amazon keeps rolling out new versions of its Kindle Fire tablets, including a 6-inch version for $99 and a $149 tablet designed for kids, but it's struggling in the tablet market. IDC showed Amazon slipping out of the top five this summer, behind Apple and four Asian manufacturers. Amazon's response to a crowded tablet market is to make more kinds of tablets, doubling down on an already costly strategy.

- The Fire Phone has been an outright disappointment. Amazon took a $170 million charge last quarter largely related to writing down unsold phone inventory. In September, the company slashed prices as low as 99 cents with a wireless contract (or $449 without), and even then Amazon's loyal customers were unhappy, rating it 2.3 out of 5 stars.

- Smartphones, tablets, and ereaders are important to Amazon's core business of selling media as digital content becomes the norm. When CDs and DVDs were the norm, Amazon had a big share of that online market. Now that movies and video are being consumed through monthly subscriptions, Amazon's share of the market is considerably diminished. Amazon blamed a sluggish 4-percent growth in media revenue on a shift to rented textbooks, but its eroding share in digital media may be a bigger drain longer term.

- Meanwhile, Amazon is spending heavily – more than $4.6 billion in capital expenditures over the past year, including 13 new fulfillment centers around the world. Amazon Fresh is renting a distribution center on a 562,000-square-foot campus in New Jersey across from Staten Island. And that's just to serve New York City. It's also spending nearly half a billion a year on original content alone.

- Amazon is seeing slow progress in establishing footholds in India and China. A research note from Morgan Stanley pointed out that Amazon is growing on par with or faster than the ecommerce market as a whole in every country but two: China and India. “We view Amazon’s ability to win in non-core markets, like China and India, as limited,” Morgan Stanley's Katy Huberty wrote. And that's after Amazon vowed to spend $2 billion in India. In China, Amazon is finding there's already an ecommerce juggernaut there: Alibaba.

- In cloud computing, another big focus of capex, prices are declining quickly. Amazon said its usage of Web Services is rising close to 90 percent a year, but the “Other” revenue category that AWS dominates is seeing only 37-percent growth. Amazon has said costs of AWS are falling as much as 51 percent for some customers. Great for customers. Not so great for Amazon's financial health. Meanwhile, Microsoft is seeing cloud-service revenue grow by 136 percent and may soon become the first big player to present Amazon a true challenge in the cloud-services market.

There is a pattern here. Whether in areas where Amazon dominates (media ecommerce, cloud services) or in markets where Amazon is pushing its way in (mobile devices, original content, groceries, China/India), the company is spending heavily even as revenue growth is slowing, sluggish, or unproven. And while that's fine in an individual business unit or two, it's troubling when it becomes a pattern across so many areas important to Amazon's long-term health.

The trump card in Bezos' hand is Prime: Not just cheaper shipping, but free ebooks, a million songs to stream, a video service to rival Netflix, and now unlimited photo storage and velvet-rope access to flash deals and perks on other sites. Amazon won't say how many members are paying the $99 a year fee, but one analyst calculated it between 40 million and 50 million globally.

At 50 million members, Prime would bring Amazon $5 billion in annual fees. But Prime is also designed to lure, and maintain, customers inside the Amazon ecosystem. Each new perk makes Prime more appealing. CFO Tom Szkutak says video streamers are more likely to renew Prime, and when the do they're more likely to buy more things. But how long can Prime membership grow? Consumer Reports questioned this week whether it was a good deal at $99 and concluded that for many, it may not be.

It's often said that investing in Amazon is essentially investing in Jeff Bezos, considered by some the world's best CEO. And so the rope binding Amazon's myriad projects together is his vision. But increasingly, another common trait is that so many are becoming areas of concern. And investors are starting to worry.

Amazon's stock has fallen 24 percent this year while the S&P 500 has reached a record high. In fact, every time for the past three quarters when Amazon has reported earnings, its stock has fallen at least 9 percent on the news.

Bezos can afford to brush off shareholder concerns, as he frequently has. But if the stock languishes long enough to affect compensation packages, Amazon may have trouble retaining talent in a competitive job market. In some ways, Amazon is like Microsoft in the 90s, when the software giant knew it needed to grow beyond Windows: at once more powerful and yet more vulnerable than ever.

Amazon won't go into outright decline any time soon. Its dominance in ecommerce is so strong it will keep growing for the foreseeable future as the ecommerce market itself grows. But it's facing an awful lot of risks in other areas. As Bezos wrote in his recent letter to shareholders, “Inventing is messy, and over time, it’s certain that we’ll fail at some big bets too.”

Sure, but fail too often, too quickly and it may result in a mess that won't be mopped up so easily.