The world's leading e-tailer became the latest dot-com bellwether to disappoint the market, after (NASDAQ:AMZN) posted uninspiring second-quarter results last night.

Despite a better-than-expected 22% surge in net sales, earnings clocked in at $0.05 a share after coming in at $0.12 a share a year earlier. The trend will likely continue; Amazon is raising its top-line guidance range for all of 2006, while decreasing its operating income outlook. The market reacted with a swipe today, sending shares of Amazon down 22%.

Amazon can't help but invest in its future. After losing Toys "R" Us this summer, Amazon will invest in beefing up its new proprietary toy store. It needs to. I was in a gifting mood earlier this week and noticed the out-of-whack pricing and skimpy availability in Amazon's toy department. Let's hope that Amazon is serious about getting up to speed with the playthings -- and making Toys "R" Us regret its decision to bolt and create a formidable online competitor in the process.

Amazon is on firmer ground with its other merchant partners. Target (NYSE:TGT) renewed its deal, and Amazon launched a new website for Sears Holdings' (NASDAQ:SHLD) Sears Canada. Yes, Amazon is skimming both ends of the retailing equation as a landlord and a tenant.

Naturally, there are other retailers growing at a headier pace than Amazon. Even though the company will top $10 billion in net sales this year -- $10.15 billion to $10.65 billion, to be precise - top-line growth of 20% to 25% is meager compared to more nimble upstarts. That's OK. Amazon is a play for investors who want the most established online retailer, not the glitziest.

Investors' bigger concern is with the company's bottom line, and that's where Amazon is struggling. Delivering goods and often subsidizing significant shipping costs will never be a high-margin business. There's hope that Amazon can become a major player in digitally downloaded books, music, and films. After all, it knows where the buyers are, and the buyers, in turn, trust Amazon. But even if Amazon is successful in any of those areas, it will be years before the results are material to a company delivering more than $10 billion a year worth of goods the old-fashioned way.

Does that mean that investors may want to buy Amazon the old-fashioned way, too? With last night's after-hours dip, Amazon's stock has gone retro, trading at prices last seen in the spring of 2003. That's a year worth remembering; unless Amazon produces operating profits at the high end of its projected range of $310 million to $440 million, 2006 will mark the company's worst annual operating income since 2003. To be fair, this year's target also includes a $120 million hit from stock-based compensation, but let's not let Amazon skate from liability just because it's a popular Stock Advisor newsletter recommendation.

Companies have to learn to pay the price for granting stock options liberally on this side of 2006. In Amazon's case, if you're giving away that much in stock options and your stock is at a three-year low, it's clearly not working as an incentive.

Everyone's watching you these days, Amazon, and the market isn't in a forgiving mood.

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Longtime Fool contributor Rick Munarriz has been shopping online for about as long as has been in business. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.