Company / division: Amazon
As usual, it would be great to understand in more detail the methodology behind this survey, but it’s not available. The Verge seems to have got the rankings wrong – from what I can tell, Samsung was 7th and not 3rd last year – but it’s also worth noting that Samsung’s score dropped from 80.44 to 75.17, which sounds a lot less dramatic than dropping from 3rd (or even 7th) to 49th. The fact is that there are a lot of companies clustered together between 75 and 87 points and so a small drop in the score produces a big drop in rankings. Since the survey was also conducted in November and December last year, when the Note7 debacle was still very fresh in people’s minds, I’m guessing it would score a lot better just a few months from now. Though the Verge picked up on Samsung’s drop as their headline, it’s worth noting where other tech companies sit too: Amazon is #1 (score 86.27), Apple #5 (82.07), Google #8 (82.00), Tesla #9 (81.70), Netflix #18 (79.86), and Microsoft #20 (79.29), all of which classify as either very good or excellent. It’s also worth noting that big cable companies like Comcast and Charter score in the low 60s, which qualifies as “poor”, while the major wireless carriers score 66-72 (“fair” to “good”), with T-Mobile top and Sprint bottom.
“Just like Alexa” is a bit of a stretch here, because the whole point of Alexa’s ordering is that you know the products will come from Amazon. Google Home, by contrast, will order from a range of different Google Express merchants, only some of which are available nationwide. And because most people don’t have a Google Express account set up yet, they’ll have to do that first before they order anything. Lastly, unlike items bought using a Prime subscription, shipping will be charged extra after a short promotional period. Despite all that, this is obviously an area where Alexa has had unique capabilities and where Google Home has now closed the gap a little. By far Home’s biggest disadvantage is still its lack of awareness and distribution.
Amazon just shared new numbers that give a clue about how many Prime members it has – Business Insider (Feb 15, 2017)
I had missed this earlier in the week, but we got some juicy new numbers from Amazon as part of its 10-K filing, and they’re quite illuminating when it comes to Prime. This article specifically talks about Prime subscriber numbers, but the same underlying figures from the 10-K can also be used to derive some other interesting conclusions about Prime revenues and so on. I put together an in-depth blog post just now on all this, which you might want to check out too (my subscriber numbers are a little different from Morgan Stanley’s).
via Business Insider
If only the device you use as a voice assistant had phone functionality built in! I’m being facetious, but it’s interesting to watch Amazon and Google potentially working backwards from a non-phone device to something capable of making calls. This is a logical extension of a voice search for a local business – I already regularly do this using Siri, especially while driving, and it’s very useful. As with yesterday’s Nest story, this is a great illustration of the benefits of software-based products – you can provide meaningful additional functionality through an update and suddenly the device you already have becomes more functional. I would guess that Amazon would need a partnership for local business search, whereas Google of course has that functionality in house – it’s in domains like this that Google has an advantage over Amazon despite the latter’s early big lead. I’m very curious how far out these efforts are – unusually, the WSJ is reporting on both companies’ efforts at once here, but they may well be at quite different stages of development. And of course Google famously stayed out of the phone business when it launched Google Fiber because of all the regulatory headaches and fees that go along with being a fully-fledged phone provider – it might try to stop short of going that far this time around too.
Amazon’s most high-profile enterprise offerings are back-end stuff – AWS, obviously, but also a range of other services mostly designed for IT departments rather than the broad base of employees within a business. But it has tinkered with employee-facing services in the past, and now it’s getting into one of those big categories almost every enterprise end user uses (and probably mostly dreads): conference calls. It looks like Amazon has thought this through pretty well – there are a handful of little features which could address specific pain points, and the pricing seems reasonable compared to some of what’s out there too. I’m definitely tempted to try this myself with a view to potentially ditching my expensive and frustrating WebEx subscription. This feels like it could be a gateway to more end user-focused enterprise stuff from Amazon too – much more promising than some of its earlier efforts in this space.
This feels like a totally logical next step for Amazon, which already has lots of both episodic and feature length content, and has been selling other companies’ premium channels for a while now. It’s presumably learning a lot from selling Showtime and the like, and has seen an opportunity to add yet another layer of subscription revenue to the base Prime membership. One big question, of course, is how it will divvy up its original and acquired content between the existing Prime service and this premium tier – any exclusivity around the paid channel dilutes the value of the base subscription, which Amazon wouldn’t want to do. It’s possible that this will be an offering primarily aimed at non-Prime subscribers, or part of its video-only version.
via New York Post
Reviews for the Tap were mostly pretty negative when it came out, because it was like the Echo without its best feature: hands-free usage. Requiring a button tap to invoke Alexa basically ruined the experience for many of the reviewers, but this new software update rectifies that when the device is connected to WiFi. I’m guessing it runs down the battery quite a bit faster when it’s always listening, so users will probably want to have it plugged in when in this mode, and the mic array isn’t as impressive in this cheaper device than in the Echo either. But this is now on paper the same functionality as the Echo for $50 less than its list price, which isn’t bad. The Dot, however, continues to be by far the most cost effective way to get into the Amazon Alexa ecosystem, at $50 per unit, and that’s why it’s the best seller in the lineup by far.
via The Verge
Billboard does an annual Power 100 ranking of the most important/influential execs in the music industry. Coming at this from a tech angle, there are several notable companies on the list: Spotify’s Daniel Ek takes the top spot, several Apple folks are at #4, Amazon at #12, iHeartMedia at #19, YouTube at #30, Pandora at #34, Facebook is at #54, and various others are scattered through the second 50. Amazon’s ranking is surprisingly high, but is entirely due to Billboard’s perception of Echo and Alexa’s role in transforming music, as illustrated by Billboard’s interview with Jeff Bezos and Amazon Music head Steve Boom. I think the take here is a little overblown, but there’s no doubt Echo and Alexa are changing the experience of music for the small minority of people who use them. YouTube’s relatively low ranking is surprising given how important a channel the site is for the music industry, but of course its relationship with the labels and artists is complicated. This kind of ranking exercise is always somewhat arbitrary, but it’s interesting to get a music industry take on the tech companies and their relative importance here.
Amazon put out some new numbers around its third party Payments platform today – volume nearly doubled in 2016, 33 million customers have now used it, over half those using it are Prime members, and around a third of transactions were on a mobile device. There’s good growth here for Payments, which doesn’t get much press but has made quiet but steady progress since its launch. But it’s also worth putting in context – the leader in the space, PayPal, reported 197 million active customer accounts as of the end of 2016, up from 179 million a year earlier, so Amazon may be growing but it’s way behind. Amazon, of course, has over 300 million active customer accounts itself, but most of those only use their accounts to shop on Amazon.com. All the more interesting, then, that the two companies are apparently in talks about working together in some way.
Last week, Recode reported that several big tech companies were drafting a letter to the Trump administration on immigration, though I still can’t find confirmation that this letter has actually been sent. However, those tech companies and many others have now filed an official friend of the court brief in the lawsuit being brought against the administration by the states of Minnesota and Washington. This steps things up a notch, formally putting the 97 companies behind the brief on the other side of a court case from the administration. As with the early condemnations of the executive orders just over a week ago, Amazon is notable by its absence, as is Tesla (whose CEO Elon Musk has continued to sit on the advisory council Uber CEO Travis Kalanick vacated last week). Tesla’s absence is consistent with Musk’s overall stated strategy of trying to bring change from within, but Amazon’s absence may simply be due to the fact that it weighed in on the case separately earlier in the process (though Microsoft has participated at both stages).
Update: this tweet explains that Amazon was asked not to sign the amicus brief because it was a witness in the original case.
Amazon Reports Fourth Quarter 2016 Financial Results (Feb 2, 2017)
Amazon had a somewhat disappointing quarter relative to analyst estimates, as growth slowed in its core e-commerce business. Unit shipment growth, which had been above 25% for the last five quarters, dropped suddenly to 24%, which impacted overall growth rates, as those dropped for the second quarter in a row. The International business had significant losses for the second straight quarter as Amazon invests more heavily overseas in fulfillment, market entry, and extending services like Prime video globally. AWS grew at a healthy clip, though margins are flattening at around 26% lately. As usual, executives on the earnings call were not helpful in understanding or predicting the big swings in both growth rates and investment levels, though guidance for Q1 looks fairly light. The official explanations are the anniversary of a leap year in 2015, which added 150 basis points to growth, and currency headwinds, which are being mentioned more frequently again on earnings calls lately. But it looks as though Amazon may be expecting slightly slower growth in Q1 too. Dropping back down to the high teens and low twenties growth rates Amazon saw in 2014 and 2015 wouldn’t be the end of the world, but it would be a rather different trajectory from the one it’s been on for the past year and a half, and investors would react accordingly.
Target has stunned its employees by suddenly shutting down two big innovation projects – Recode (Feb 2, 2017)
Amazon got lots of attention around its Amazon Go store concept a few weeks back, though it’s still an extremely limited pilot program. Target, on the other hand, seems to have just killed off its own similar initiative out of nowhere. It’s obviously tempting to view this as some kind of response to Amazon’s moves, but given Amazon’s tiny presence in physical retail it seems far more likely Target simply felt the project wasn’t delivering meaningful results and its innovation budget was best spent elsewhere. Having said that, if physical retailers can’t at least attempt to compete with Amazon in innovating on their home turf, it doesn’t bode well for their ability to stand up to it more broadly.
Yet another story about Amazon’s deepening investment in shipping infrastructure (see also ocean liners). Its Prime Air freight investment is an existing strategy, but Amazon is leasing the planes and has been using existing hubs, whereas this new $1.5 billion investment is to create its own hub in Kentucky. Amazon’s claim that it isn’t looking to compete with UPS gets harder to believe all the time.
Walmart is going after Amazon Prime with free two-day shipping and no membership fee – Recode (Jan 31, 2017)
Walmart is making two changes to its free shipping program: eliminating the $49 annual fee, and lowering the minimum purchase amount that qualifies for free shipping from $50 to $35. This doesn’t give the impression of Walmart coming from a position of strength, but rather one of weakness, where it has to keep making concessions and changes to try to make its equivalents to Amazon’s Prime service look more enticing. Of course, there’s also an argument to be made that Amazon’s Prime service works so well psychologically precisely because it has a hefty annual fee – once you make that commitment, you’re more likely to purchase lots of things through the site to justify and make use of the money already spent. Removing the membership fee means that users have no special reason to prefer Walmart over Amazon for any given purchase. At this point, I don’t think many people are choosing Amazon for shipping alone – they likely just think of Amazon as the default option for online retail, and if they happen to be Prime members (which many American households are) that seals the deal. Short of going all-in on free shipping a la Zappos, I’m not sure that any changes Walmart makes to its shipping policies and prices will move the needle meaningfully.
Silicon Valley’s responses to Trump’s immigration executive orders, from strongest to weakest – The Verge (Jan 28, 2017)
This is a good summary of the responses from the tech industry so far to President Trump’s executive orders on immigration from Friday. It also does a nice job sorting the responses by strength – there’s quite a range in the responses, from those focusing narrowly on the practical impacts on employees of each company to those issuing broader moral condemnations of the policy. This certainly won’t be the last we hear on this topic. It’s notable that as of right now Amazon is one of the major holdouts among the big consumer tech companies.
via The Verge
This is an interesting but not unexpected development – PayPal already powers lots of payments for e-commerce purchases online, and the biggest past barrier to doing the same with Amazon was the close ties between PayPal and eBay. With that relationship now severed, PayPal is free to pursue this opportunity further, and with Amazon the largest e-commerce retailer in the US and a number of other markets, that could be a big boost. It’s less obvious that it will make a huge difference for Amazon, since it has credit cards on file for many of its regular customers, but it could well help reduce friction for occasional or first-time users, potentially providing a wider funnel for eventual Prime members. The other interesting wrinkle here, of course, is that even without the eBay angle, these two companies still compete with each other for web payments – Amazon has a much smaller third party payments platform which is used as an alternative to PayPal by some online retailers.
Apple Officially Joins Partnership on AI (Jan 27, 2017)
I commented on the reports that Apple was about to join the Partnership on AI yesterday, so I won’t revisit all of this today. Two notable things from today’s announcement, though: Apple’s representative will be Tom Gruber, who runs Siri at Apple, and that may be indicative of where Apple sees ownership of AI residing within the company (it has no formal head of AI); secondly, Apple has been involved with the Partnership from the outset, but hadn’t formalized its membership until today. That might signify that there were some details of Apple’s membership which needed to be worked out before it felt comfortable joining -I’d love to know what those were. Separately from Apple’s involvement, it’s worth noting that the board now has representatives from a number of other organizations beyond tech companies including several universities. So the Partnership won’t just be about driving the agenda of the tech industry here.
These numbers get crunched every year, and are always an insight into the sometimes complex relationship between tech companies and the US government, as well as the very different strategies pursued by the various companies – Apple spends far less than some of its peers (less even than Facebook, which is a fraction of its size), while Google is always a big spender. The other thing I’m always struck by is the relatively tiny size of the spending – even Google’s $15.4m lobbying spending is minuscule in the context of its overall business – Apple’s spend was a fraction of a hundredth of a percent of its revenue for the year. It’s also interesting to see which issues the companies lobbied on: Apple lobbied mostly on technical issues directly related to its business, while Google lobbied more broadly on trade and immigration policy as well as several technical topics. All this will obviously potentially get a lot more complicated under the new administration, which has so far had a much more adversarial tone towards big tech companies than its predecessor.
Amazon Expands Into Ocean Freight – WSJ (Jan 25, 2017)
Amazon seems to be treating building its own shipping infrastructure as a major strategic goal at present, from running its own planes to shipping its own sea freight. That’s partly about leverage over the traditional companies it has historically outsourced these jobs to, and partly about flexibility and control over the infrastructure it needs to get the job done. The further Amazon goes down this route, the harder it becomes for anyone to compete on a level playing field – Amazon’s logistics and distribution infrastructure is reaching a point where it’s becoming a massive competitive advantage.
Amazon has become the first streaming service to have a movie it owns nominated for best picture at the Oscars. This follows years of Netflix and Amazon content receiving nominations for TV awards, and Netflix has previously earned nominations in other categories. The catch here is that Amazon released Manchester by the Sea in theaters, so it feels much more like a traditional release than most of Netflix’s movies (The Little Prince, a Netflix-owned movie that didn’t debut in theaters, was not nominated in the best animated feature category despite being well received). So although there’s some symbolism here, it’s mitigated a little by the fact that the movie still received a traditional theatrical distribution (and did well there). It is ever clearer, however, that Amazon and Netflix (and potentially others) will continue to grow as a force in movie acquisition – the Sundance Film Festival is underway at the moment and we’re likely to see several more big buys there as the streaming companies beef up their libraries with exclusive content.