Amazons Two Recent Acquisitions: How They Can Change the World
You start off your day by asking Alexa about the weather. After having a sausage omelet, made from the ingredients bought from Wholefoods, you head out to school. Of course, make sure your Ring doorbell works properly to prevent any bad situations from happening. On your way to school, you pick up a Kindle for a quick read or maybe a nice little podcast from Audible. After a hard day of work, you decide to watch a movie to decompress. IMDb provides the best movie ratings and reviews, which help to inform your decision to watch one of the James Bond movies, produced by MGM studios. Before starting the film, you quickly check the wifi router Eero to ensure Amazon Firestick broadcasts seamlessly when watching the movie. After the film, tired, you close off your day by saying, “Hey Alexa, can you shut the lights?”.
Welcome to the Amazon era, where Amazon.com, Inc. has managed to infiltrate multiple facets of everyday life.
As the #1 company in multiple industries including, e-commerce, Cloud computing, digital streaming, AI, and many more, Amazon has grown to become one of the biggest platforms people rely on in their day-to-day. While most customers recognize Amazon only as an e-commerce platform, Amazon has been expanding its area of business like no other corporation. Recently, Amazon’s acquisition of two leading companies in healthcare and home products suggests an even greater opportunity for Amazon’s future. Here, simultaneously we are witnessing a very interesting business scheme from Amazon. Considering the pattern of Amazon’s past acquisitions, Amazon seems to be part of almost every aspect of our everyday lives. As we begin with a discussion of the two most recent acquisitions of Amazon, the article will analyze how the series of acquisitions could affect the privacy of the customers.
Amazon recently acquired 1Life Healthcare Inc., which runs a primary-care practice under the name One Medical. (Dan Rubin) Amazon is set to buy off the company for $18 a share in an all-cash transaction, valued at nearly $3.9 billion, including One Medical’s debt as well. (Amazon) According to Neil Lindsay, SVP of Amazon Health services, the company believes “health care is high on the list of experiences that need reinvention”. With so many people spending unnecessary hours booking appointments, taking time off work, and making trips to the doctor and pharmacy, Amazon envisions a more affordable, accessible, and enjoyable experience through a seamless combination of both in-person and virtual care services. (Lindsay) As the healthcare industry is governed by state and federal regulations, it has been proven notoriously hard to expand the business. In fact, Amazon’s earlier attempt at expansion with Berkshire Hathaway Inc. and JPMorgan Chase & Co. called Heaven, designed to provide high-quality, transparent, and cost-efficient healthcare services to employee families, failed to settle in the industry after three years. After spending over $100 million, these companies struggled with costs, data, and human resources. Yet, one of the reasons why Amazon is so stubborn about knocking on doors in the healthcare industry is because it “remains as one of the few industries that are less susceptible to recession”. (Evans, Herrera) With both companies, Amazon and One Medical, feeling optimistic about the future of American healthcare, they are now to create “high-quality, high-value healthcare”. (Dan Rubin)
Not even a month after the acquisition of One Medical, Amazon purchased another company, IRobot, “a global consumer robot company that designs and builds thoughtful robots and intelligent home innovations that make life better”. (Amazon) Some of these innovations include robot vacuums, mops, and air purifiers with the latest technology. This second acquisition was deemed especially risky and experimental given the significant decline in revenue from the past quarter, indicating possible signs of a slowdown in the business cycle. Amazon acquired iRobot for $61 per share, representing a 20% premium to market at the time, in an all-cash transaction valued at approximately $1.7 billion, including iRobot’s net debt. (Hart). Ever since the launch of its Roomba vacuum in 2002, IRobot sold more than 40 million units and has also been featured on Amazon’s Prime Day shopping for 8 straight years. Although the revenue of IRobot dropped by over 30% this quarter due to reduced orders, spurring from supply-chain issues, and stronger dollars, Amazon is “betting on one key aspect of this robot manufacturer” (Hart). With this transaction being the fourth largest acquisition performed by Amazon, Amazon envisages introducing Roomba as one of its connected-home products along with Eero, Ring, and Alexa. If Amazon integrates such technology into our lives in the near future, this would serve as a revolutionary medium for managing homes. Future homes would become more digitized as every home function would operate with a simple tap on one’s smartphone or a command word to Alexa.
Given these two major acquisitions, Amazon is now on the pace of becoming the largest conglomerate ever. However, while the frequency of these acquisitions has increased in recent years, this acquisition scheme from Amazon is certainly not anything new. Beginning with Audible in 2008, Amazon introduced an online audiobook and podcast platform, which was a paradigm shift from reading physical books. It not only garnered much profit but also served as a genesis for a trend, where so many people rely on digital devices to read books and newspapers while using podcasts for meditation and motivational speeches. In 2014, Amazon set its target on Twitch, an interactive live streaming service mainly focused on streaming games. This platform revolutionized how people consume media and provided a solid base to broadcast in a safe environment. By recently offering a 70/30 revenue split option to top-tier streamers, Twitch has been generating continuously high amounts of revenue, even during COVID times. Then, in 2017, Amazon decided to acquire a Texas-based supermarket chain, Whole Foods for $13.7 billion, by far the largest acquisition. Not only did this expand Amazon’s authority outside of the e-commerce industry but this buyout also enticed pre-existing customers to change their choice of shopping by offering Amazon app-barcode discounts. Amazon’s dominance continued with automotive when it acquired Zoox, an autonomous vehicle manufacturing company, in 2020. Reading, watching, listening, shopping, and driving.
While Amazon is to provide excellent service to almost every integral part of people's lives, this comes with costs.
Despite its relentless pursuit of expansion of business, customer privacy is the leading problem. While it’s understandable for some companies to hold data about themselves, it would be a little concerning for a gigantic mega-business to hold incredibly exhaustive data profiles on individuals across the globe.. Starting with IRobot, the results don’t seem to be too disturbing. Amazon would now gain the technology to capture the floor data of each house (Klosowski). This would potentially accelerate Amazon’s goal of creating a “smart home”, where Amazon would incorporate the floor capture technology along with Ring, Eero, and numerous other subsidiary companies to create an automated home service. Yet, in terms of personal privacy, there would be a minor issue. If one owns an iRobot vacuum and doesn’t like the idea of Amazon collecting all that data, one can opt out of sending mapping data to the cloud, opt out of the camera upload feature, or delete one’s account (Klosowski). Meanwhile, as One Medical allows patients to book appointments with a network of providers, track health records, and renew prescriptions, the only option to protect my information seems to be simply not subscribing to it. Nevertheless, every patient data acquired by One Medical is protected under the HIPAA (Health Insurance Portability and Accountability Act). The sad reality is that even if one was to cancel the subscription, Amazon would still retain the data and hold the possibility of being hacked. As Amazon does not demonstrate a great track record of protecting customer data, either way, giving any sort of data to Amazon would put one’s privacy at risk. One way to track how much information Amazon has about you is to request “data and privacy” from Amazon.com. Not only would this provide the volume of data that the corporation has about you, but it would also serve as a great checkpoint to manage the information one sends to the corporation.
With the growing concern about recession, skyrocketing interest rates, and a stronger dollar, Amazon is expected to transition to a generally more conservative posturing rather than continuing on its aggressive acquisition spree. From the corporate perspective, given the current macroeconomic situation, it’s important for Amazon to utilize their saved earnings and assets for growing sales and R&D. In the case of Amazon, this fall would serve as a period for developing a long chain of home and life-connected products. Yet, with uneasy feelings in the air about customer privacy, Amazon must construct a better privacy system to maintain the trust of its customers. Given the aforementioned advantages and problems lying ahead, we must be careful about giving out data about ourselves, as it may take a bad turn.
References
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“Amazon and One Medical Sign an Agreement for Amazon to Acquire One Medical.” Press Center. Press Center, July 21, 2022. https://press.aboutamazon.com/2022/7/amazon-and-one-medical-sign-an-agreement-for-amazon-to-acquire-one-medical.
Ang, Carmen. “Amazon's Most Notable Acquisitions to Date.” Visual Capitalist, May 28, 2021. https://www.visualcapitalist.com/most-notable-amazon-acquisitions/.
Evans, Melanie, and Sebastian Herrera. “Amazon to Buy One Medical Network of Health Clinics in Healthcare Expansion.” The Wall Street Journal. Dow Jones & Company, July 21, 2022. https://www.wsj.com/articles/amazon-to-buy-one-medical-for-3-9-billion-11658408934.
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Klosowski, Thorin. “How Amazon's Acquisitions of IRobot and One Medical Could Affect Your Privacy.” The New York Times. The New York Times, September 6, 2022. https://www.nytimes.com/wirecutter/blog/amazon-acquisitions-irobot-and-one-medical/.
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