Who Will Amazon Buy Next? & Other Poorly Researched Questions
There’s a post on the Software Advice blog that has me more than a little annoyed this morning.
One blogger, who I will not be naming because his post is wrong in so many ways, has put together a list of companies that he thinks Amazon might buy next. He’s also assembled a chart showing most of the companies Amazon has bought in the past 15 years (it’s missing a few non-obvious acquisitions like Abebooks' share in LibraryThing and Bookfinder.com).
The chart may be incomplete but it’s still useful; unfortunately I cannot say the same about that blogger’s list of future acquisitions.
Most of that list consists of companies that cannot be bought, companies that Amazon already owns, and companies that I would not touch with a 10 foot pole. In fact that list is so bad I thought it worth a dissection just to show just how bad it is.
But before I critique that list, let me share what few details I have gleaned about Amazon’s acquisition strategies. I have been watching Amazon for a while now, and so far as I can tell Amazon has been buying companies for one of two reasons.
Amazon buys tech companies (Ivona, Kiva Systems, Mobipocket) that Amazon thinks would be useful (product, tech, or skills) for some project Amazon is working on internally. It is sometimes unclear exactly how Amazon plans to use the startup, but I think Amazon always has some use in mind.
Amazon also buys retailers like AbeBooks, The Book Depository, Woot, Zappos, etc, that are successful in their niche. It’s my guess that Amazon buys these retailers to keep them from becoming a serious threat to Amazon (and also to keep new potential competitors from launching).
With that in mind, let’s consider the companies that blogger suggested Amazon might buy.
His list includes retailers Best Buy and Radio Shack, neither of which are IMO a good buy. I’m not sure they are healthy; they’re not dying off but they’re also not doing too well, either. The net gain from the possible synergies of the purchase don’t necessarily outweigh all the baggage.
That blogger also suggested that Amazon should by Songza, a startup that lets you assemble playlists. This is a great idea, which is why Amazon bought Songza in 2010 (as part of another acquisition).
Update: It turns out that Amazon is only a partial owner of Songza. This startup relaunched and now has a number of outside investors.
Netflix is also mentioned as a potential acquisition, but that purchase could never happen. Even if Amazon could work out a deal I seriously doubt that they would be able to get regulatory approval to buy a competitor.
The online grocery delivery service Peapod is another deal that I do not see happening. That startup is owned by the retail chain conglomerate Royal Ahold and is integrated into that conglomerate’s supermarket chains (a complementary relationship). A hundred bucks says it is not for sale.
The list also includes 3 potential acquisitions that aren’t completely ridiculous: Lions Gate, Staples, and Pinterest. If Amazon wanted to buy a movie studio, Lions Gate might be a good buy; it’s the largest independent studio left standing. And Staples is a healthy retailer that has a solid chunk of the business retail market. But Pinterest, even though it could be a good complement for Amazon, is probably too expensive to buy at the moment. The hype has driven the purchase price too high for it to be worth buying.
All in all, the post Who Will Amazon Buy Next? was a complete waste of a couple hours of my morning. I wouldn’t pay it too much attention.
fjtorres July 11, 2013 um 12:17 pm
RadioShack I could see Amazon buying but only if the price is low enough and they’re not deep enough in trouble for that yet.
If it ever gets there, in a couple of years, there would be some synergy between their horde of lightly-staffed storefronts and Amazon’s logistics prowess. Just not soon.
As for Netflix, no. Hulu is cheaper, a better fit, and they haven’t even bid on it.
Movie studio? I doubt Lionsgate is available: they just bought Summit. If it were and the Summit people agreed to stay it might be a fit.
Nate Hoffelder July 11, 2013 um 1:26 pm
I don’t understand why everyone assumes that Amazon needs store fronts. It’s been 18 years and so far Amazon seems to be doing fine without them.
fjtorres July 11, 2013 um 2:56 pm
It’s not a matter of needing.
But Amazon is an opportunistic company; presented with the right deal, I have no doubt they will jump in to B&M. Or that they can make it work. Those distribution centers they’re building have plenty more uses that just feeding online sales.
Paul July 11, 2013 um 8:03 pm
Its more likely that they would want a series of smaller warehouses so that they can do their product within 3 hrs on-demand service. You don’t need peapod for that (because of peapods existing relationship). Radioshack is too small. Staples might be worthwhile if they wanted to get more into the business supply market (but they are already doing pretty well at that anyhow) but I think it would be cheaper if they built the front ends themselves.
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Ravi July 12, 2013 um 7:31 am
Even putting aside the current price, Pinterest would be difficult for Amazon to acquire.
Rakuten (Kobo’s parent) put 50 million into them last May. I doubt they’re very interested in selling their stake to Amazon, even if they made a tidy profit in the bargain.
Nate Hoffelder July 12, 2013 um 7:42 am
At the very least that interest would result in a bidding war.
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