BZ Notes
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BZ Notes

Amazon — Operating System For The Home?

I saw a video clip yesterday where Jeff Bezos was being interviewed about analysts’ reaction to Amazon’s quarterly reports. He said something profound: that he doesn’t really think much about the next quarter or two or the next eight, as pretty much those earnings are already built into the business via strategy his team adopted a few years ago. He focuses on strategy that would impact his quarterly earnings 2 to 2.5 years down the road. Its an incredible view into the mind of an amazing CEO who is aiming for nothing less than total domination.

I was thinking about above in the context of various ways in which Amazon is engaging with consumers in their homes. AmazonPrime, WholeFoods, Alexa, Home and Professional Services, partnership with door lock companies, acquisition of Blink home security camera, and other. What is the long term play here?

I would not be least bit surprised if Amazon/Bezos has his eyes on owning the internet pipes into the home. That is, owning the broadband access into our homes, and becoming the nerve we rely on to connect with the outside world, whether its via websites, apps, connected devices, or otherwise.

AmazonPrime has been a smash hit. As of late last year, there were more than 90 million AmazonPrime subscribers. Free shipping means we are not only preferring to buy from Amazon over others, we are also generally increasing our online purchases many fold. There is hardly a day that goes by without an AmazonPrime box sitting outside my house.

AmazonPrime also provides consumers access to unlimited streaming music and movies, not to mention Kindle competing with iPad, and FireStick with AppleTV. We have already seen a significant reduction in our use of Apple Music, Spotify, Netflix, and Hulu. And now there are also Prime Originals and Exclusives. Via such services, hours of consumer attention is hooked on what AmazonPrime has to offer. Perhaps not as many people have noticed, but Amazon Photos also provides an unlimited full-resolution backup of all your photos and videos for Prime customers.

Alexa has been another major success for Amazon. Just this past holiday season Amazon sold tens of millions of Alexa devices. It is now the first user-interface to the online world that kids are growing up with. Alexa is being built into other devices, such as light switches, locks, refrigerators, washer/dryers, bathroom fixtures, and even cars. Is it evolving into an operating system for the connected world?

Amazon has also partnered in other ways with home automation/connected devices. Major lock companies are partnering with Amazon on enabling an in-home delivery (vs on the doorsteps), and Amazon recently also bought Blink, an internet connected camera company. Amazon is literally providing the eyes and ears to the home.

Finally, Amazon is also now a major player in Home Improvement via its Business & Commercial Services activities. Might insurance be next on the way? Home services rolled into the Prime bundle?

Amazon’s quest for a larger piece of our wallet is not a surprise, especially in our homes. Others had opportunities along the way to become the so-called “operating system” for the home, but failed to build connective tissue for our home internet experience. For example, broadband providers, internet router companies, home automation and connected device companies, and even major appliance makers. Perhaps amazon has sensed the opportunity, and is on its way towards home domination, rolled into a single bundle for consumers’ benefit?

Is there ever a point where we might think Amazon is too big to fail?

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I am an early stage VC, partner at Lux Capital. I am attracted to startups that solve real, practical problems with technically ambitious solutions. Passionate about tech, entrepreneurship and social good. I like tacos and café lattes.

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Bilal Zuberi

Bilal Zuberi

Partner at Lux Capital. Investing in entrepreneurs inventing the future. I like tacos and café lattes. bz at luxcapital.com. @bznotes

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