Why Jeff Bezos Bought the Washington Post, and How Other Acquisitions Compare

jeff bezos

Jeff Bezos.
Wikimedia Commons photo by Steve Jurvetson. Click the photo to see the source.

I agree with Business Insider’s Henry Blodget’s reasons why he believes Amazon founder Jeff Bezos bought the Washington Post. Read his article for the details; in the meantime, here are the three points I agree with:

  1. Amazon’s already in the content distribution business, and news is another form of content — but one that Amazon doesn’t yet distribute.
  2. Amazon’s already in the subscription and media-gadget business. The former is where newspapers used to excel, and the latter is where they’re lagging far behind.
  3. News is a high-traffic intersection, and where there’s traffic, there’s walk-through traffic…as in shopping! Simply put: come for the news, stay to buy shoes!

The one I don’t buy is: Amazon is getting into the physical delivery business, which the Washington Post is already interested in. Yes, Amazon’s interested in the physical delivery of goods, but only because it’s currently the only way to send physical goods. I think the actual ink-on-paper part of the Post is the least interesting thing about the institution, and I think Bezos would agree.

I think that the purchase is great news for the Washington Post. Bezos has historically played a long-game, enduring short-term pain for long-term blue-sky gains. In today’s business environment, where everything is about what the balance sheet will look like next quarter and damn everything else, this is a much-needed breath of fresh air.

Bezos bought the Post for $250 million, which Business Insider says is a bargain, based on their financial reports. In case you were wondering how this purchase compared to other big purchases by high-tech companies and people, I put together the chart below:

Company What They Do Acquired By Year Purchase Price
Pixar Computer animation Steve Jobs 1986 $5 million
Ticketmaster (80% share) Event tickets / legalized scalping / ripping off people in general Paul Allen 1993 $243 million
IMDB (along with BookPages and Telebook) Movie facts database Paul Allen 1998 $55 million
YouTube Online video Google 2006 $1.65 billion
DoubleClick Online advertising Google 2007 $3.1 billion
Feedburner RSS feed aggregator Google 2007 $100 million
Postini Email security and acrhiving Google 2007 $625 million
P.A. Semi Semiconductors Apple 2008 $278 million
Zappos Shoe and clothing sales online Amazon 2009 $928 million
FriendFeed Social networking update aggregator Facebook 2009 $47.5 million
AdMob Mobile advertising Google 2009 $750 million
Quattro Wireless Mobile advertising Apple 2010 $275 million Photo sharing / 3rd-party apps for Facebook Google 2010 $228 million
Anobit Flash memory Apple 2011 $390 million
Zagat Restaurant reviews Google 2011 $151 million
AuthenTec Mobile device security Apple 2012 $356 million
Zenprise Mobile device management software Citrix 2012 $355 million Facial recognition Facebook 2012 $100 million
Instagram Social photo sharing Facebook 2012 $715 million
Meebo Online chat Google 2012 $100 million
OMGPOP Games Zynga 2012 $180 million
Waze Navigation Google 2013 $1 billion


Also worth reading: Salon’s The Iceberg Just Rescued the Titanic, which includes this bit:

Even better, Bezos is a man who knows how to lose money.

Amazon did not become profitable for seven years after its IPO. Just last year, Amazon lost$39 million. Amusingly, the most recent quarterly filings for both Amazon and the Washington Post Co. have WaPo making a profit of $5 million on total sales of $959 million while Amazon lost $7 million on total revenue of $12.8 billion. (Of course, the Washington Post’s profits presumably are mostly generated by its educational testing subsidiary Kaplan, which is not part of the sale.)

One can well wonder how Jeff Bezos managed to become a billionaire 20 times over while presiding over a company that has lost money in more years than it has made money. The standard explanation for why Wall Street hasn’t left his company riddled with bullets on the stock exchange floor is that Amazon’s losses stem from Bezos’ determination to invest heavily in the future. In the long run, Wall Street seems to think, we will all buy everything from Amazon — and that should earn the company a tidy profit … in the long run.

Yeah, yeah, but to paraphrase Keynes, in the long run we’re all former employees of shuttered brick-and-mortar bookstores and employees of publishing houses who lose money on every Amazon sale and writers who will never earn out our piddling advances because Amazon has made it impossible for anyone but Amazon to make money from publishing. In other words, we’re all dead. But the point is this. Love him or hate him, Jeff Bezos has never paid even the semblance of lip service to Wall Street’s insistence on pumped-up quarterly earnings statements. That’s the kind of owner today’s newspaper desperately needs? He can wait out a wrenching period of technological transition longer than anyone this side of Bill Gates or Warren Buffett.