Amazon CEO Jeff Bezos has outlined plans to have drones---specifically versions for Prime subscribers---deliver packages weighing up to 5 pounds in 30 minutes as early as 2018 or 2019. Cue the debate on whether Amazon timed its news perfectly for Cyber Monday or is really innovating.
- Cynic: Bezos knows damn well that a five year time line is way aggressive and the FAA is going to look long and hard at the concept. Bezos' 60 Minutes spiel is nothing more than a PR stunt.
- Techno-optimist: Amazon is reinventing shopping and will close the gap between instant gratification and e-commerce. Amazon is innovative beyond belief.
- Realist: Amazon concept could work, but will likely take more than five years to pull off, but sounds neat. Who am I to doubt Bezos?
So what's this drone idea really about? Messaging. Amazon is increasingly being known for its innovation---whether it's Amazon Web Services, supply chain or its Kindle business model. This innovation culture keeps people interested and away from annoying questions about profit margins.
Piper Jaffray analyst Gene Munster noted:
While it's highly unlikely we have flying Amazon delivery drones in four to five years, the recently announced initiative illustrates the culture of innovation at Amazon and the depth of its goal to re-engineer the fabric of retail for the next 100 years.
Munster also noted that Zookal, a textbook rental company in Australia, works with Flirtey, a commercial drone service, for quick deliveries.
In other words, Amazon's drone idea may not be all that original. If drones can shoot at bad guys and patrol the skies, surely they can drop off a package at your doorstep.
The overall theme is that Amazon could actually find profit margins with a fleet of drones. These drones, which could carry up to five pounds for 10 miles, would cover 86 percent of the goods Amazon sells. Shipping costs would plummet and Amazon could depreciate its fleet of drones. In theory, Amazon's bottom line could improve dramatically---unless Bezos finds some other venture to invest in.
What do we make of Amazon's drone plan? The realist, cynic and techno-optimist outlined above are all correct. Bezos is a showman so you can bet the drone story is well timed so Amazon dominates the news on Cyber Monday. Amazon will also target new markets that initially look crazy and prove you wrong. And Amazon will likely have drone delivery, but it'll take some time.