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Amazon Roundup: Google Ads, Experience Centers, Alexa, Sears

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Amazon (AMZN - Free Report) shares jumped over 11% in the past week. Let’s see what’s driving the optimism:

Amazon Stops Buying Google Shopping Ads

Marketing firm Merkle noticed late last month that Amazon ads stopped appearing on the Alphabet’s (GOOGL - Free Report) Google Shopping platform. Amazon subsidiaries like Zapoz however continue to advertise on the platform.

Google has said that periodic adjustments in ad campaigns are not unheard of while people connected with Amazon have confirmed on condition of anonymity that the company has in fact stopped advertising there.

Maybe we are reading too much into it, but since Amazon spends an estimated $50 million a year on the platform, this could be worth analyzing...

The most obvious reason forwarded by analysts is that Amazon could be turning focus to its own advertising business, so making money for Google while it tries to take share from it may not make sense any more. Amazon’s own comments on its earnings call regarding the very strong growth in its advertising business supports this theory.

This could also be a continuation or escalation of the showdown between the two companies. Amazon earlier removed Chromecast from its marketplace and Google removed YouTube from Amazon devices in retaliation.

Alexa Building Healthcare Chops

CNBC reports that according to internal documents seen by its reporters, Amazon is building a healthcare division within Alexa to obtain HIPAA (Health Insurance Portability and Accountability Act) compliance with particular focus on diabetes management, maternity and pediatrics, and geriatrics.

Rachel Jiang who has varied experience at the company will be leading the effort. Missy Krasner, who joined Amazon last year after helping Box attain HIPAA compliance, will be responsible for business development and strategy. Other members of the team are Larry Ockene who has worked as engineer at Amazon for the last 10 years and Yvonne Chou who has taken various roles across Prime, fashion and retail.

The healthcare market is complex and highly regulated so Amazon is rightly taking it a step at a time. Its past efforts include a collaboration with Merck (MRK - Free Report) to encourage developers to make apps (Alexa skills) for diabetes management; a special team within AWS dedicated to health and pharmaceutical companies; and a joint initiative with Berkshire Hathaway (BRK.B - Free Report) and JPMorgan (JPM - Free Report) to improve patient outcomes while reducing cost for insurers and employers.

According to Transparency Market Research, the digital health market is expected to grow at a CAGR of 13.4% between 2017 and 2025, to reach$536.6 billion by the end of 2025. HIPAA compliance will facilitate sharing and uploading of patient data on Alexa-enabled devices and take Amazon that much closer to taking its share of this market.

Jeff Bezos says, “Success is going to require talented experts, a beginner’s mind, and a long-term orientation.” So that is going to be Amazon’s approach for sure.

Amazon Experience Centers

Amazon has tied up with home builder Lennar to convert model homes from the company into Amazon experience centers, i.e. homes in which customers can have Alexa operate thermostats, lights, shades, locks and televisions with simple voice commands. The goal is to showcase how Alexa operates. So even if you aren’t buying a Lennar home, you can buy the Amazon devices to convert your home into a smart one powered by Alexa.

Lennar communities in Atlanta, Dallas, Los Angeles, Miami, Orlando, San Francisco, Seattle and Washington already have Amazon experience centers and the companies haven’t said if more locations will be added later. Lennar earlier had a similar arrangement with Apple’s (AAPL - Free Report) Siri that likely didn’t go down that well. It has now gone all in with Alexa.

Amazon Sears Deal

Sears Holdings shares soared on the announcement of a deal with Amazon that will see it offering tire installation services for orders booked on Amazon. The services will extend to all brands and not just its own DieHard brand. The service will initially be available to all customers in eight metropolitan areas including Atlanta, Chicago, Dallas, Los Angeles, Miami, New York, San Francisco and Washington, D.C. that say they want to have their tires shipped to one of the 47 Sears Auto Centers in these regions.

The service will eventually be extended to all its 400+ Auto Centers across the U.S.

The relationship between the two has been growing over the past year ever since Sears started selling its Kenmore branded home appliances on Amazon and then later added DieHard batteries.

Sears has seen a sharp decline in sales over the past few years and has been closing down a large number of stores. There’s some doubt about whether the company will even be able to continue as a going concern. So any deal like this that is likely to send customers to its stores, even if they are well satisfied Amazon customers, is something investors cheer. But this may just be en route to selling off its entire business to Amazon…who knows, right?



Amazon shares carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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