According to Bloomberg and TechCrunch (July 12, 2019), Amazon has ramped up development on Vesta, an Alexa-powered home robot on wheels. This is an exciting project and a potential game changer representing a big step towards bridging the world of “bits” with the world of “molecules”. (Think iPhone extending into the physical world).
Like the Echo, Vesta could be a platform on which Amazon and third party developers write apps and develop hardware extensions on to do all sorts of tasks around the home, e.g., vacuuming the floor, bring food, move heavy parcels, tidy the house, water the plants, and just about anything imaginable.
We all would be delighted to have some help around the house, but this need is far more pronounced for the elderly, in nursing care and for those who are less mobile. In Japan, the Pepper robot from Softbank is already used in elder care and nursing, and robots are already used in US hospitals (like the Cleveland Clinic and UCSF Medical Center) to move food and supplies, zap bacteria and lower costs. However, there is still much to be done to create a robot platform that is flexible enough for a wide variety of tasks.
While building flexible robots for home use is a massive undertaking that no robotic companies has succeeded to date, I believe Amazon has significant advantages against other robot developers:
Amazon has already built significant robotics expertise as a major developer of industrial robots for its fulfillment centers. The company has a history of successfully commercializing internal tools for third parties—for example, Amazon Web Services was an internal capability that Amazon parlayed into the world’s leading cloud provider for external parties, and this robotic technology is a logical next candidate;
Vesta builds on top of the voice recognition, artificial intelligence and developer platform of Amazon Echo, which already has a 60+% of the home assistant market;
The Echo already has a proven platform with a large number of developers who could potentially write apps for Vesta;
Amazon’s philosophy of delighting “divinely discontented” customers and willingness to “forgo short terms profits for long term free cash flow” will result in attractive pricing for customers and profits for developers; and
The Company is now generating copious amounts of cash flow, and has deep pockets that can be used to fund the R&D of the project
There are risks that the Vesta project may not see the light of day, and odds are that the initial product will, like the first iphone, be relatively primitive. However, over the long term, Vesta will likely give rise to extensions, applications and uses that we can’t even imagine today. I am convinced that, like the smartphone, this will become a huge category that creates a lot of value for consumers and shareholders.
At this point, Amazon has at least as good a chance to succeed as any other competitor. Even though I view this R&D project a “call option” embedded within Amazon, this call option could be highly valuable many years from now.
Disclosure: I am/we are long AMZN.