Amazon will take a risk with snooping

Another week, another Amazon acquisition. WiFi start-up Eero should help with its plan to fill homes with connected gadgets. But smart speakers and doorbell cameras are one thing. Amazon monitoring online browsing more closely may be less popular.

CEO Jeff Bezos knows the value of digital privacy. Eero says it has no interest in tracking online use. Still, startups have a habit of misjudging the ambitions of acquirers. Think of Whatsapp’s bewilderment that Facebook wanted to introduce targeted adverts. Website-snooping may not even be necessary. Amazon could use Eero data to track smart-home device use as it expands in hardware.

This is just the sort of scheme to rile antitrust campaigners. Amazon is already being investigated for anticompetitive behaviour in Europe. If breaking up a homegrown success story proves unpalatable to politicians, there may be appetite to limit ways in which Amazon uses data to give its own products and services an edge.

For now, antitrust risk is not reflected in Amazon’s shares. The company trades at 60 times expected earnings more than Alphabet, Facebook and Apple. Potential growth in advertising and cloud computing outweighs the fear of regulators. High-margin revenue contributed to free cash flow of just more than $19bn in 2018 more than double 2017’s. Ignore any suggestion that this will translate to Amazon finally paying out a dividend. With close to half-a-million shares trading at $1,638, the entire pot would provide a fairly unimpressive 2% or so.

For now, acquisitions such as Eero show that money is still being ploughed back into the business. This means annual capital expenditure has more than tripled in five years, exceeding $13bn in 2018. Amazon expects to spend even more in 2019. The only stumbling block is political pushback. No-one knows how much data tech giants can collect before governments intervene. Eero could help provide the answer. /London, February 13