News has just broken that Amazon.com has purchased hot ecommerce up-and-comer Zappos for 10 million Amazon shares or $880 million. (The Amazon release said it was $807 million, but that was based on a trailing 45-day estimate of its share price. Closing price today bumps the deal up to $880 $888 million.) Zappos employees also will get $40 million in cash and restricted stock. In other words the deal is more like $920 $928 million all told. And Zappos management will remain in place.
This is a great exit for Zappos’ investors, including Sequoia Capital and Venture Frogs, who put in about $60 million in seven rounds.
This isn’t just one of those times when companies say the management will stay and the company will be run independently. People close to the company say Zappos has long struggled with its desire to build a company for the long term and pressures to deliver a return for investors. This deal appears to be the best of both worlds. The way it’s described to employees, it’s less an acquisition and more a swap in shareholders.
I’m digging around for details now but here’s a video Jeff Bezos did that just went to Zappos employees. The post by Zappos CEO Tony Hsieh is here. In a letter to employees he writes:
We plan to continue to run Zappos the way we have always run Zappos — continuing to do what we believe is best for our brand, our culture, and our business. From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different.
Wow. Congrats Tony! Zappos is great company.
Of course Scoble gets the first comment.
That’s what I get for watching FriendFeed and Twitter in real time!
I wonder how Zappos’ culture will clash with Amazon’s. Zappos is very transparent and fun. Amazon, closed and not so much fun.
Amazon is the new owner, However don’t change anything at Zappos. Keep it Open And fun internal Zappos, but report progress to boss Amazon “closed” And without humor;)
If they’re smart, they’ll let the Zappos division remain the exact same culturally.
You’re a killjoy Scoble lol.
Of course they’re going to keep Zappos the same, the culture and branding is invaluable and that’s what they bought it for – the cool factor.
Hey Robert, one thing that makes zappos great from a consumer standpoint is their free roundtrip shipping. How long you think that will last with amazon in control? I pay a fee for amazon prime and this place gives it away?
Amazon has it’s own shoestore called Endless.com which offers free overnight and free 365day returns. It’s current service level beats Zappos, and it’s gain selection. but Zappos has the brand recognition.
I did not realize endless.com did that.
They’re a great company when you only look at customer service. But when you look at their inventory, it’s no more long tail than the neighborhood shopping mall. Very frustrating — which is why I never buy anything from them.
Zappos is a nice company, but Amazon overpaid.
According to the S4, their net income in 2008 was $10M. And their net income during the first 3 months of this year was $220,000. Unbelievable.
Very exciting. How are they going to integrate the cultures?
I read that Zappos doesn’t pay their employees competitive wages. Is that true?
Hey Facebook User, are you an idiot? The only person that can determine if a company pays a competitive wage to employees or not is a prospective employee….if and when the prospective employee accepts a position, by definition, the employer paid a competitive wage. So all of the employees that accepted jobs at Zappos or any company in America is paid a competitive wage…the ones that do not consider the company to pay a competitive wage work for a different company that competed for the employee with a higher wage/benefits/environment etc…
Thanks for that lesson in economies, I must have fallen asleep for that one in econ 101
@billbanker
not sure where you got that theory that “if and when the prospective employee accepts a position, by definition, the employer paid a competitive wage”
i disagree … an person can accept a position in a company “because it is a job”, “he needs a job” and “it gives him income”, it doesn’t necessarily mean that he accepted it because the wage was competitive. in a situation where an employee has multiple options of job offers, a luxury situation in the economy nowadays, then your statement holds true. However, you can’t just use that blanket statement for every job and employer.
An example would be if a guy gets laid off at a good office job, he needs to pay the bills desperately and goes to Walmart or his local grocery store to work temporarily to get some income…. that doesn’t necessarily mean that he took the job because the job paid competitively, he took the job because it helped him pay the bills and support his family.
@billbanker
plus your statement just zeros out every competitive wage statistic out there ever compiled. competitive wage statistics aren’t based on an employee perception of what the job pays, it is based on comparing companies of the same stature, function and size.
A potential employee then uses those statistics to see how well the job pay compares to another company and/or for negotiations.
No need to be rude. What (s)he’s referring to is in context with other markets. To answer the question, no. My our firm was considering signing a long-term recruiting contract with them, but were surprised to find out what their definition of “competitive” was WRT to Silicon Valley/Seattle executives.
I hope that this means that zappos will still be one of the best places to buy shoes. Gald to see that the employees get something out of the deal also. makes me wish I worked there lol
Can’t wait for the real details of the deal to totally come out.
You just knew this was going to happen! Congrads!!!
‘grats Zappos! 10 million shares? whoa!
So appropriate. Is Netflix next?
This move isn’t very surprising if you pay attention to what Bezos has been doing lately.
Oh no… I hope management at Zappos stays in tact.
Agreed! Cool that Mr. Tony is stayin at the top — let’s check in 2.5 years from now?
Zappos will probably end up being merged with Endless.com the shoe-selling site from Amazon
What will happen to Endless.com was my first questions as well…
Zappos culture won’t be the same!
I would expect one more zero!
Amazon has made a great deal I guess.
9 billion? can i have a sip of your kool aid
Wow, maybe now we can have the Zappos experience in Europe soon? Congrats!
Up and comer? Zappos has been around since 1.0
Brilliant! Great move for both companies!!!
Great purchase
Wow….$900 million roughly?
Outstanding Tony. Another great acquisition. I will be interested in seeing this develop.
Great news for all involved. I love both companies and think they’re good for each other.
Rumor!
Should have used the title “Zappos and Amazon sitting in a tree…”
this video is classic.
Is that correct? 10 million shares? Wouldn’t that be an almost $888 million acquisition (street value)?
yep. $807 million to be precise.
$807 million? When was this deal locked? Closed today at $88.79/share
Yeah you’re right actually, hadn’t seen it was just the trailing price offer. It it worth about $880 million
Congrats Zappos! Amazon, buy me, buy me
Guessing they can’t do any more major acquisitions for a while….
I can be fairly minor
Can’t wait to see how they use this deal.
Please don’t squash Zappos. >.<
Congrats on the deal! Hope this leads to more jobs, and fewer ones.
I meant “more jobs, and *not* fewer ones.”
great pick Tony..
Wow, that is huge! Great news indeed. Amazon is very strong when it comes to operations, while Zappos is a social media powerhouse. Would be interesting to see how those capabilities cross pollinate.
Wow – Amazon just bought some top notch talent who “get” customer service; Buying a seat at the world class customer service table.
Looking fwd to more gory juicy wonderful deets!
Amazon did the right thing. Endless was not exactly a runaway hit!
Zappos is a great company. This is a good move for Bezos. What does this mean for endless.com?
Wow! Congrats Zappos. I hope this is good news for everyone.
This actually seems a little low given the sales I thought they were doing. Anyone have good reason to agree or disagree?
Retail usually has very low margins. Usually around a few percent. So, don’t look at the fact that they sold a billion, look at real revenues (IE, what did Zappos get to keep). That’s the real number.
We call those profits, Scobie
Real revenues that they get to keep…how is this Scoble even semi-respected in your industry. WTF?? Holy cow.
Do not take Scoble’s name in vain! You’ll be chewed out: http://smackdow...me-in-vain-wtf/
You’re a moron, seriously.
The video reminds me of a Family Guy episode where a speaker is talking to the high school about abstinence… the kids keep saying things like, “Hey, he’s sitting casually backwards in his chair like us! We should listen to him!” But hey, if Zappos can preserve its culture, I’m sure some amazing things will come of this buy! Congrats to all!
Zappos was expanding beyond shoes, and building a cool brand. Amazon is just taking the competition away.
Congrats! I take it that is the end of endless.com?
Wow! Couldn’t happen to a better company! Congratulations!
You always hear the they are a great company, but they are also outstanding to work with. http://Zappos.S...ggestionBox.com
I sure hope the Zappos culture doesn’t change with this… regardless, congrats to Tony and the crew!
Congrats Zappos. Look forward to Zappos sharing some of its customer service prowess with Amazon. Would make for happier customers!
congrats to @zappos and team. well done.
Congrats Tony! I hope Zappos remains customer obsessed.
Wow, big move. Advice to Amazon Mgmt: Don’t change Zappos!
“Zappos culture”? This is how capitalism WORKS. Luckily, there are PLENTY of local businesses around to support instead of (or in addition to, if that’s your thing) Amazon/Zappos.
$807 million, didnt Zappos sell more then $1 billion in sales, seems a bit low or maybe ression discounted. Anyway congrats Tony and Zappos team!
I don’t have profit number for Zappos obviously, but in that space, I would guess that this acquisition will work out to greater than 10 times earnings…which is very fair. Especially when the currency being traded is a public stock with generally bullish prospects.
What would you rather have for $850 mil…Zappos or Bebo…if the goal is to make money, it almost seams comical…
zappos is not a profitable company. this deal saved the venture capital people.
is Zappos not profitable? This price seems really low considering what a powerful retail brand Zappos is? I am surprised Wal-Mart or Target or Sears didn’t pay $1B plus. It would have been well worth it to these guys.
I don’t have profit number for Zappos obviously, but in that space, I would guess that this acquisition will work out to greater than 10 times earnings…which is very fair. Especially when the currency being traded is a public stock with generally bullish prospects.
What would you rather have for $850 mil…Zappos or Bebo…if the goal is to make money, it almost seams comical…
Genius move on both their parts! I can’t wait to see what they do together, and I’m hoping some of Zappos’s exceptional customer service rubs off on Amazon.
I wonder how this is all going to work out considering Amazon already has a shoes property in endless.com. Definitely a good purchase for Amazon though and Zappos is a great company, hopefully the guys in Seattle don’t tinker too much with that winning formula.
Wikipedia says 1,500+ employees, so each should be getting about $25,000. Pretty nice, if they get to keep their jobs. If not, a slap in the face.
The employees never have that much stock, percentage wise, when compared to execs.
Actually I think that’s about right as the article notes that $40M was set aside to be distributed to the employees (which is about $26.6k an employee if the 1500 employees number is accurate)
no kidding. Employees don’t have as much stock as executives. I would have never guessed that this is the case. Next thing, you’ll be telling me is that some people make more money than others.
Tony makes less than some or most of his employees at Zappos.
http://simplesh...journal/item/50
I’m thankful to have a CEO like that. Thanks Tony!
You were a rocket scientist before you started schlepping “tech” videos, right?
So they spend the whole last year advertising the hell out of their brand just so they can sell to Amazon? I wonder if this was their strategy all along…
Well, Amazon and Zappos are both extremely well branded.
I absolutely love Zappos – i hope Amazon leaves them alone to stay fabulous….i’m a bit worried to be honest
Interesting. I wonder how this will fit together with the Amazon property Endless.com which sells shoes.
I was also wondering exactly the same thing–anyone know?
Why did you edit the article to remove the name of one of the early investors?
Congrats to everyone at Zappos, you have built something special.
So when will I be able to get e-Shoes on my Kindle?
Soon, but careful, if they have any issues you may find yourself walking to work barefoot…
Probably not, but the DX is big enough that it could measure your foot size accurately by placing your foot on the screen… hmmm.. but, I guess more people would break the Kindle by actually walking on it…