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How Will Amazon Pay For Drones?

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Amazon CEO Jeff Bezos has been tinkering with his Erector Set lately, and his latest erection has the media buzzing.  Within 5 years, Amazon plans to be doing deliveries via drone.  Drone deliveries will be to locations within a few miles of Amazon's fulfillment centers, meaning that the folks in Box Elder, Montana are not likely to see Amadrones whizzing at by their heads in the near future.

There are obviously some technical constraints.  Even with GPS, the drone would need to have some spatial awareness to know exactly where to deposit a package (unless you had some sort of Bat Signal that would serve as a data collection device for the NSA beacon for the drone).  Packages that needed a signature would also present a challenge - the drone would need to be at least as lifelike as the UPS delivery guy (I'd recommend extracting algorithms from old episodes of King of Queens).  They may also need to dodge incoming fire from people trying to score a free gift (shields up!).

Beyond the technical constraints is the cost.  The drones are expected to make one delivery at a time and then return to home base.  From a logistics point of view, this is really inefficient.  You may have noticed that UPS trucks often carry more than one package, and that they don't return to home base every 20 minutes.  There's a good reason for this.

As I see it, there are two main options to keep the drone budget under control.

Option 1: Limit the expenses

Amazon may consider using cheap, disposable drones.  If they were to take this Erector Set Drone, beef it up a bit, order in bulk (tens of thousands), and utilize preschool labor to assemble them, they may be able to get their costs down to $10-$15 per drone.  As a bonus, the buyer would get a free drone with every purchase.  Honestly, this is hardly a new idea.  Look no further than your own mailbox.  How many of your messages come with a free delivery mechanism?  Envelopes, and sometimes even boxes!  Back in the olden days, you could build a small menagerie from pony express and carrier pigeon deliveries.  Ah, those were the good old days. [Editor's Note: In more recent times, people build furniture from FedEx boxes.]

Option 2: Maximize revenue

Option 1 is thinking small, though. There's huge potential for revenue maximization with these drones.  Sure, Amazon could make throwaway drones for fifteen bucks, but it might actually be more profitable to build a small air force of hardy drones, even if the cost could soar well into the millions.  Sometimes you need to spend money to make money.

First of all, Amazon could create barriers to entry for competing delivery mechanisms in an effort to corner the market.  Am I suggesting that Amazon arm the drones and open fire on delivery vehicles?  Yes, yes, a million times yes.  Of course not, that would be unethical and very dangerous.  I'm simply suggesting that they use the quick delivery turnaround in their marketing campaigns.  Hard drive crashes at 11:15 PM on a Sunday night?  You'll have a new one in your hands in 30 minutes, or your next pizza hard drive is free.

Amazon could also make a few extra bucks while doing a solid for Uncle Sam.  Outfit these suckers with spy cameras and heavy artillery and take recon photos while also taking out a few strategic non-cvilian targets.  You're already spending the money on drone fuel - why not kill two enemy combatants birds with one rocket stone?  Of course, offering your services to a single buyer isn't a great way to create a market, as you give the buyer a lot of leverage.  There are probably a few other countries that would like to have photos of American command bunkers landscapes.  Canada and Denmark immediately come to mind.  Get the leaders of the three countries together for a brunch of pancakes, Canadian bacon, and Danishes and hold an auction after the dishes have been cleared.

Last updated on December 3, 2013.

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9 Responses to “How Will Amazon Pay For Drones?”

  1. Kathy says:

    I’m wondering how the drone is going to actually drop the package without destroying it and ho is it going to place it under the roof of my fairly narrow entry. Plus deliveries to apartments will be very interesting.

  2. Kosmo says:

    I’d actually expect something along the lines of a bat signal. More precisely, some sort of beacon device that you would place at the delivery site. Or perhaps even a special Amazon delivery box.

    I’d expect the drone to place the package, rather than dropping it from a height.

  3. Kosmo says:

    Apparenly UPS is also kicking the tires on the idea of drones. We are not far away from seeing aerial dogfights. Awesome.

  4. Steve says:

    You had me at “batsignal”. Funniest thing I’ve read all day.

  5. Evan says:

    I had never even thought of the idea of people taking the drones out on purpose for free stuff! I guess it all depends on how high they fly.

    Seems like an far fetched idea, but who the hell would have thought that the consumer Nav, internet, or even sirius XM would work?

  6. Elizabeth West says:

    Pretty funny stuff. I don’t think they’ll be able to do it, however. Too expensive and too many logistical issues.

  7. contrarian says:

    Makes me wonder … how long till Prime Air has a passenger delivery service to compete with the major airlines? Gawd knows the service would be a hell-of-alot better and we might even get more leg room in the main cabin.

    Who knows? Branson started a record store and ended up with an airlines. Maybe Bezos legacy will be that he started a book store and ends up with an airlines too? Food for thought :)

    – Contrarian

  8. bobk says:

    As a pilot, and having watched the 60 minutes segment, let me throw in an added wrinkle – not insurmountable but a definite concern for me.
    Per what I saw, the drones will navigate directly from point a (fulfillment center) to point b (customer). Better hope that there is no airport between point a and point b, or that Amazon Air is going to build enough intelligence into these things to avoid that airspace. Otherwise, it is only a matter of time before an airplane engine eats one of these things. Not a good thing for the drone, but even worse for the aircraft and the persons on board.

  9. […] In news that shocked the country, Amazon recently bumped the free shipping minimum order from $25 to $35.  Obviously, this is a cash grab to allow Amazon to pay for its drones. […]

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