Report: Amazon acquires AI photo tech startup Orbeus

Dive Brief:

Amazon.com Inc. acquired artificial-intelligence startup Orbeus Inc. last fall, sources told Bloomberg, though neither company has announced the deal and wouldn’t comment.
Orbeus offers artificial intelligence-powered photo-recognition technology called ReKognition that automatically identifies and categorizes photo content. Its PhotoTime app was released before Google’s similar AI-based Photos app.
Other companies are making similar moves to acquire AI startups: Apple acquired facial-recognition company Emotient Inc. in January and Salesforce Monday said it had acquired image-recognition startup MetaMind.

Dive Insight:

Amazon’s Web Services (AWS) cloud-computing unit is widely seen as supporting its retail profits, which have lagged behind costs. Amazon's net sales grew 21.7% to $35.75 billion in the fourth quarter, compared to sales from AWS that increased 69.4% to $2.41 billion. The company is investing in AI and robotics to boost its web services as well as to automate warehouses and fulfillment operations.

The last part could be particularly useful to Amazon, given its rising fulfillment costs. Shipping costs increased 37% in the fourth quarter, and operating expenses rose over 20%. Even with these numbers, there's no sign that Amazon is letting up on its push to sign up Prime members, who receive free-shipping perks even on the smallest of orders.

AWS accounts for about half of all cloud computing platform sales and a third of Amazon’s sales, according to RBC Capital Markets analyst Mark Mahaney. And this year “is lining up to be the year that AWS profitability starts to surpass retail,” RBC Capital Markets wrote in a January research note, as reported by the Seattle Times.

With AWS so key to Amazon’s bottom line, it can’t afford to cede any ground to rivals like Microsoft, Google, Salesforce or IBM, and it looks like it doesn’t plan to.

Success in this area depends largely on getting companies and consumers to depend on cloud services to host their data, so any moves to beef up capabilities and security are integral to that. While Amazon does have large customers like Netflix and the Central Intelligence Agency, the bulk of its business is with startups.

"Amazon's power alley in terms of customers has been small- and medium-size enterprises. Frankly, a lot of the privately funded unicorns are major AWS customers. As they now try to build up the capabilities to go into large enterprises, that's unproven. Whether Microsoft and Google have more success in that, it's a jump ball," Mahaney said last year, according to CNBC.