Washington Post purchase isn’t first local business venture for Bezos

August 11, 2013

Amazon.com founder Jeffrey P. Bezos shelled out $250 million for The Washington Post and affiliated publications, but the deal announced last week is hardly the Internet billionaire’s first foray into Washington’s business community.

As an individual, investor and chief executive, Bezos has connections to the local technology, government contracting, lobbying and, now, media sectors. Although each of these roles is technically separate, they all run through Washington and back to Bezos.

Among his more recent business interests is Georgetown-based EverFi, which provides online tutorials that supplement school curricula. The start-up collected $10 million last year from a roster of investors that included Bezos Expeditions, Bezos’s personal investment fund, as well as Google Chairman Eric Schmidt and Twitter co-founder Evan Williams.

“Their approach with us has been they’re very hands-off on the operations of the business,” said EverFi chief executive Tom Davidson. “Having said that, they’re very detail-oriented when we do . . . seek their counsel on our strategic moves or other operating issues we might have.”

Melinda Lewison, managing director at Bezos Expeditions, declined to comment on the firm’s investment and management strategy.

Davidson said Bezos takes a long-term view of a company’s potential for success, a fact that makes him an ideal investor as the young firm expands into the often-challenging public education market.

“At EverFi, we really want to build a storied institution, and every move that he has seemingly ever made in his business has been about building an institution,” Davidson said.

EverFi is just one of Bezos’s connections to the local technology sector. Amazon owns 29 percent of District-based daily-deal purveyor LivingSocial after sinking hundreds of millions of dollars into the firm since late 2010.

Tige Savage has represented the Revolution investment firm on LivingSocial’s board since the company’s earliest days. Amazon’s interest in the company and subsequent investments helped establish LivingSocial as a dominant player at a time “when everyone was jumping into the daily deals business.”

“In the e-commerce world there’s no better company to keep than Amazon,” Savage said. “We thought that could be an item that differentiated us from the pack and make it a one-two horse race in the daily-deals space between Groupon and LivingSocial.”

Indeed, money from Amazon and other deep-pocketed investors fueled LivingSocial’s meteoric rise. The company used those millions to add subscribers across the United States and snap up similar daily-deals companies around the globe.

But the deal had one complicating factor: Amazon had plans to launch a service called Amazon Local that would also offer steep discounts at restaurants, spas and retail outlets. LivingSocial helped Amazon establish the business, Savage said, but the potential for conflict of interest was obvious.

“There have been some complicated times related to that in terms of being in cooperation and competition with a partner, but I think both the folks at LivingSocial and Amazon did their best to navigate through that,” Savage said. “It was never perfect, but we didn’t think it was going to be perfect.”

Since taking a stake in LivingSocial, Amazon’s quarterly regulatory filings have offered the best insight into the local company’s otherwise private finances. It has lost money in the past year and a half as some of its acquisitions lost value and new lines of business failed to yield significant revenue.

Savage declined to comment on LivingSocial’s business performance. But as the firm has looked to expand beyond daily deals, Amazon has been active in every board meeting, represented by vice president of worldwide corporate development Peter Krawiec, as well as in discussions between meetings.

“They’ve been quite vocal and brought to bear a lot of experience as we’ve looked to expand beyond what was just the daily-deals space into a broader social commerce platform,” Savage said.

(Tim O’Shaughnessy, the chief executive of LivingSocial, is the son-in-law of Washington Post Co. Chairman Donald E. Graham.)

Perhaps Amazon’s most aggressive move in Washington involved its Amazon Web Services (AWS) unit, a company that sells cloud computing technology.

In 2010, the company lured Teresa Carlson away from Microsoft’s federal business to lead its public-sector group.

“She stepped almost into a start-up,” said Glenn C. Hazard, chief executive of Herndon-based cybersecurity company Xceedium, which has partnered with AWS. “Amazon is a very large company [but] AWS, when she joined, this was a new foray into this market,” he said. “They chose somebody that had the credibility, understood the market.”

In 2011, AWS rolled out GovCloud, a cluster of data centers available only to government agencies and contractors. This year, AWS was approved for a program that fast-tracks companies approved to sell cloud computing services to government agencies.

Shawn P. McCarthy, research director at IDC Government Insights, said AWS’s focus on the federal market was clear in its fierce pursuit of a recent contract with the CIA. (After Amazon won, competitor IBM successfully protested the decision with the Government Accountability Office, and Amazon has since filed a lawsuit.)

The federal government market “takes some time, it takes some effort,” McCarthy said. “It’s only worth making that effort if you’re going to go after it aggressively.”

This month, AWS is set to celebrate the grand opening of its expanded Herndon office. In May, state officials said the office would be home to 500 employees who would support the company’s commercial and government businesses.

It also maintains “a significant and growing data center infrastructure investment in Virginia,” an AWS spokeswoman said, though she would not provide specifics on the number of data centers in the area or how many people they employ.

Amazon also lobbies lawmakers in Washington on a number of issues, including online sales taxes and patent reform. The company counts 25 registered lobbyists in Washington, most of whom are at outside firms. The company spent $2.5 million on lobbying in 2012, a figure that has more than doubled from a decade ago.

During the first half of the year, the retailer spent $1.7 million to lobby Congress and executive agencies, and $660,000 of the sum went to outside firms. Lobbying powerhouse Patton Boggs, where heavyweight Tommy Boggs Jr. and former senators John Breaux and Trent Lott are listed among the retailer’s Capitol Hill advocates, received the biggest chunk of Amazon’s business, earning $370,000 so far in 2013.

Catherine Ho contributed to this report.

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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