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Protocol Index: Amazon’s lending ambitions

Protocol Index

Good morning! This Thursday, what Amazon wants from lending, understanding Just Eat's Grubhub acquisition, and the stressful world of pandemic ecommerce. Want Index in your inbox each morning? Subscribe here.

What Matters Today

  • NetEase started trading in Hong Kong today, with its shares jumping as much as 10%. The positive debut will offer comfort to other Chinese firms that plan to list in the region as a contingency plan to U.S. crackdowns. That said, NetEase's Hong Kong shares closed at a 1% discount to its U.S. listing — perhaps implying that companies looking to shift to Hong Kong might have to take a valuation cut.
  • 2 p.m. PDT: Adobe reports earnings. The company is heavily reliant on customers in the entertainment and advertising industries, both of which have been badly hit by the coronavirus crisis.

Layoff Watch

Today's News

As of 4:50 a.m. PDT: Nasdaq Futures: -1.52% | Euro 600: -2.53% | Nikkei: -2.82% | Hang Seng: -2.27%



  • The EU reportedly plans to file antitrust charges against Amazon for using third-party seller data to develop competing products.
  • Amazon said it would stop police departments from using its facial recognition technology for the next year, saying it hopes Congress passes rules during that time.
  • The California Public Utilities Commission formally ruled that Uber and Lyft drivers are employees. Separately, it told the companies that they have until July 1 to get workers' compensation coverage for drivers, and could have their right to operate revoked if they don't.
  • The EPA told Amazon and eBay to stop selling certain products, some of which falsely claim to stop COVID-19.
  • Volkswagen delayed the launch of ID.3, its flagship electric car, to September.
  • Travis Kalanick's CloudKitchens said fires at its facility were "suspected arson."


  • Facebook is reportedly establishing an investment fund "to stay in close touch with the startup world." The fund will be under its New Product Experimentation team.
  • reportedly raised $3.9 billion in its Hong Kong share sale, and plans to start trading next Thursday.
  • Ocado, the U.K. online grocery platform, plans to raise over $1.2 billion in a new equity and debt offering, saying it wants "to capitalize on opportunities arising from the significant acceleration in online adoption."
  • The U.K.'s competition authority said it would postpone its final decision on Amazon's Deliveroo investment until August.

Diving Deeper

Amazon's lending ambitions

A few years ago, there was a lot of talk about how Amazon Lending — which offers loans to Amazon sellers — spelled the end for traditional Wall Street banks. That … hasn't quite transpired.

  • Yesterday, Amazon announced a partnership with Goldman Sachs. The bank will reportedly offer revolving credit lines of up to $1 million to Amazon sellers, who can apply for the loans through Amazon's site.

Amazon took a circuitous route to getting here. When it first launched Lending in 2011, it used its own balance sheet. But it seemed to realize quickly just how tricky running a bank actually is.

  • In 2016, Jeff Bezos said Amazon was "working on ways to partner with banks so they can use their expertise to take and manage the bulk of the credit risk."
  • And in 2018, CNBC reported that the company had partnered with Bank of America to provide loans on its platform.
  • Reports have continuously outlined a cautious approach from Amazon. Loan growth was just 2.6% in 2018, and CNBC reported that "there was a deliberate effort by Amazon to slow the expansion" because the company wanted to "better understand the credit risks."

It now seems that it has understood — and has decided the risks aren't worth the rewards. After mulling a loan marketplace, it's decided to partner directly with Goldman Sachs.

  • Amazon will make less money from Goldman's loans than if it offered them itself. But Amazon has never cared about lending in and of itself. Instead, it views it as a tool to help its merchants — and hence, Amazon — grow.
  • "Click-to-cash access to capital … benefits Amazon since our marketplace revenue grows along with the sellers' sales," Bezos once wrote.

Seen in that light, lending starts to look a lot like Prime Video or Alexa. It's not something for Amazon to make money from directly, but it's something that can fuel retail growth. Understood in that light, the Goldman partnership — which will let Amazon offer way more loans, with way less risk, than it otherwise would — makes a lot of sense.


  • "The capital is there and the solution is in front of us, and what was missing was the will." — Kindred Ventures' Kanyi Maqubela thinks the speed at which SoftBank's Opportunity Fund was set up shows us something about the VC industry.
  • "Previously I would have said I'm not letting a camera into my fab. Are you crazy?" — ASML's Wayne Allan said the pandemic has changed how chip makers do business, with ASML now using Microsoft's HoloLens to help customers do machine maintenance.
  • "It's innovate or die … This crisis is going to be the push that people need to start selling online. We're years behind the U.S." — Spanish fishmonger Juan Manuel Caro Márquez has pivoted to ecommerce.

Diving Deeper

Grubhub just got taken away

Turns out the hottest deal in tech isn't happening: Uber isn't buying Grubhub after all. Instead, European behemoth Just Eat (which we'll call JET) is gobbling it up for $7.3 billion.

  • The Uber deal went south because of antitrust concerns, CNBC reported. From the get go, politicians had been very vocal in their opposition — the combined company would have controlled around 55% of the U.S. restaurant delivery market, according to Wedbush.
  • Amid that uncertainty, Grubhub reportedly wanted Uber to agree to a cash breakup fee in case things didn't work out. Uber, which is in a bunch of financial trouble right now, wasn't too keen on the idea.

And so here we are. Months after Just Eat and combined in a $7.4 billion deal, the new entity is getting even bigger.

  • Despite its huge presence across Europe, JET has no U.S. presence. Grubhub gives it an obvious way to expand.
  • Grubhub's a particularly good fit. Grubhub, Just Eat and have all been around since the early 2000s, and all had once-successful "marketplace" businesses, pairing up consumers with restaurants that handle their own delivery.
  • All have also started to dabble in doing their own delivery, something they were effectively forced into after the VC-backed DoorDash, Postmates and Uber Eats entered the fray.
  • And all have been reticent to go all-in on doing deliveries themselves, with Grubhub executives famously saying that business would never "generate significant profits."

JET said yesterday that it plans to continue that hybrid model in the U.S. And with both JET and Grubhub having such similar models, there are presumably big savings by combining back-end technology.

  • The remaining question, though, is how this all ends. As Wedbush analysts noted this morning, "this doesn't change what has pressured Grubhub's profitability which has been driven by a cut-throat environment driving discounting and elevated marketing spend."
  • The Uber/Grubhub deal was seen as good specifically because it would have reduced competition, easing up a price war that's hurt every player in the game. That may have stoked antitrust concerns, but it's unclear what the alternative is: If prices don't rise in the end, some players might exit the game altogether.

Closing Bell

Ecommerce sounds stressful

Remember that period in March where it was impossible to buy anything online? Turns out that was really awful for ecommerce platforms, too. The Wall Street Journal has a great article about Thrive Market, which saw delivery times soaring as demand outstripped the company's wildest expectations. "It was excruciating," CEO Nick Green said.

Thoughts/feedback/tips? Email me — — or And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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