IAM Alert: Amazon.com has announced a “definitive agreement” to purchase the ecommerce, “powered by service” Zappos.com for 10 million shares of Amazon stock (current market value of $807 million). (see the Letter from the CEO – Tony Hsieh – to Zappos employees, describing the drivers and benefits behind the acquisition)

Amazon has long been held up as the best of E-commerce 1.0, and has powered the growth of Amazon from the laughing stock of bookstores (“Who can sell books without REAL bookstores?”) to an extended platform for e-commerce – selling nearly everything except houses, cars and people, to the infrastructure of many web 2.0 startups, and even into becoming the infrastructure of corporate america via Amazon’s Elastic Computing offering (EC2), or the Amazon Simple Storage Service (S3) (and related offerings) that make up Amazon Web Services.

One of the interesting ironies of Amazon, however, is the near non-existence of traditional “customer service.” Frankly, that’s because for the most part, there is no need to interact with the people behind the scenes at Amazon. When you’re buying through Amazon, you are buying the customer experience, streamlined order processing, and ability to find darn near anything that can be bought online, along with all the recommended items that “others like you” have bought.

So why buy Zappos?

Zappos has been selling through Amazon for some time now, and many of the brands that Zappos sold could also be bought through Amazon.

Perhaps this ~8 minute clip from Jeff Bezos (CEO/Founder of Amazon) to the employees of Zappos, will help.

Next Gen Customer Service

As some have put it already, the acquisition of Zappos by Amazon really brings to Amazon a “next generation customer service capability.” While Bezos claims to be “customer obsessed” (and as a long-time customer, and purchaser of quite a bit of products and services from or through Amazon, I do agree), Zappos really does embody going well above and beyond customer service, as anyone who has purchased from Zappos already knows.

Will the combined innovations of Amazon and Zappos work? Is 1 + 1 = 3++?

Amazon clearly has the technology and logistics capabilities that most companies would kill for, and Zappos provides the “over the top” human-side of the customer experience, together with a deep understanding and use of social media (primarily Twitter).

No doubt there will be hurdles to overcome, although some of the traditional issues of acquisitions are being sidestepped as Zappos will remain it’s own “wholly-owned” brand.

Given the speed with which Zappos has tended to react and improve, versus the longer-cycle of testing/innovation/improvement that Amazon has typically shown, it will be interesting to see how the combined operations work together.

What are your predictions for this acquisition? And what can you learn from the strengths of the respective companies, applied to your own?