Amazon Updates, Part 1: Amazon Continues to Up Its Smart Home Game, This Time with Tado

On October 25, news broke that Amazon joined a $50 million investment in Tado, a European smart heating and cooling startup. This investment is one more step in Amazon’s continuous quest to dominate the smart home. Tado has two core solutions: a smart thermostat and smart air conditioning control. These controls address the different types of heating and cooling systems that exist in Europe versus more centralized systems in the US, a topic discussed in more detail in Guidehouse Insights’ upcoming Residential HVAC report. The company has raised $102 million since 2011.

This investment round, Amazon is focusing on expanding its service offerings, such as installation services and software as a service applications like its proactive boiler maintenance, which analyzes app data to notify customers if there is an issue with their boiler before it breaks down. While this investment (as well as Amazon’s previous investment in Canadian smart thermostat startup ecobee) is an obvious move to challenge rival tech-duo Google-Nest in the smart thermostat market, it also highlights some pieces of Amazon’s larger smart home strategy, such as growing revenue through services.

Regional Smart Home Developments

Tado is focused on expanding in the European market, and in this competitive landscape, service providers are readily exploring direct-to-consumer services to generate new revenue streams. Other energy suppliers in Europe are pursuing similar business models. For example, Eneco acquired smart thermostat startup, Quby, which provides a Toon thermostat and personalized services (which currently includes an energy waste check, bill shock prevention, and boiler maintenance) in exchange for a monthly fee and signing a long-term energy contract. British Gas also offers a similar boiler maintenance service called BoilerIQ for a monthly fee. In other regions like the US, thermostats are often deployed as part of utility demand-side management programs to help meet energy efficiency and demand response regulations, which is a strategy that Nest has capitalized on with initiatives like its Rush Hour Rewards program.

Amazon’s Acquisitions Show Its Priorities

This difference in regional thermostat propositions and Amazon’s acquisition of Tado aligns with the company’s priority to continue generating revenue through services. This strategy can be seen in Amazon’s other acquisitions and investments, including its acquisition of connected video doorbell startup Ring for over $1 billion to ensure its products are delivered more successfully; its acquisition of Whole Foods, which not only fuels its Fresh grocery delivery service, but also gives it a brick-and-mortar presence fostering Echo devices sales, delivery lockers, and discounts for Prime members; and building out a Geek Squad-type service where employees visit a customer’s home to advise them on what devices to buy and how to set up Echo products.

Amazon’s push to generate recurring revenue streams through enhanced product delivery and direct-to-consumer services is only part of the tech giants larger smart home plan, which is discussed in detail in the second part of this blog.