Amazon Updates, Part 2: What Amazon’s Recent Investments Say about Its Smart Home Strategy

Part one of this blog series highlighted Amazon’s investment in Tado. While this was obviously a move to defend against Google-Nest in the battle for smart thermostat market share, it also highlights the company aligning its interests where it can expand its service offerings. Yet, services are only part of Amazon’s overall smart home strategy. This investment is part of a stream of recent activity that reveals Amazon’s reasons for owning the smart home and beating its rival, Google, to it. This blog reviews this recent activity, explaining the reasoning behind it. 

In September 2018, Amazon revealed a new suite of Alexa-enabled devices, including updated Echo devices, a subwoofer and amplifier, and gadgets such as the Echo Auto—a device that brings the Amazon Echo to your car—the Echo Wall Clock, a smart plug, and even a microwave. Among the new offerings, one component of this unveiling has the potential to completely change the smart home experience. This is called the Alexa Connect Kit (ACK), which is essentially an Amazon Echo-on-a-chip. 

ACK-Enabled Interactions

ACK allows product developers to make any device Alexa-connected without writing an Alexa Skill or managing cloud services, which is a massive improvement to the time and cost associated with connectivity. On top of this, Amazon’s Smart Home Skill API significantly improves the voice experience of Alexa devces; it enables more colloquial interactions with Alexa by no longer requiring users to first prompt Alexa with the appropriate Skill before issuing a command. Alexa is also becoming more contextually aware and anticipatory, suggesting actions it deems relevant on top of user commands. Competitors like Google Assistant and Siri have had a leg up on Amazon in this regard, but by no means are these experiences perfect.

In addition to these improvements, Amazon now makes it easier for users to set up devices by storing Wi-Fi credentials in its cloud. This means when a device you’ve ordered on Amazon arrives at your home, it will immediately authenticate on your Wi-Fi network. It has also introduced a new service called Guard, which effectively turns Amazon Echo devices into a security hub that listens for alarms and breaking glass and works with an ecosystem of security devices to automatically arm/disarm. 

Today, the smart home is plagued by a lack of interoperability, high prices, lack of enticing value propositions, painful installation processes, and some shortfall meeting consumer expectations. With this latest unveiling, Amazon has addressed many of these issues. It isn’t perfect. Pushback is likely from manufacturers who don’t want Amazon to own the entire customer experience and want consumers to use their apps so they can collect data too. Apple has had similar issues with HomeKit. There is also the risk that irrelevant suggestions by Alexa could have a more negative impact on the user experience. However, it is progress toward a better smart home experience. 

What’s the Bottom Line?

This recent market activity demonstrates Amazon’s strategy to own the home, which is very different from its rival tech giant, Google. Google’s respective event in October featured far fewer devices and didn’t have nearly the wow-factor of Amazon’s. But that’s because its priorities are different. By introducing low cost devices and fostering an ecosystem where all interactions take place seamlessly through Alexa, Amazon fuels its retail and services business, while Google collects your data and figures out how to better target advertisements. As both companies race to own the smart home through a flurry of investments, acquisitions, updates, and new releases, each will do so in a way that ultimately benefits their bottom line, whether it be selling to you or selling you.