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Amazon Further Extends its Lead in the Home

What Amazon’s Latest Product Event Tells Us About the Future of the Smart Home

All images credit: Amazon

Editor’s note: This is an abridged edition of our Fast Forward newsletter. For the full version, please contact our VP of Client Services, Josh Mallalieu (josh@ipglab.com) to send a request.

As we enter the fall, tech companies are starting to share the latest updates to their product lineups in anticipation of the holiday shopping season. On Tuesday, it was Amazon’s turn to unveil its hardware updates, and in true Amazon fashion, the company announced a slew of Alexa-enabled products aiming to enhance Amazon’s foothold in the emerging home ecosystem and compliment its existing ecommerce business.

Since the start of the pandemic, the home has increasingly become the center of gravity of most people’s daily lives — it now doubles as our offices, our gyms, and, for people with kids, classrooms. It has never been more important to tech companies to establish their presence in these spaces via smart home devices that will determine how we interact with our homes in the near future. Currently in the U.S., Amazon is the category leader in smart home devices, with Google trailing as a major competitor. The announcements on Tuesday showed that the Seattle-based company is determined to further expand its lead by releasing more affordable devices beyond smart speakers, continuing to test home robotics and ambient computing, as well as partnering with Disney to further customize the voice experiences it offers.

Cheaper & Better Devices

Smart speakers powered by voice assistants have been on the market for over half a decade now. Smart speaker adoption now exceeds 90 million users and includes 35% of the U.S. adult population, but its growth flatlined last year, per the latest data from Voicebot, indicating a saturated market. Therefore, it makes perfect sense for Amazon to turn its attention elsewhere.

Source: Voicebot.ai

Instead of releasing updates of its popular Echo speaker lineup, Amazon has chosen to focus on other Alexa-enabled home devices this year. One is Amazon’s first-ever smart thermostat, which will retail for $60 (holiday promotions should get the price tag below $50 before December), costing less than half the price of the average smart thermostat sold on Amazon. Made via a partnership with Resideo, the manufacturer of Honeywell Home thermostats, this smart thermostat would also allow some customers to get energy rebates, bringing down the price even further.

Similarly, Amazon also announced a no-frills, entry-level video doorbell under its Blink branding. Retailing for just $50, this Blink video doorbell seriously undercuts its competitors — and Amazon’s own Ring doorbells — on price. In addition, Blink is also expanding its outdoor camera accessories, with new, affordable products such as a $40 Floodlight Camera mount and a Solar Power Mount that you can buy as part of a $130 bundle with the outdoor cam.

Echo Show 15

The other noteworthy Alexa device that came out of Tuesday’s press event was the Echo Show 15, the most ambitious smart display Amazon has released to date. Building on previous Echo Show devices, this new iteration is a 15.6-inch smart display that is meant to be hung on the wall like a picture frame. It can also be placed on a stand like previous Echo Show devices, the larger of which featured a 10-inch display and cost $250. With the bigger screen, Echo Show 15 is meant to serve as a smart home hub, or a multifunctional family bulletin board, displaying not only the usual rotating array of ambient content like headlines and weather updates but also customizable Alexa widgets that show more apps like family calendar, shopping list, and reminders. Also, Sling TV is coming to all existing Echo Show devices, further solidifying this as an alternative screen for casual viewing.

Amazon is making a smart strategic decision to shift its attention from speakers to other smart home devices, for now. Smart speaker adoption grew quickly in part thanks to the affordability of the lower-end devices such as the Echo Dot and the Google Nest Mini (née Google Home Mini), but its market penetration has stagnated because the use case hasn’t evolved much over the past few years. To their credit, Amazon has been trying out various ways to make the voice experience more conversationally engaging and useful, but ultimately, the underlying artificial intelligence powering Alexa is just not quite there yet to be capable of delivering a transcendental experience.

One particularly notable Echo Show widget that Amazon highlighted was a “What to Eat” widget that suggests recipes from sources like Allrecipes and Epicurious, restaurant delivery choices, and more. It even has a Blue Apron option that helps you order meal kits and shows you step-by-step recipe instructions. Previous editions of Echo Show were already widely used as kitchen companions, and this latest edition has further honed in on its cooking-related use cases and enhanced them with brand integrations. Given the context in which voice experiences are delivered, organic integrations like the Blue Apron example remains the preferred way for brands to reach customers via smart home devices today.

Amazon Halo View health and fitness trackers

Outside the home, another notable new device was the Halo View fitness tracker, which comes with a touch screen, an optical heart rate monitor, skin temperature sensor, and an accelerometer. In addition, new Halo Fitness and Halo Nutrition services will be added later this year to help users exercise and eat better. Competitively priced at just $80, it is clearly positioned as an affordable alternative to Apple Watch and Fitbit trackers. once again shows Amazon’s determination to enter the healthcare space, and this new wearable device will help it capture more user data, especially biometric data that could be useful for medical diagnostics, a field that Amazon is quickly expanding into with the roll-out of its Amazon Care service.

By focusing on releasing these cheap devices this year, Amazon is able to gain new footholds in the smart home market and increase its leverage in the budding fight for the smart home ecosystem. It also puts the pressure on competitors to come out with more affordable devices to keep up. While it is true that the Matter standard will be soon rolling out to ensure the interoperability between various smart home devices made by Google, Amazon, Apple, and more, it is still important for Amazon to expand its reach at home via various small appliances and devices given its inherent lack of control over mobile touchpoints.

The Ambient Computing Vision

Besides the affordable devices designed to get Alexa into more homes, Amazon also showcased its long-term vision with two automated smart home products. The Ring home security drone, named the Always Home Cam, will cost the same as an Echo Show 15 ($250). This drone camera will fly predetermined paths in your home when triggered via a Ring Alarm sensor or from the Ring app, making sure that no disturbance in the house would be left unrecorded.

Always Home Cam

If having an camera drone flying around at home sounds a little creepy, worry not, Amazon also developed a cute home robot to win you over on automated home surveillance. Retailing at $999, the Amazon Astro home robot will roam around the house on three wheels and surveil the premise by itself. Better yet, Astro can also help bring small objects (like a cup of coffee) from room to room, or function as a moving smart display for video calls and playing music.

Astro bot

If Amazon can actually get people to buy them, the company stands to benefit a lot in terms of collecting valuable data about our homes, although I don’t think most consumers would be interested. While both devices may seem quite futuristic and “out there,” they are clearly not meant to be mass market products. At the moment, only U.S. consumers can apply for an invitation to buy the camera drone, and Astro is a “Day 1 Edition” product with no shipping date announced. Regardless of their lack of availability and mainstream appeal, both products point to a long-term vision of ambient computing that Amazon clearly has for the home.

The beauty of automated smart home devices is that they are supposed to work in the background without requiring explicit commands from users. Freed from the attention that conventional interfaces require to function, they facilitate Amazon’s vision of ambient computing that thrives on networked automation. In this scenario, Alexa would serve as the ultimate interface layer that connects the various devices into a home IoT network to work together. And to make this work, you need as many appliances as possible connected and working together, hence the aforementioned strategy of launching more competitively priced smart home gadgets to expand beyond speakers.

For Amazon, this automated, ambient computing vision of home, run by Alexa as an invisible yet omnipresent butler, fits perfectly with its core ecommerce business. Voice shopping has not taken off yet, even among the existing Alexa users. In 2020, only 6.7% of U.S. consumers made voice-enabled purchases while shopping for either groceries or CPG products, per data from a Visa study. But the home infrastructure that Amazon is building will ensure the company is well positioned to enter the post-mobile era where digital interactions become less device-centric. In a sense, Alexa-as-an-interface is an interesting way to consider what a distributed OS may look like. The Dash Replenishment service has largely ceded into the background in recent years, becoming a natural part of Amazon’s software backend to facilitate auto-fulfillment based on user preference and purchase history. And the Prime bundle is the ultimate membership that will ensure every shopping journey at home starts on Amazon.com by default — a powerful advantage that will only be accentuated and enhanced by a semi-automated home network of ambient smart devices that run on Alexa.

“Hey, Disney” Brings IP into the Smart Home

This automated, ambient computing future no doubt sounds exciting to some consumers, but to others, it opens a myriad of questions regarding data privacy, algorithmic decision-making, and the surveillance economy. Amazon has garnered a lot of goodwill and trust from its loyal customers, often ranking first in consumer trust among its competitors, so it does have a lot more leeway than, say, Facebook, to experiment in the home space. But as the general public opinions on the power of big tech continues to worsen, Amazon will not be exempt from the persistent calls for tighter regulations.

In a bid to soften its image and capture younger audiences, Amazon made two announcements on Tuesday that could make it popular for households with kids. First, a partnership with Disney will enable Echo devices to respond to voice commands as various beloved Disney characters and serve extra Disney content including jokes, interactive trivia, and cinematic “soundscapes.” It will be available next year as a paid Alexa skill, although Amazon has not yet unveiled the pricing. There’s also a new stand, made by Otterbox, for the Echo Show that looks like Mickey Mouse. Moreover, Echo speakers equipped with Disney content will also be placed inside Disney World Resort hotel rooms to acquire new users.

Two, Amazon also announced another kid-oriented voice-enabled device called Amazon Glow, a video calling device that projects games that kids can play with family and friends. It may sound like a strange gadget, but Amazon’s rationale was that younger children tend to get bored quickly with video chats, so playing a game will keep them entertained and prevent them from wandering off.

While Amazon has done various celebrity voices for Alexa before, this Disney partnership marks the first time an entertainment company is able to customize Alexa technology to fit its own content and brand. It is invaluable for Disney to bring its beloved characters and IP content into the smart home and build brand affinity with kids via voice interactions that often exist outside the allocated “screen time.” For Amazon, this Disney partnership further solidifies its Echo lineup as a device for all members of the family, and helps it capture life-long customers.

Obviously, this type of content partnership won’t be applicable for all brands. Disney has the cultural cachet that Amazon craves, which the House of Mouse leveraged to gain unprecedented access and leeway to customize the branded voice experience it wishes to deliver. Nevertheless, this partnership indicates that Amazon is certainly open to working with entertainment brands and media owners to further diversify the types of voice experiences that Alexa can deliver. For entertainment brands, it is time to explore voice assistants as a potential channel for audio storytelling and customer engagement.

Overall, this Amazon event is very focused on extending Alexa’s reach at home. It is interesting to note that there was no update for the in-car devices like the Echo Auto, nor was there any mention of the Amazon Sidewalks mesh network designed to extend Alexa’s reach beyond the home. One could argue that the increased presence of Ring cameras in this event is a way for Amazon to subtly extend its reach beyond the inside of the home, under the guise of “keeping the neighborhood safe,” but that only goes so far without more outdoor gadgets being connected to the network.

If you want to learn more about Amazon’s Alexa strategy, or to have a deeper conversation on your brand’s place in the future of the smart home, the Lab is here to help! Please reach out to Josh Mallalieu (josh@ipglab.com) to start a conversation with us.

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Richard Yao

Richard Yao

Manager of Strategy & Content, IPG Media Lab