Apple Inc. (NASDAQ:AAPL) announced HomeKit — its strategy for becoming the center of the smart home — in June 2014. Amazon.com, Inc. (NASDAQ:AMZN) revealed its Alexa-powered Echo smart speaker that November.
While there are currently several dozen HomeKit compatible smart home products, Amazon’s Alexa is now connected to thousands of smart products and services and has spread from the Echo to third-party devices.
On the surface, it looks as though Amazon has outmaneuvered and thoroughly trounced Apple. But despite the seemingly insurmountable lead and momentum, AAPL could still end up beating AMZN in this smart home race.
Here’s how.
Apple Chose the Closed Approach With HomeKit
Apple tends to be extremely cautious. Its software is designed to be user-friendly and secure. iPhone apps can’t just be downloaded from anywhere; they need to go through the official App Store and that requires approval by AAPL. Third-party hardware needs to be certified by Apple before it can be marketed as being iOS-compatible.
It’s that “walled” approach that has made the iPhone more secure than smartphones running Alphabet Inc’s (NASDAQ:GOOGL) Android operating system.
With the iPhone and Siri — Apple’s voice assistant — at the center of Apple’s smart home strategy, that focus on security, compatibility and ease of use carried over to HomeKit. Manufacturers who want to make their smart devices HomeKit-compatible face a daunting series of requirements.
As pointed out in a recent Reuters article on differing smart home approaches, this includes being forced to buy a special HomeKit chip, being limited to approved (and more expensive than average) Bluetooth and Wi-Fi chips and even extends to manufacturing being limited to factories that are certified by Apple. End-to-end encryption is mandatory. Once a HomeKit product is ready, it faces extensive testing by Apple engineers to ensure compatibility. Then it may be sold. That process alone can take three to five months.
So you have additional costs, the procedural red tape and a delay. It’s easy to understand why Apple currently lists only 75 or so HomeKit-compatible devices. And half of those are either different color options or regional variations of the same product.
Amazon Alexa Is Open for Business
Amazon took a radically different approach with its Echo speaker and Alexa. The company openly courted third-party companies to develop Alexa “skills” or software-enabled interactions with an Amazon Alexa-powered device.
A skill can be the ability to tell Alexa to order an Uber. It could also be telling Alexa to turn on your home’s smart lights or to start your electric car. The process is simple. Amazon provides an example showing how to build an Alexa skill in 60 minutes, and that includes the time needed to create a developer account. Submit the skill to AMZN for a quick verification, and it’s published.
That’s how Amazon Alexa tripled its available skills in just three months last year, hitting 3,000 in September. If that sounds impressive, by CES 2017 in January, it had hit more than 7,000 Alexa skills.
In addition to skills, Amazon also encourages third parties to integrate Alexa functionality into their products. That way, consumers get the Alexa experience without requiring an Echo speaker.
That’s a far easier process than Apple HomeKit certification. A “Works with Alexa” label takes about 10 days to obtain (it can even be issued by third party labs) and doesn’t require special chips. According to the Reuters post, that has resulted in over 250 products that are Alexa-certified. We saw some of these at CES, including third-party speakers with Alexa and even home appliances with built-in Alexa capability.
Smart Home Security: Apple Strength, Amazon Alexa Vulnerability
The differing approaches of AMZN and AAPL have led to Alexa rapidly leaping to a massive lead over HomeKit in the smart home. However, there is one scenario where this could change rapidly.
Security is increasingly becoming an issue for smart, connected devices. Apple’s HomeKit approach emphasizes security, to the point of forcing the use of specialized chips and even certified manufacturing facilities.
Amazon’s Alexa strategy, on the other hand, leaves its platform relatively exposed. Amazon told Reuters it can’t guarantee the security of third-party devices running Alexa. Those thousands of Alexa skills also integrate with third-party services that may have their own vulnerabilities.
All it would take is one catastrophic hacking for a PR disaster that turns consumers off Alexa. As CNET puts it in a review of the hacking risks for different smart home standards: “Don’t assume that a device has high security standards just because it works with Alexa.”
Bottom Line
There’s no disputing the fact that Amazon completely caught Apple and others off guard with its stealthy approach of sneaking Alexa into the home using its Echo connected speaker.
Before the Echo, it was generally assumed that a smartphone would be the natural smart home controller. Making Alexa integration so open has also paid off for AMZN, resulting in a formidable lead in the smart home in a very short time. That lead may well turn into complete domination of the connected home. But Amazon’s open approach may also prove to be its Achilles heel.
Should hackers turn their attention to Amazon Alexa, the resulting headlines may flip the equation and put the much more secure Apple HomeKit on top in the long run.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
