The smart home is turning into the next high-stakes tech battleground and Amazon.com, Inc. (AMZN) is determined to win this one. The company is building on the surprise success of the Amazon Echo and just announced Alexa — the smart assistant lurking within the Echo — has now surpassed 1,000 third party skills.
There has been an explosion of connected devices in recent years. Companies like Koninklijke Philips NV (ADR) (PHG) with its Hue smart lighting and Alphabet Inc’s (GOOG, GOOGL) Nest paved the way for smart products to move from being a high tech niche to being stocked at national retailers like Home Depot Inc (HD).
Countless startups are creating “smart” devices and connectivity is now being baked into everything from refrigerators to pool heaters. The smart home market was worth an estimated $43 billion in 2015 and is on pace to hit $100 billion by 2020.
“Skills” Are the Key to AMZN’s Smart Home Leadership
The real prize isn’t in selling those individual devices — it’s to control the smart home. Right now, one of the biggest obstacles to consumer adoption of smart home technology is the countless standards and individual control schemes for the devices.
Setting up a smart home can require a smartphone or tablet running a dozen different apps. The company that can position itself to be the central hub in the smart home — with all interaction routed through its platform — will be in a prime position to integrate its own devices and services, as well as having access to a wealth of valuable data.
AMZN made a play for being that central hub with the release of the Amazon Echo smart home speaker, with Alexa integration. Providing an open application programming interface and developer tools, has meant a growing number of third party companies are turning to Alexa for voice control and interaction with their devices.
These “skills,” as Amazon refers to them, include being able to control a Nest smart thermostat or even requesting fitness stats from Fitbit Inc (FIT). Alexa skills also include abilities outside of smart home devices, such as being able to order a Domino’s Pizza, Inc. (DPZ) pizza with a voice command to the Amazon Echo.
And Amazon has now surpassed 1,000 skills for Alexa. Add that stat to Jeff Bezos’ recent statement that his company has over 1,000 employees working on Amazon Echo and Alexa and it is clear that AMZN is not only winning the race to be the smart home leader, it is pushing hard to maintain that lead.
Amazon Echo: Holding Off Google and Apple
Google and Apple Inc. (AAPL) beat Amazon to two of the most important technology fronts of the past decade: smartphones and tablets. They were there first, and Amazon was left trying to catch up … it got smoked in the smartphone arena.
The Fire Phone arrived five years too late, sold abysmally and it was discontinued within a year, leaving Amazon out of the $400 billion global smartphone market. It has fared better with tablets, but still trails far behind Apple’s iPad and tablets running Google’s Android.
But this time, Amazon got there first. The Amazon Echo has a full-year lead on Google’s recently announced Google Home smart speaker. Apple hasn’t revealed its answer yet, but a speaker or possibly an Apple TV version with Siri inside that’s focused on being a smart home hub is widely expected.
AMZN has been making the most of its lead, releasing several less expensive and more portable variants on the Amazon Echo, and it has been working closely with the developer community and smart hardware manufacturers. The goal is to build up such a head start in the smart home that even the best efforts of its competition won’t be able to overcome the momentum — basically what Google and Apple did to it in the smartphone market.
Amazon Echo and Alexa have the early lead in the race to control the smart home. With the rapid progression to 1,000+ third party skills and integration with some of the biggest names in consumer electronics, they have momentum.
The question will be whether AMZN can ride that head start to continued domination now that its biggest rivals are waking up to what’s going on.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
