Alexa, good morning.
Turning on your shower.
From the coffee maker to the front porch, the
floors to the counters.
You have four items on your shopping list.
And the mesh WiFi connecting it all.
Amazon is everywhere in the home.
And in this smart home lab we visited in Seattle.
In this lab alone, we have more than 45 devices.
There is a smart fridge that is connected to
Alexa. We have our thermostat, our ring
doorbell and cameras, vacuum, the indoor quality
monitor, the TV.
And with its recent offer to buy Roomba smart vacuum
maker iRobot for $1.7 billion, Amazon is showing
no signs of stopping, although the Federal Trade
Commission is reviewing whether the deal would
violate antitrust law before allowing the
takeover.
At this point, with its acquisition of iRobot,
with its presence in streaming, with its ring
cameras, with its Echo smart speaker, Amazon can
basically do everything but smell what you're
having for dinner.
Alexa on the beat, the station dance party
favorites on Amazon music.
Amazon takes its responsibility to
customers and privacy incredibly seriously.
And if we were to acquire iRobot or any other
company, that would not change.
Ahead of Amazon's annual smart home event, we talk
to the VP of privacy to find out what really
happens to all the data collected by Amazon's
devices and sat down with the head of smart home to
hear the strategy behind Amazon's race to dominate
the internet of things.
It all started less than a decade ago, when Amazon
introduced its first Echo speaker in 2014.
It was a runaway success, selling 5 million devices
by the time Google introduced its first smart
speaker in 2016.
We didn't think about smart home on day one, but
we quickly learned from customers that they wanted
to use their voice for more than entertainment.
Lighting was first, with Amazon adding Alexa
activation to an early smart light bulb, the Hue
by Philips, where Marja Koopmans was CMO before
she joined Amazon to lead smart home three years
ago.
300 million devices are connected to Alexa today.
That's up from 200 million less than a few
years ago. And so the growth is rapid.
Amazon was the first major player to the smart home
market, and it remains the biggest and fastest
growing. It controls 11.5% of the U.S.
market, up 15.5% from the year before, with
runner-up Google at 6.5% and Samsung coming in a
close third. And now, owning a smart home device
has become mainstream, with the market ballooning
to nearly $113 billion in 2021, up 20% from the year
before.
If you asked me three or four years ago what the
adoption rate was, it was hovering around about 12%
. During the pandemic, we saw that rocket to almost
half of American households that have a
WiFi network at home have at least one smart home
device.
Adam Wright leads smart home research at data firm
IDC. He says his home is filled with 185
Alexa-enabled devices.
Users that have a smart speaker, more than 60% of
those users say that that device itself has led them
to buy another smart home device.
Amazon also launched its Alexa-enabled Fire TV
streaming stick in 2014 as it grew its
entertainment arm with Prime Video.
Then in 2015, Amazon opened up its voice
platform to outside developers, and the number
of Alexa-enabled gadgets skyrocketed, reaching
140,000 today.
And how many of these devices that are
Alexa-enabled are actually owned by Amazon?
Very few. Very few.
Amazon doesn't break out device sales and earnings,
but with a string of big acquisitions, it's
certainly expanding its collection. In 2018,
Amazon purchased video doorbell maker Ring for
$1,000,000,000 just three months after acquiring
home security company Blink for $90 million.
A year later, it bought Eero for $97 million, a
mesh WiFi system that can connect it all.
But these devices have to work, and my entire smart
home experience is irked frequently every day with
these devices just not working.
I think we've made great strides, but the value of
the smart home to me personally remains
uncertain.
Now, Amazon has offered $1.7 billion to acquire
iRobot with its room-mapping Roombas, a
deal that analysts say isn't really about the
sale of the vacuums themselves.
It's very difficult to make a lot of margins on
the hardware and the device itself, but they
have just acquired a massive data set which can
help them in the aggregate better
understand the floor plans and the mapping of
people's homes.
20 different privacy and labor groups, including
Sarah Miller's American Economic Liberties
Project, have sent a letter to the FTC asking
it to block the deal, citing concerns about
privacy and Amazon's growing dominance of the
smart home market.
The FTC is requesting more information from both
Amazon and iRobot before making a decision.
It has a camera in the front, which is a little
bit unsettling.
It can tell what you already have in your
house, who's in your household, what types of
things might you want to add to that?
Right? They can target advertising on the Amazon
platform in that way.
In response to privacy concerns raised by the
pending deal, iRobot CEO told CNBC in a statement,
"We know that customers welcome us into their
homes because they trust that our products will
help them do more and that we will respect their
information. We take that trust seriously.
Once we are aquired by Amazon, our commitment to
customer data and privacy will remain.
Privacy and security are a huge, huge area of
investment for us, and will continue to be.
Similar concerns were raised in 2018 when Amazon
bought Ring, where Leila Rouhi was president for
four years before joining Amazon in April in a new
role: Vp of privacy and trust.
Earning the trust of our customers is incredibly
difficult, and if we don't earn that trust,
they're simply not going to use our devices.
And that is not what we want.
And Roombas aren't the only smart home devices
that can map the inside of our homes.
Smart lights like the Philips Hue have a new
feature that will allow them to turn on or off
automatically by detecting your presence in
a room. Essentially, WiFi strength is evaluated to
create a 3D image of the house and those disturbing
the WiFi around it.
Meanwhile, Amazon is developing its own robotic
household monitor called Astro.
It's made for checking in on specific rooms,
children or aging loved ones, not unlike the dog
in the futuristic, smart home of the Jetsons.
Yippee. He did it.
Astro captured the burglar.
Astro captured the b urglar!
To track your shopping habits, to track your
movements, to track even where things are placed in
your home, what's going on outside your front
door. They can create this incredibly complex,
detailed data profile that they can then use to
expand and grow their own business.
And through that process, to push out competitors
that simply could never surveil you with that
degree of sophistication.
We are incredibly thoughtful about the data
that we use, and our focus has always really
been to use that data on behalf of the customer and
to improve the services and the experiences that
we know our customers enjoy on a daily basis.
Amazon's alleged anti-competitive practices
are being challenged by an antitrust bill being
considered by Congress and in lawsuits filed by
the attorney generals of D.C. and now California.
As Amazon's list of devices expands, so does
the amount of data it can gather, allowing it to
improve the capabilities of its devices.
The smart thermostat will have a "hunch" that
everybody is out of the home, so why should it be
running at 70? Let's lower it down a little bit
. And it does that automatically on your
behalf.
Koopmans told us about Alexa "hunches."
Essentially, the data collected by all your
devices teaches Alexa your routines.
Thermostat, keeping the temperature between 71 and
75.
How does it know, or have a "hunch," that there is
no one left in the home?
And that happens through a variety of different data
points that we get. You're not using devices
actively, for example.
It also is with geocaching on your phone.
We know that you've left.
Another new data-enabled capability is "follow" on
the Echo Show 15 that came out last year.
Following is now on.
Amazon can also now create a Visual ID for each Echo
user with facial recognition software.
So, for example, if you live in a household with
multiple people and it's you that's going into the
kitchen in the morning, you might have a different
routine and different music and different
newsfeeds that you're interested in.
And Amazon copped a bit of flack for that, right?
People were raising the idea of how does this
become a major intrusion into privacy in the home?
But it was very rarely juxtaposed against the
same technology that's on our smartphone every day.
Amazon also says it's easy to delete Visual ID
history. Same for videos from Ring and audio from
Echo.
You can even set a schedule to have it auto
deleted, or you can just ask Alexa to delete your
data at any point in time as well.
Someone is at the front door.
Still, the default setting for these devices is not
to delete the data, but rather to allow Amazon to
use it to inform its growing smart home
ecosystem, albeit in an anonymized aggregate
format.
How we build, design and deliver every single
device feature and service has privacy built
in from the ground up.
And we work really hard to keep our customers
information safe and to provide them with
transparency and control over their experiences.
This device has a as a feature for that, which is
a slider where you can cover the camera.
But video is crucial to ring doorbells, credited
with catching thieves and even saving lives.
One of our customers had a, I believe it was a
heart attack, on his front porch and the family
was able to see this on the ring video doorbell
and alert authorities.
The latest ring has an option for two-way video
encryption, although it's turned off by default.
On the Neighbors app, users can voluntarily post
or provide video to law enforcement for active
investigations, but Amazon has also been
criticized for sharing Ring video doorbell
footage with law enforcement without user
consent.
There is legal process, and so our legal process
happens through our legal team.
We understand the absolutely sensitive
nature of videos, and we do our utmost to ensure
that we are being incredibly thoughtful in
how we respond to legal requests and protecting
the customer's interest.
On Echos, the microphone can be muted, and despite
tailored ads fed to you after a related
conversation at home, Amazon says, No, Alexa is
not always listening.
There's absolutely not a room of people that is
monitoring our customers and their behaviors.
In other parts of his business, namely grocery,
Amazon sells the data gathered at its Whole
Foods and Fresh stores to brands looking to gain
valuable insight into how consumers shop their
products, something it says will not happen in
its smart home business.
Instead, Amazon says all this data will help
devices work in unison for what it calls "ambient
intelligence," where routines are automatically
started and Alexa has "hunches."
Imagine that you are at work, you're getting in
your car and you're driving home.
Alexa knows that you're in the neighborhood.
It will turn the lights on.
It will set the temperature at the right
setting.
Another example is this indoor air quality monitor
that can automatically turn on a fan or air
purifier.
The indoor air quality is good with an air quality
score of 96.
Amazon says more than 30% of experiences are
initiated by Alexa instead of humans.
And Amazon's ownership of mesh WiFi system Eero can
boost the strength of the connection between all
these devices.
The latest devices with Eero allow you to connect
up more than 75 devices on the Six Plus.
It enables these smart devices to be set up
through frustration-free setup.
That basically means you screw in the light bulb
and it works.
And then there's Amazon Sidewalk, a shared
network, allowing devices to connect to each other,
so it's always on, eyond the reach of home WiFi and
even if your Internet goes out.
It can use just a little bit of bandwidth from
customers that have opted in to the Sidewalk
network. And so, for example, if you have Ring
smart lighting, typically you'd have to be within
Bluetooth range for the lights to be able to turn
on and off using your app, with something like
Sidewalk, it can go up to a mile distance.
And soon, Alexa, Siri, Google and more may play
better together too.
An alliance of different device makers, including
Amazon, Apple and Google, is developing a protocol
called the Matter Standard that would allow
devices to work across platforms instead of only
answering to one voice assistant.
We believe that the home will always be a
heterogeneous environment, meaning you
will have many different brands, many different
devices from many different companies in
your home.
What remains to be seen is whether the internet of
things will ever be a highly profitable, or high
functioning, part of Amazon's vast business
portfolio.
I don't know that.