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22 June 2018

Google and Amazon begin smart home security war in earnest

Just a few days after Google’s Nest knocked $100 off its Nest Secure bundle, bringing it down to $400, Amazon-owned Ring launched its own equivalent – the $200 Ring Alarm kit. The two leaders are now going to start slugging it out, and Amazon seems to have notched up a decisive win outside the home – in a deal with Marriott Hotels to use Alexa throughout its hospitality business.

Nest has always been one of the more expensive brands on the market, but the Ring Alarm kit is now 50% cheaper. It is not clear if Amazon is selling these at a loss to boost share, which could be reclaimed later through its retail operations, but Nest has consistently performed poorly, based on leaked numbers and what can be gleaned from Google’s larger results.

Figures from Consumer Intelligence Research Partners say that the average Amazon Prime subscriber spends around $1,300 annually with Amazon. CIRP says that Amazon Echo owners spend around $1,700, and so every home with an Echo in it is ‘worth’ around $400 to Amazon. To this end, it wants to aggressively boost its footprint and penetration, and home security is an obvious way to do that.

Both packages require subscriptions to make the most out of them. With Nest, you will want the $5/month cellular backup option, while Ring’s fees range from $3-10 per month. Both are designed to be expanded, providing a good basic experience that can be augmented with cameras and additional sensors.

They are attempting to be cheaper DIY alternatives to the monitored offerings from the likes of ADT and – which are more expensive on the monthly side, and usually too on the hardware. However, these professional services are also looking to offer smart home features, and both prominently feature smart home device integrations. recently announced its latest, a partnership with August to on-board its connected door locks.

It’s not hard to imagine a future where Google or Amazon actually make a move to buy one of these providers. ADT (owned by Tyco) has around a $6bn market cap, and is much cheaper, at $1.8bn. There are a raft of options that could help boost sales channels, including Vivint, Frontpoint, SimpliSafe, and Armorax. For Amazon and Google, these acquisitions would be a drop in the bucket, but they could help significantly increase their footprint growth – for Amazon to boost its retail wing, and for Google to boost its data and advertising services.

Video seems integral to the smart home, and to this end, Nest acquired Dropcam for $555m, and Amazon picked up Ring ($1bn) and Blink (undisclosed) to add cameras and video doorbells. The two camps match up pretty evenly, in terms of the devices offered, but a major sticking point for both remains the monthly fees that customers have to pay on top of the cost of the devices.

For video, it’s quite obvious why these companies need to charge – storing all that video is quite expensive. However, that’s not something that most consumers are used to, and the issue with a service fee for a DIY security platform is that many consumers are going to assume that the service provides some form of active monitoring – like that which you would get from the likes of ADT.

So it can be a bit of a shock when you find out that there is no direct link between your home alarm and the police, especially once you factor in the fees. Conversely, the pure security providers are moving into providing more of these smart home services, and so there’s an additional pressure there on the likes of Nest and Amazon. They are getting squeezed in on, but they so have the major advantage of controlling the digital assistants.

And that’s before you consider the TV, ISP, MNO, or utility offered Smart Home as a Service (SHaaS) bundles that are rising in prominence. For these service providers, even a simple smart home bundle can help increase their stickiness, and therefore their churn ratings. But if these firms can then add a monitored security element too, packaged up into an existing service bill, then Nest and Amazon now have another front line to worry about.

Essentially, this space is something of a mess. No single provider has created the ideal approach, whether that’s through an off-the-shelf DIY offering or a low-cost professionally installed system. Striking the middle ground is difficult, and it looks like no one option ticks all the boxes. Of course, lower consumer version prices increases the pressure on the professional options, and SHaaS providers are going to be squeezed in their channels when smart home devices get cheaper in retail – but Amazon and Google do have considerably deeper pockets if this becomes a race to the bottom and a quest for dominant market share.

Away from the home, however, hospitality has always been an obvious avenue for the digital assistants to pursue. To this end, Amazon has just announced a partnership with Marriott International, which will see Marriott deploy Amazon Echoes in its hotel rooms, in order to provide customer service features to its guests.

The goal is to be able to ask Alexa to order room service or book services within the hotel, as well as provide the question-answering features that have proven so popular in the home. Marriott reportedly tested Apple’s Siri, but publicly said that Siri was “not a direct comparison,” and clarifying that it worked with a number of partners to test features. Siri isn’t having a good time of it, lately.

In terms of devices sold, hotels are a huge opportunity for Amazon and Google, with hospitals another good candidate. They benefit from selling hardware to these sorts of customers, as well as potentially carrying out back-end software and business system integrations too. But more importantly, they extend the reach of the Alexa or Assistant experience, so that their users can keep using wherever the need takes them. It keeps people within the ecosystem, getting their fix of their preferred digital assistant.