The Trends and Gems Buried in Amazon's Product Barrage

Amazon introduces so many products at its fall events that it’s easy to get lost in the details. I attended the event live and got hands-on with many of the products, some of them in depth, but this report focuses on core strategic issues before touching on just a few of the key products.

Five Key Takeaways

Alexa’s strategic value
Amazon understands privacy is an issue – up to a point
It’s not just timers; Amazon is serious about AI
Sidewalk would get its own press conference at any other company
Day 1 Experimentation

Alexa’s strategic value

Alexa doesn’t generate direct revenue for Amazon. There is no charge to use Alexa, you don’t even need to buy hardware from Amazon to run Alexa, and voice commerce is more of a concept than a common use case. Contrary to popular myth, Amazon isn’t using Alexa to record your conversations to serve you ads. However, Alexa is like a flywheel for all of Amazon’s other consumer-facing businesses. Alexa-enabled devices are now a big business on their own: the Echo Dot is Amazon’s best-selling product, and the silly Alexa-enabled microwave oven was the best-selling oven on Amazon. Consumers who use Alexa have higher take rates and engagement with Amazon’s services, including music, IoT/security subscriptions, and Amazon Prime. Prime users have significantly higher transaction volumes and values on Amazon’s retail web site. Given the strong strategic value Alexa has across multiple businesses, Amazon has been investing heavily in filling in any conceivable hole where Alexa does not already have purchase, and is investing in Alexa-adjacent ecosystems with products like a Ring box that works with existing legacy home security systems.

Amazon’s privacy pitch is a good start (but only a start)

Any technology that puts a cloud-based, always-listening AI in your house, car, and on your body is going to have inherent privacy problems. Amazon understands at least some of the privacy issues it is introducing, and it opened its press conference with promises to give consumers more control over their data. For example, next year, when Alexa does something unexpected, it will be able to answer, “tell me what you heard,” which will reassure consumers that the AI is not random or spying on them. Amazon will also add the ability to automatically delete all the data Alexa records on a rolling three or eighteen -month basis. This won’t satisfy everyone – other vendors have different approaches – but it is a positive position to take. However, Amazon did not even acknowledge that its Ring division is creating privacy problems with its Neighborhood features or the ability for police to request footage. As Ring is more successful and is used to create de facto surveillance networks, we expect that this will become a bigger issue of public concern. Amazon would be wise to get out in front of it before some footage goes viral or the issue attracts the attention of public policy makers.

It’s not just timers; Amazon is serious about AI

Alexa is a major AI effort, involving huge investments in linguistics, heuristics, prediction, and machine learning. However, most of the advances are often invisible; for example, last year Alexa improved its understanding of children’s speech patterns, and can respond in greater detail to a child’s questions. However, at this event, Amazon showed off an incredible science fiction-like AI capability: Alexa will be able to answer the door for you and independently carry out simple conversations on your behalf. Wow.

Amazon Sidewalk would get its own press conference at any other company

While trying to build connected outdoor lighting, Amazon’s Ring team discovered a hole in the available wireless standards: Zigbee, Z-Wave, and Bluetooth are great for low-power connectivity indoors, but there is nothing that works outdoors at low power draws today (5G IoT implementation could serve this need in the future, but it is at least two years out, and we’ll see where costs end up). With no preexisting solution that fits, Amazon is introducing its own: a new networking standard in the unlicensed 900 Mhz band. It will share the standard and hopes that it will eventually become a shared network so that it can introduce pet trackers that work beyond your own backyard. Astonishingly, Sidewalk was introduced in the middle of Amazon’s presentation, with few details. Only Amazon would introduce a new networking standard and immediately move on to AI car integration, earbuds, and smart glasses.

Amazon experimentation

I often joke that Amazon’s product managers don’t know where consumers want Alexa, so they’re putting it everywhere (“throwing it at the wall and seeing what sticks”). Amazon is now building a product process and accompanying brand, “Day 1 Editions,” specifically to experiment with products it knows are not ready for the mainstream and may never be. Day 1 Edition products will be sold with up-front limitations, which can include just a few sizes for wearables, limited availability, and invitation-only ordering. The first two Day 1 products Alexa-enabled wearables: glasses, and a ring. Amazon also introduced another Alexa-enabled wearable at the event, Echo Buds, but this is an established category, and the Buds are too mainstream to be considered Day 1 Editions.

To discuss the implications of this report on your business, product, or investment strategies, contact Avi at avi@techsponential.com or +1 (201) 677-8284. Avi is also available to discuss specific products launched at the event, including Echo Studio, Echo Buds, Echo Frames, Echo Loop, the Echo Dot with Clock, new Echo, Echo Smart Oven, Ring Stick Up Cam, Ring Indoor Cam, Ring Retrofit Kit, Echo Flex with accessories, Echo Glow, Echo Show 8, new eero WiFi routers, Certified for Humans IoT initiative, multi-lingual mode, and celebrity voice packs for Alexa. Whew.