Latest World News

Amazon dominates the $113 billion smart home market — here’s how it uses the data it collects

20

Since Amazon introduced the Echo smart speaker in 2014, it’s remained the biggest and fastest-growing player in the smart home market. Its most recent expansion includes four new Echo devices, a new Fire TV, two new Ring cameras with features like radar-triggered motion detection, and the Halo Rise contactless bedside sleep tracker that can sense your breathing and movement to determine sleep stages. The new devices were all introduced Wednesday at Amazon’s annual smart home event.

Amazon Halo rise sleep tracker

Amazon

Last month, Amazon made moves to enter a new segment of the smart home, with a $1.7 billion offer to buy iRobot, the maker of the smart Roomba vacuum. Now, the Federal Trade Commission is requesting more information from both iRobot and Amazon before deciding whether to approve the deal.

Earlier this month, 20 privacy and labor groups sent a letter to the FTC asking it to block the acquisition. The letter cited concerns about privacy and Amazon’s growing dominance of the smart home market. 

“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,” said Leila Rouhi, Amazon’s vice president of Trust and Privacy.

Amazon says 140,000 products are now compatible with Alexa, although “very few” of those are owned by the company. It acquired video doorbell maker Ring for $1 billion in 2018, just three months later it bought security camera maker Blink for $90 million. Then in 2019, it paid $97 million for a mesh Wi-Fi system called Eero to help connect multiple smart devices in the home.

Amazon’s Eero mesh WiFi systems are shown inside the Amazon smart lab in Seattle, Washington, on September 9, 2022.

Katie Schoolov

“Eero was a pivotal acquisition because it gave Amazon this ability to see which devices and appliances are being used. They can see the internet traffic that’s going to every connected item in someone’s house. And that gives you a lot of insights. And I’m sure that some of the insight that Amazon got from that was just how popular and how often Roombas are used,” said Stacy Mitchell of the Institute for Local Self-Reliance, one of the advocacy groups that signed the letter to the FTC.

Marja Koopmans, director of Smart Home at Amazon, told CNBC that the data from its devices is only used to improve the capabilities of its interconnected smart home ecosystem.

A growing market

When Amazon became the first major player to introduce a smart speaker to the market in 2014, the Echo was a runaway success. It sold 5 million devices by the time Google introduced its first smart speaker in 2016. Apple, which has never gained much headway in the smart home space, introduced its first HomePod in 2018.

“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,” Koopmans said.

Lighting was first, with Amazon adding Alexa activation to an early smart lightbulb, the Hue. It’s made by Philips, where Koopmans was chief marketing officer before she joined Amazon to lead the smart home operation three years ago.

“Three hundred million devices are connected to Alexa today. That’s up from 200 million less than a few years ago. And the growth is rapid,” Koopmans said.

The number of Alexa-enabled products started skyrocketing after it opened its voice-activation platform to outside developers in 2015. Last year, the U.S. smart home market was worth nearly $113 billion, up 20% from 2020, according to data firm IDC.

Amazon shipped 11.5% of U.S. smart home devices in 2021, a 15.5% increase from the year before. Runner-up Google shipped 6.5% and Samsung came in third with 5.8%.

More than 77% of Wi-Fi-connected households in the U.S. owned at least one smart home device in 2021.

“If you asked me three or four years ago what the adoption rate was, it was hovering around about 12%,” said Adam Wright, who leads research on smart home and office devices at IDC.

Amazon’s Ring Video Doorbell 4 is shown at the Amazon smart home lab in Seattle, Washington, on September 9, 2022.

Brady Lawrence

Wright says his home is filled with 185 Alexa-enabled devices. IDC surveys found that 60% of users with a smart speaker end up buying an additional smart home device. Still, Wright isn’t entirely optimistic.

“I think we’ve made great strides, but the value of the smart home to me personally remains uncertain,” Wright said. “My entire smart home experience is irked frequently, every day, with these devices just not working.”

iRobot and privacy concerns

Ahead of the smart home event in September, CNBC visited Amazon’s smart home lab in Seattle, where more than 45 connected devices were on display.

“There is a smart fridge that’s connected to Alexa. We have our thermostat, our Ring doorbell and cameras, vacuum, the indoor air quality monitor, the TV,” Koopmans said, listing only a few of the gadgets.

Amazon doesn’t break out device sales in earnings. But with a string of big acquisitions, it’s certainly expanding its collection. The proposed iRobot deal, Wright says, is likely about much more than selling the vacuums.

“It’s very difficult to make a lot of margins on the hardware and the device itself,” Wright said. “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.”

“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. So then they can target advertising on the Amazon platform in that way,” said Sarah Miller, who founded the American Economic Liberties Project, which also signed the letter to the FTC seeking to block the iRobot deal.

Colin Angle, the CEO of iRobot, best known for the Roomba vacuum cleaner, poses for a portrait in Bedford, MA on Jan. 22, 2020.

Suzanne Kreiter/The Boston Globe via Getty Images

“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,” iRobot CEO Colin Angle told CNBC in a statement. “We take that trust seriously. Once we are acquired by Amazon, our commitment to customer data and privacy will remain.”

Amazon’s Rouhi, the VP of privacy, reiterated that “privacy and security are a huge, huge area of investment for us and will continue to be.”

Roombas aren’t the only smart home devices that can map the inside of the home. Smart lights like the Philips Hue have a new feature that will allow them to turn on or off automatically by detecting your presence based on the disruption to Wi-Fi strength in a room. 

Amazon also has introduced a flying indoor Ring camera called Always Home Cam, and a robotic household monitor with a face called Astro. They’re made for checking in on specific rooms, children or aging loved ones.

Miller of the American Economic Liberties Project said she is concerned about the growing number of devices that can collect user data.

“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,” Miller said. “And through that process, to push out competitors that simply could never surveil you with that degree of sophistication.”

Amazon’s alleged anticompetitive practices are being challenged by an antitrust bill being considered by Congress, and in lawsuits filed by the attorney generals of the District of Columbia and now California. 

Amazon’s stated policy is to use data only in an aggregated, anonymized way.

“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,” Rouhi said.

Amazon’s Echo Show 10 is deomnstrated with a built-in camera cover at the Amazon smart lab in Seattle, Washington, on September 9, 2022.

Katie Schoolov

Privacy protections

Privacy concerns also arose in 2018 when Amazon bought Ring, where Rouhi was president for four years before joining Amazon in April.

“It’s foundational that 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,” Rouhi said.

One way Amazon has added user control is by adding options for scheduled deletion of your history and data, including audio and video from Echo and Ring devices. The microphones can be muted, and cameras on the Echo Show and other devices can be blocked with a built-in cover, although video is critical to Ring cameras.

On the Ring 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

“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 interests,” Rouhi said.

The latest Ring Video Doorbell 4 has an option for two-way video encryption, and the new security cameras announced Wednesday allow users to exclude recording in specified “privacy zones.” 

On Echo devices, the microphone can be muted. And despite tailored ads that make it feel otherwise, Amazon says Alexa is not always listening.

“There’s absolutely not a room of people that is monitoring our customers and their behaviors,” Rouhi said.

Although Amazon sells the data gathered at its grocery stores to brands looking to gain valuable insight into how consumers shop their products, Rouhi told CNBC that Amazon does not sell customer data from devices and services, and has no plans to.

Using data for ‘ambient intelligence’

Amazon says all these new capabilities and the data coming in from them will help devices work in unison for what it calls “ambient intelligence.” Amazon told CNBC more than 30% of experiences are initiated by Alexa instead of humans. 

One example is an indoor air quality monitor that can automatically turn on a fan or a purifier if the air quality drops. 

Back in the smart home lab, Amazon’s Koopmans demonstrated how its smart thermostat can save customers money on their electric bill by automatically turning off when you’re away, using something called Alexa “hunches.” Essentially, the data collected by all the connected devices in the home “teaches” Alexa your routines, she said.

“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. Or you may have actually told Alexa, ‘Alexa, I’m leaving,’ and to switch on your alarm system, for example,” Koopmans said.

Amazon’s Smart Thermostat is shown inside the Amazon smart lab in Seattle, Washington, on September 9, 2022.

Katie Schoolov

Another new data-enabled capability is “follow” on the Echo Show 15. The device rotates around the room to match your location and better show you the screen. Amazon can also now create a “visual ID” for each Echo user with facial recognition software.

“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, different music and different newsfeed that you’re interested in,” Rouhi said.

“Amazon copped a bit of flak 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,” Wright said.

Amazon also has a shared network called Sidewalk that users can opt in to. It allows devices to connect to each other, expanding the signal beyond the reach of home Wi-Fi and staying on even if the home internet goes out.

“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,” Rouhi explained.

Alexa, Google and Siri may play better together soon, too. An alliance of different device makers including Amazon, Google and Apple 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,” Koopmans said.

Source: CNBC