Amazon Echo Helps Sell Other Connected Devices
Following a startling report in the Wall Street Journal that Amazon lost $25 billion developing and selling Echo and other proprietary devices, and presumably the Alexa platform, we want to understand what Amazon is trying to accomplish with Echo. We think of at least two revenue streams - or measures of “downstream impact” as Amazon refers to it - besides unprofitable hardware sales. These are using Echo as a voice shopping or buying portal for Amazon.com, and positioning Echo as the center of smart home strategy, selling smart home accessories and related services, ideally ongoing subscriptions
Earlier we showed Echo owners don’t really use Echo to buy stuff at Amazon.com. It remains a streaming music device, an interface for Internet queries, and a really great timer and alarm clock. It seems, though, Echo does help motivate purchases of smart home accessories.
In our semi-annual survey of smart speaker buyers, we ask subjects what connected home smart devices they own and how they use them. We ask about a wide range of devices:
thermostats
electrical equipment, such as light switches, outlets, and lightbulbs
home security, camera, and smoke detector systems
door locks and doorbells, including Amazon’s Ring brand
garage door openers.
Based on our data, a relatively small percentage of Echo owners buy these devices. Yet, for those that do, ownership of an Echo smart speaker may have been the catalyst for purchase, especially for lighting and smart plugs. And, Amazon captures a significant share of these sales.
Among Echo owners, smart doorbells and video security cameras are the most popular smart home devices, with about one-third and one-quarter, respectively of Echo owners having one of these (Chart 1).