By purchasing smart-doorbell company Ring for an estimated $1 billion or more, Amazon.com (NASDAQ:AMZN) is proving that not only is it interested in having its Alexa artificial-intelligence platform be the gateway to the home security market, but also that it will thwart Alphabet's (NASDAQ:GOOG)(NASDAQ:GOOGL) advance into the connected home at every turn.
Although Ring is best known for its smart doorbell, which is essentially an all-in-one doorbell, intercom system, and security camera system that allows homeowners to see who is at the door and interact with them through their smartphone, it has also branched out more directly into home security with a low-cost monitoring system that undercuts Nest, another smart home device maker that started with smart thermostats and has similarly expanded its focus to include more areas of the home. It even has its own smart doorbell called Hello.
Google purchased Nest in 2014 for $3.2 billion, and last month cNet reported Google was transferring Nest from its Other Bets division -- which houses a diverse mix of projects such as its internet and TV services business Access, the R&D biotech Calico, and the self-driving-car unit Waymo -- and is bringing it under the Google umbrella that is home to search, YouTube, and Android.
As the battle for the connected home heats up between Alexa and Google Assistant, and more recently Siri with Apple's (NASDAQ:AAPL) HomePod -- and who knows, maybe even Microsoft's Cortana soon enough -- the need to have a complete suite of devices covering all aspects of the home becomes imperative.
Amazon wants to own your home
The Ring acquisition builds on Amazon's December purchase of Blink, another security camera and video doorbell manufacturer, that will likely be integrated at some point with Amazon's Cloud Cam home security camera and its smart lock app Amazon Key that lets Prime members give access to the home to select individuals, including Amazon package delivery people. Ring fits neatly into the Amazon ecosystem, as it already interacts with Alexa.
So does Nest, for that matter, and though that reportedly continues to be the case, the Ring purchase and expansion into competing home security systems could change all that. Amazon and Google have been engaged in a series of acrimonious actions against one another. Amazon stopped selling Chromecast devices several years ago (it apparently started selling them again in December), and Google pulled YouTube off Amazon devices, such as its Fire TV. How long Nest and Alexa remain compatible is unknown, but it looks like it won't be long.
Business Insider reports that Amazon just lowered the boom on Nest by blocking its access to the e-commerce site. Only a handful of Nest products are sold on Amazon, and the online retailer informed Nest that its newest products, such as the latest version of its smart thermostat and its home security system, would not be carried on the site. In response, Nest decided to end its relationship with Amazon and will not restock items once the inventory is depleted.
Although it's understandable Amazon wants to promote its own businesses and limit the exposure of its rivals, as it enters into more industries it's going to run into these conflicts more often. If it continually shuts out the competition, particularly for highly rated products like Nest, Amazon could hurt itself since the utility of the site is diminished.
Not giving an inch
It's estimated that Amazon owns anywhere from 70% to 76% of the smart-speaker market, with Google having anywhere from 15% to 24%. Now that the HomePod is on the market after several delays, it may capture a slice of that pie, though probably a small one, since the HomePod is more of a music device at the moment. The ability of Alexa and Google Assistant to offer a far more holistic solution to consumer needs suggests they'll enjoy more mass acceptance.
After years of a home security market that's been dominated by companies such as ADT, Vivint, and others, Amazon and Google are injecting technology into the space with their advanced connected-home systems, a move that promises to shake up the status quo and push Amazon's battle with Google to your front door.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.