’s Eero Acquisition Raises Some Peripheral Concerns About Privacy

The purchase fits well into its smart-home plans, but it’s also another interesting step in the e-commerce giant's march toward ubiquity in our lives.

Motley Fool Staff
Motley Fool Staff
Feb 14, 2019 at 10:59AM
Technology and Telecom (NASDAQ:AMZN) is buying mesh home-router maker Eero, a small company with the simple goal of solving the annoying issue of dead spots in your home's Wi-Fi coverage.

It's an interesting move for the giant company in terms of improving its smart-home and device strategy. But as Market Foolery host Mac Greer and senior analysts Andy Cross and Jason Moser reflect on in this segment of the podcast, there are potential privacy questions. How much Amazon do we want in our lives and homes? On balance, do we care more about convenience or privacy? And how often are most people really even asking themselves the question?

Check out the latest Amazon earnings call transcript.

A full transcript follows the video.

This video was recorded on Feb. 12, 2019.

Mac Greer: Let's talk some Amazon. Amazon is buying the router maker Eero. Andy, this is just Amazon's latest push into the smart-home market, Amazon last year buying the video doorbell maker Ring for around $1 billion.

Andy Cross: A continued push into having more influence in that space. Obviously, it's a tiny drop in the whole Amazon story. What's interesting to me is the ability for Amazon to recognize through their own platform what is working, what is selling, what has the best reviews, how much data they're collecting on Eero that was selling versus their competitors and be able to make an attractive offer. Now, we don't know what the price was. The last Eero valuation was around $250 million, and they took on about $100 million in financing over the years. I'm sure their investors got a nice return on this. A small move for Amazon, yet it does speak volumes to the direction that Amazon is going when they want to have more influence on the shopping habits and the online presence habits in our own homes.

Greer: Jason, we were Slacking before the show today and you posed a really interesting question. It's not a question I understand completely, so I want to put it back at you, but I want to pretend that I came up with it. OK? Are you good with that?

Jason Moser: [laughs] Sure!

Greer: OK. Here's the question. At what point does Amazon start becoming Facebook (NASDAQ:FB)? What do you mean by that? What do I mean by that?

Moser: [laughs] We've been talking a lot about Facebook and privacy. That's been really the conversation du jour for about the past year, it seems. It's becoming more and more obvious every single day that we basically can't get around in our day-to-day lives without dealing with Alphabet, Facebook, Amazon and/or Apple in some capacity.

Greer: And Costco.

Moser: And Costco, yeah. Some of us more than others, I guess. When we look at what Amazon's doing, and all of the things that they're putting out, the devices -- Echoes, tablets, Kindles, all of these things, now routers, certainly looking to get into the smart home more and more, and really the bets that they're making on the smart home are starting to pay off -- you just start to wonder, how comfortable are you with Amazon essentially being that extra member of your family so to speak? Even though you're not really giving them an allowance --

Greer: Not comfortable.

Moser: -- maybe you are because you're buying stuff from Amazon. It's just something to think about. We've talked a lot about Amazon, we've been putting Amazon in this positive light for so long. Let's flip the coin a little bit, look at the other side, and think: "What does it take for people to really start becoming more and more apprehensive about allowing more Amazon in their lives? What's the line?" And I feel like I'm getting kind of close to it. After we were Slacking, my line was going to be, if my Echo in the house chimed in with her opinion unsolicited, that was going to be my line right there. But it's worth posing. We've been talking about this stuff a lot with Facebook. Let's be fair and talk about the other companies that are in this same arena. Amazon's one of them. Alphabet is another.

Cross: I mentioned about the data that they're collecting on all the shopping habits, but their advertising business is just starting to ramp up. We saw this last quarter as they continue to become a bigger and bigger player in advertising, advertising on their platform. This is going to be a bigger push into the privacy concerns that have hurt Facebook over the last couple of years. Jason's right. The privacy issues are now facing Facebook, and in this example, is another case that people may point to, like, "Wow, my privacy is becoming more and more dominated into fewer and fewer players in technology," and Jason named those earlier.

Greer: Along those lines, do you think people are getting more and more comfortable with giving up their privacy? Or do you think people, on some very basic level, just don't realize how much of their privacy they've given up? Those are two very different scenarios.

Moser: I think generally, they realize it. I think most people are just lazy. I would put myself there. We're all, as humans, creatures of habit. Technology has made us lazy. It's really tough to put that toothpaste back in the tube. We're going to figure out ways to justify it for the sake of convenience or what we really want. People will frame it however in their minds. "Oh, I don't have anything to hide anyway! What are they going to get from me? Privacy shmrivacy!" Privacy means something different today than it did 20 years ago, no question about it. But generally speaking, once you start really engraining human behavior the way these companies have, it's extremely difficult to undo that.

Cross: I actually think we're on a little bit of the top of the S-curve here. Maybe a couple of years ago, we were like: "Yeah, privacy, great! We value convenience more than privacy, and I'm willing to sell a little bit to these players, these tech giants, to get much more convenience." I think now, after all the turmoil with Facebook, after GDPR over in Europe, we saw the fine hit Alphabet in the past couple of weeks, I think people are going to start pushing back a little bit more and more. We've already seen it, clearly, with Facebook. I think we're going to start seeing on the consumer side a little bit more.

I think Amazon will continue to be more and more relevant in our lives over the next five, 10 years. But I do think consumers will start being a little bit more careful about what they're willing to give up.

Moser: I think it's figuring out, at what point is it over-convenient? A good example there would be something like those Amazon Dash buttons. Those little buttons you'd buy, you'd put it on your washing machine and you just push a button to order more laundry detergent or whatever. Do you really need that? Is it that difficult to open your phone and just click "buy"? How lazy -- that's an example. Now, I don't know that those Dash buttons have really gained a lot of traction. But I will say, having tried them in our house, we tried them, and I thought, "God, how lazy have I become where I can't just open my phone and order it?"

To Andy's point, I think there is that line there where convenience is almost like, "All right, that's a little bit beyond convenience. I don't need it." There is a line that people will draw, it's just a matter of where it is.

Cross: At least that's active, whether it's opening your phone or pushing that button. I think on the passive side, that's where the concerns are going to start coming in. We're already seeing it a little bit with AI, artificial intelligence. When they start providing solutions, when people are listening constantly to conversations -- Jason made the joke about when the device is all of a sudden offering their input. I think that's where the concerns are going to start coming. It really does come mostly, I believe, in the smart home, where the concerns will be. This is exactly the direction that Amazon's going into with the Eero acquisition.

Greer: That's the part that scares me. It's not what we know, it's what we don't know and we find out later and we are like, "Wow, I had no idea that that Dash button was walking my dog."

Moser: We're finding out more and more and more as time goes on. It may sound ridiculous on the surface, but who knows what kind of information that little Dash button is gleaning. And then, look to a company like Control4, where the entire business is founded on the smart home and getting that hardware and operating system into your house. How much are you going to trust any of that stuff? At least with Amazon, they have a lot of different levers to pull. Something like Control4, maybe not so much. It's interesting to watch this all evolve.