With 70% market share in smart speakers and over 100,000 Alexa Skills powering everything from toasters to transportation, Amazon is a clear leader in smart home technology.
Maybe even the leader, depending on how you look at it.
It all stems back to Amazon’s failure to crack the smartphone market, and its genius jiu-jitsu move to own voice and the home.
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But smart home isn’t as smart as we’d like it to be. It’s so hard, in fact, that 70% of the “smart home” devices that consumers return aren’t actually defective ... people just couldn’t figure out how to make them work. Amazon’s got a plan for that: voice-only activation via Alexa, and it’s identifying products that meet this challenging standard in the ‘Certified For Humans’ program.
But where is smart home going?
And what does Amazon have up its sleeve next?
I spent 35 minutes with Amazon’s vice-president for smart home, Daniel Rausch. Here is a lightly-edited version of our conversation. (Or, you can listen in on our conversation in the Tech First Draft podcast.)
Koetsier: Why don't we start it on a personal note? Tell me about your home. What tech do you have in your home?
Rausch: Hmm ... a lot. And I would say we're still a net exporter of smart home technology, though my home is also full of tough customers, one of which is me, but I've even tougher ones in my family.
My home has many of the usual suspects ... we count on smart lights to do things like make it look like we're home through Alexa Guard when we're away, but also just to give a simple voice control and walk in and out of a room. My children grew up in a home where you could just sort of assume you can talk to the room to turn on the lights.
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And there’s a bunch of things that you might think of as table stakes, whether that's a connected thermostat, you know, by Ecobee or connected wall switches, Amazon smart plugs, or Phillips Hue lighting, depending on what room you're in. One of the first products that I was explicitly asked to make sure we got was a Ring doorbell.
And that's when we started trusting our kids to make it home from the bus by themselves on time and get through the door. And boy, the peace of mind that is offered by that awesome integration with the doorbell is just amazing. And now that from our Echo Show in our kitchen you can answer the door without needing to go there... my kids feel confident being able to answer the door without opening it.
Many of them you might consider the usual suspects ... a lot of other great products, like connected appliances in the home or some real standout ones that I think are super awesome are things like the Rachio smart lawn watering system.
Koetsier: That’s an impressive list.
Rausch: I live in Seattle proper and I do try to grow veggies in the summer. I love the idea that we actually put some things on the table that we grow ourselves and I like being able to turn on and off things and not waste water when, as frequently happens in Seattle, it rains.
Koetsier: How has that evolved over time for you personally and the market at large? Is smart home tech sort of like tattoos? People just can't have one?
Rausch: Hahaha, that's awesome. I love the way you asked that question. You may just see me borrow that.
Let me actually just rewind a little bit and talk about why I think it's become like tattoos. So if you pull back even a little bit farther, you know that smart home went through tons of fits and starts before the advent of voice control and Alexa. We had decades of customers trying to hack away and needing to be a computer scientist basically with like an old X10 system or something.
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Then you reach the moment of the smart phone and actually I would say consumer adoption tried to start and mostly failed after one or two devices. What customers mostly discovered in that era was that in many ways, the smart phone as the hub of control for the home is worse than the analog world that preceded it.
It’s only in one customer's pocket!
You had to fish it out. If you were the lucky customer that had it, you'd fish it out and you'd unlock your phone. You'd think who is the manufacturer of the product of the device you're trying to control, you find that app, you open the app, you find the device, you tap the device, you find the control, you turn it on and that's how to turn on a light switch right?
So I think that basically the world of the smart phone as the hub of the smart home just under-delivered and so there you saw the exact opposite of the pattern. It's basically the regretful tattoo. Maybe that's like the Tasmanian devil, you know, that you got at Spring Break or something.
We know that a customer's purchase intention for a smart home product, after they connect it to Alexa, it goes up for the second product. And the third product purchase intention is actually higher than the second product purchase.
So then we reached the point where voice actually simplifies the home. It's in the same usage model, meaning anyone in the home that can get into your home can turn on and off the lights, right? Anyone you let in, so that same model, right?
Your voice is ambiently available in your home. It's ubiquitous.
You can affordably add this voice surface to every corner of your home now in different use cases like Dot and Show at three different sizes and Echo Studio, our best-sounding device now that can do this sort of awesome studio quality sound for your living room.
So with all those options and ubiquity, it means it's everywhere. It's simple to use, everyone in the home can use it. You don't have to think about the manufacturer of any given device. You just say, turn on the lights, whether that's any of the thousands of makers of smart lights that now integrate with Alexa. And it just works.
This kept all the advantages of the analog world and added new advantages, that you can make it look like you're home when you're away. You tell Alexa Guard "I'm leaving" and Alexa makes it look like you're home with away lighting. Or you can add a routine to turn on and off at sunrise or sunset.
And of course you get the simplicity of voice control.
It's only Alexa's fifth birthday, as you probably know. It's only in that period of voice that we've been able to come through for customers. This is a long-winded answer, but I think it's important. And we’re really entering the model where customers do start adopting and then look for deeper adoption within a use case.
So customers that start with safety and security end up adopting more products. Maybe they put on a Ring doorbell, but then they realize actually they'd love to have their backyard or the ingress of their backdoor protected by a doorbell or a stickup cam.
And then connect that to Alexa. And then they'll say, you know, I really love that kind of simple control everywhere throughout my home. So we do see that.
We know that a customer's purchase intention for a smart home product, after they connect it to Alexa, it goes up for the second product. And the third product purchase intention is actually higher than the second product purchase...
Koetsier: Let's go a little deeper. I've asked you some questions about yourself and your usage. You've gone into also the data of what you're seeing. Let's talk about broader topics here. The question I have here is, do people buy devices or ecosystems?
Rausch: I think what customers really want to do is just solve a problem.
And I think we are now scratching at the surface of making that truly possible. Let's say we rewind the tape over the five years of Alexa. We started with no smart home devices at the very, very early stage. And then we saw people that wanted to do smart home hacking, so to speak.
For example, they’d use the to-do list. We saw that customers would send us emails and say, you know, I set up my smart home in this way: I say, "Alexa, add ‘turn on the lights’ to the to-do list."
So very, very early on we realized we should build some smart home APIs to make that easy. And we started with a few products. Through 2017 we went from zero to 4,000 products that Alexa was compatible with ... from lights, to thermostats, to cameras, to all kinds of products at the edge of the home that we didn't even imagine at the beginning.
Then in the space of 2018 we go from 4,000 products to 30,000 products ... this year, year-to-date, we've gone from 30,000 products to over 85,000 products that are Alexa compatible from over 9,500 brands.
Then in the space of 2018 we go from 4,000 products to 30,000 products ... this year, year-to-date, we've gone from 30,000 products to over 85,000 products that are Alexa compatible from over 9,500 brands.
And so you're just seeing the proliferation of, on the one hand, yes, devices, but on the other hand, it's really problems that customers are trying to solve.
You know, when my wife asked me to get us a Ring doorbell, it was the first smart device she ever actively asked me to bring home. The reason was we wanted to know that our kids were home from school. That wasn't about adopting an ecosystem, as you say, or a device. It's about solving a problem.
Of course, customers should have the choice of whatever so-called ecosystem they want to choose for interoperation. It's certainly true that the vast majority of smart home products start from the assumption that Alexa is going to make their product better and smarter, easier for customers to use, and it's going to help drive their business.
Koetsier: The smart home still isn't all that smart ... how can we get there? Let’s talk about getting the second and third and tenth tattoos ... how can you make it easier?
Rausch: Well, the other component that'll let us really just have customers solve a problem is when smart home setup can become as simple as the analog world that preceded it.
On a device by device basis, it has to be dead simple, and it has to be as simple as it was. It used to be to set up a light bulb, you basically just had to remember ‘righty tighty lefty loosey.’ That was pretty much it. And if you could unscrew a light bulb, you could screw in its replacement.
Now with the new program that we call 'Certified for Humans,' we think that we're setting a new bar and a very high bar for the expectations customers should be able to have around simplicity of setup and ongoing use and expectations for the reliability of that product.
There are two critical dimensions there.
We think the only prerequisite for being a smart home adopter should just be that you're a human being. If you can find a wall outlet, or you can screw in a light bulb, that should be the bar for setting things up.
We think the only prerequisite for being a smart home adopter should just be that you're a human being. If you can find a wall outlet, or you can screw in a light bulb, that should be the bar for setting things up.
So, you know, you and I both know all the steps it takes to set up a smart home product today. In general, it means unboxing the product, learning where you have to download that application, right? That's specific to that product. So your light bulb now needs an account.
You have to open some new account, download an application, you get them on your network, and then you move over to your, as you call the ecosystem, we might say smart home controller. In the Alexa world, you enable a skill, you mutually authenticate with that new account for the light bulb (that you didn't want to begin with) and then finally discover the device and it's set up.
The bar for a 'Certified for Humans' set up experience literally stopped at you screw in the light bulb.
Koetsier: That’s impressive.
Rausch: There are good examples of this from Phillips. There’s no third party account required, no third party app required. It doesn't require the Alexa app. It doesn't even require a voice utterance with Alexa.
There's a fresh Echo Dot. I set it up for the first time. Here's a Phillips light bulb or an Amazon smart plug. That's the second device that's set up in this new user scenario, and you see that it just works.
Alexa just says she found the device, she provisioned the wifi credentials. She has all the technology on board, as does the light bulb to work around the needs for all the accounts and account pairing and everything else. You can still, of course, in the future, download the Hue app if you want all the additional scenes and whatever controls they bring to you, but that's sort of like an extended feature set. After all the basics are done, you shouldn't need all that complexity at the point of setup.
We've got a short video on how we started the program. We convened a non-expert panel.
We convened a non-expert panel.
It was a pretty interesting idea to work backwards, starting with just a set of customers who are super intimidated by the idea [of smart home]. But we've got these different clips from moments in their journey, one of them in the middle is when these customers realize that we're going to ask them to set up a smart home device and you could just see how intimidating that is.
It's that hard. It's been that confusing.
So one of them is setup. The second bucket that extends on that theme is about being actually smart. I really liked the words that you're talking about, that you're choosing there. In a lot of ways the experience has been either a little bit clunky or hasn't returned enough value until recently. On the clunky front ... customers shouldn't have to remember the names of their devices, right?
That's not something you had to do in the analog world. You didn't have to remember the manufacturer, and you certainly didn't have to name everything around your home. So as, as a way of making steps toward and being able to eliminate names entirely, we added Alexa-enabled groups a couple of years ago.
So if you put your lights and your Echo endpoint in the same group, for example, and you say, “turn off the lights,” Alexa will just turn off the lights group. That was sort of our entry point, but we also know that customers wanted more specifically controlled devices.
So they'll say things like, Alexa, turn off the sofa lamp, or turn on the couch lamp and the name just won't be right.
So we actually have a whole machine learning and AI effort just around resolving names of devices, so that Alexa makes an excellent suggestion to you. And it's actually well into the nineties of percentiles that Alexa gets it right. The name of that feature is 'Did You Mean?' and it's when Alexa says, "Did you mean the couch lamp or did you mean the reading light?" And the customer says, "yes."
You can imagine that in the future we will take even more friction out of that experience. Knowing, for example, that you often conflate reading lamp, couch lamp, sofa lamp. We might be able to take those actions on a customer's behalf without needing to ask. But at least as a start, we've eliminated, not entirely, but in most cases, the "I don't see a device with that name."
Which can be very frustrating ...
Koetsier: That is super smart. I can't tell you how many challenges some people in my household have around which Sonos speaker to turn on. Which can be interesting depending on what they're playing ...
Rausch: Totally, we're expanding the surface area of that 'Did you mean?' experience, so hopefully, you know if it's not already true in the coming months, you'll see the surface areas 'Did you mean?' expand to the cases that are happening in your home.
Just to wrap up the answer to your question on the other side of machine learning and extending the smart home for us is knowing the state of a home that a customer prefers to be in, and then helping them detect anomalies. So for starters, when you go to bed and set your alarm, Alexa might say something like "I'll set your alarm for 6:00 AM, but by the way, your front door is unlocked."
“Would you like me to lock it? Or by the way your basement lights are on, would you like me to turn them off?”
We started hunches in the space of a very basic state changes and anomalies and state change. We've extended them recently into things like, we observe a routine. So if you wake up every day and you ask for sports scores, and you turn on your coffee maker and you turn on your lights, then we would suggest that you create a routine to do that.
So you can just simply say "Alexa, good morning."
We've also added things like detecting inventory level, [for things like] battery powered devices. We'll have hunches around when it's replenish batteries ... which we can obviously take care of you because we're a big store as well. We've got this little retail business.
Koetsier: Yes you do. That's a great segue as well, actually, because I asked a few questions on Twitter: what should I ask the Amazon VP of smart home? And one of the responses was: at what point will Alexa be trainable? This person said, you know, I want Alexa to wake me up on weekdays at 6:00AM, tell me the weather, the top news, and pre-order my regular mobile order at Starbucks on my way back from my workout at 7:45. Oh, and tell Roomba to vacuum the house every day at 11:00AM. So we're well on the way there, but maybe not 100%?
Rausch: I would say it's a really good start. So customers will start seeing you know, tangible results from the set of hunches that we call recommended routines. And it's where Alexa has a hunch that you'd want to repeat a pattern and she observed a pattern. We're definitely starting within the space of smart home where we can coordinate across a set of devices and basically get that set up easily in the app with a single tap.
I love the idea of tacking a coffee order on at the end. I'm going to take that back to the team as a matter of fact, from your reader.
Koetsier: Excellent. So, the promise of smart home of course, is controllability of many things that are going on, but it's also automation. And some of the major tasks that, that we do, we clean, we vacuum, we do dishes, we organize clothing, other stuff like that. And we cook.
"Hey, when are you going to give Alexa legs?"
One other person on Twitter said "Hey, when are you going to give Alexa legs?" Maybe that’s a poetic way of saying it, but I think what they're really asking and getting after is: when can we expect to see the future of the smart home get even more automated?
Rausch: I do think it's an extension of this theme around being actually smart, or if you want to call it truly smart. A lot of what we'll do in the near term is make even complex tasks simple. So just to take a range of examples, doing something like vacuuming the home. It was difficult before iRobot and others innovated vacuum cleaners, but with Alexa and your ability to just turn something on when you're on your way out the door and turn it off when you come home, we get around one of the more complex parts of using one of those devices, which is scheduling.
So if we can make it super simple to just kick something off and end an action, that's a way of taking what was automateable and help it fit into our lives much more elegantly. I think that includes things like Alexa Guard, where you have one simple utterance to arm your security system because it works with ADT and Ring to put Alexa in a mode where your Echo endpoints are detecting sounds like the sound of broken glass, like the sound of your smoke or fire alarm, or your CO detector. And coming soon, sounds like activity in your home like footfalls of steps or opening doors.
Koetsier: Smart. What about the managing the electronics in your home?
Rausch: Well, your smart home router and my smart home router – or let's not even call it smart, just our internet router – already has the ability to know the Mac address of the devices that are on your home WiFi network to uniquely identify those devices. It can often group those devices. Sometimes you can give them a name of who they belong to. You can control internet access, frequently on a device by device basis.
But it's just basically impossible to use. You have to log into your router, which you probably don't remember how to do. I know I don't.
In just a couple of weeks, we'll launch a feature where a customer can say "Alexa, turn off WiFi for Jimmy's device, or Elly's devices."
Hopefully I changed the password from 'admin,' but that's about as far as most customers get ... and then you can't remember it. And so no one wants to open their laptops and make these things possible, but in just a couple of weeks, we'll launch a feature where a customer can say "Alexa, turn off WiFi for Jimmy's device, or Elly's devices."
And because you spent a very few high leverage seconds grouping devices by name on your network and connecting Alexa to your router, you get this ongoing benefit. So I think another bucket of features for me is the feature set that you already have, that's just impossible to use.
Koetsier: That is really useful ... and powerful. It reminds me of the Spiderman quote ... "With great power comes great responsibility." When I talk to people on Twitter or Facebook about smart home, probably 50 to 70% of them brought up privacy.
It's a growing issue. Most of these people were smart people who are in tech. But it's also concerning to people who are nontechnical and they're just kind of giving up in some sense. In kind of in a dejected way, they’re saying, “Oh, they're listening all the time,” or, “Google knows everything that you're doing.” And they've given up on being able to create some level of privacy in their digital lives. Talk to me about Amazon Alexa and Echo and privacy and where you see that going ...
Rausch: Well first, at the foundation of all of our products is the knowledge that customer trust is paramount and that it needs to be constantly earned and that it's easy to lose. So that sort of sets the table.
We built in privacy and trust features to our devices from the very beginning, such as electronic disconnection of the microphones with the mute button. From the beginning, you've been able to see all your utterances in the Alexa app or online. You can delete them one at a time or all at once. Those are features that we built in from the very beginning of the Alexa journey.
We're also evolving and learning as we go.
But of course we're also evolving and learning as we go. We've been at this five years and we've learned a lot. I think you’ve seen us more recently launching features that fly under the same flag. We know what customers want is transparency. And they want control. They want control over their data. They want transparency around what Amazon and anyone else is doing with it.
And so that means seeing all their utterances. It means having control over them, but it also means being able to set in advance default controls, like delete my utterances after 90 or 180 days, that we introduced recently this Fall.
Rausch: It also means expanding that so you don't have to go in the app. You can ask Alexa: "Alexa, what did you just hear?" Or even: “Alexa, why did you just do that?”
Alexa will explain to you now why she took a particular action or exactly what she heard and understood. So I think we know that what's most important is earning customers’ trust and that the basis for that trust is transparency and control. You are definitely seeing us evolve the feature set around those and affording that transparency and control in different and new ways for customers as we're learning.
Koetsier: Excellent. Let’s talk about CES ... you have had a big presence at CES in years past. I literally could not take a step from one booth to another without an Amazon message or 'It works with Amazon.’
What are you planning for the coming CES in January?
Rausch: I think CES has been, and I'd expect to continue to be, a story that's really based on partner successes. So, you know, one new highwater mark that we've set, for example, this year: over 90% of the Alexa-enabled devices that are shipping this year to customers, will come from companies other than Amazon.
Which is sort of a new high watermark. And then, you know, I've already mentioned that we're already today at over 85,000 products from 9,500 brands. You can imagine where we'll be as of CES with that nonlinear growth rate.
Over 90% of the Alexa-enabled devices that are shipping this year to customers, will come from companies other than Amazon.
So, you know, first and foremost, we expect CES to be about partners. We so value that they make Alexa part of their own product story. And you know, we love to keep delivering more and more freely available self-service technology for them to build in. I think one other thing just to watch for is that you'll see an increasing amount of Alexa Connect Kit driven products. The Alexa Connect Kit is an affordable, it's a single digit dollar amount for a BOM cost. And it basically can take any, not-smart product and make it smart. So if your product has power, it can become a smart home device.
There's a really interesting one that actually just started getting some customer ratings.
It was on Good Morning America this week: this company called Mr. Christmas called us and asked about the Alexa Connect kit. And literally in the space of six weeks from their phone call to when they were shipping Alexa-connected smart home Christmas trees ... it took six weeks.
They already had an LED wall-powered, Christmas tree that went into things like candy cane mode with a little controller on a wire. But now being able to say, “Alexa, put the tree in candy cane mode” and turn on the tree and flash the lights and all these other jazzy things has been really popular already with customers.
We actually sold out once already.
That's third party innovation and they didn't have to learn a single thing about becoming a smart product developer. It's all powered by the Alexa Connect. So I'd say watch for that story as well at CES.
Koetsier: Anyone who's ever fiddled underneath their tree for the controller for the Christmas lights and maybe tipped it over, or got a face full of pine tree, will thank you for that.
One final question.
Echo and Alexa was a jiu-jitsu move for a global tech player that didn't have a mobile story at the time, and when mobile was seemingly taking over the world. How do you evaluate your process, your progress so far, and what remains undone?
Rausch: Well we strongly believe there's so much more in front of us with voice interface overall and with voice-driven AI, there's so much yet to do.
We're really sort of in the first pitches of the very first inning.
And we approached it just like we approach everything. You know, at Amazon we start with a press release of what we want to say when we actually launch a product [development initiative]. And we wrote down very much where we started for the Alexa and Echo stories.
So we worked backwards from customers and what we want to accomplish for them, and we'd let the rest take care of itself. I think that as an interface for many things in particular around the home and increasingly on the go, voice rivals the other interfaces we have available to us through touch, for example, in our pockets.
But that interface isn't going away either. There's a lot we get done with our phones, but I think we're proud of the successes we've had. We're humbled by them and we just really look forward to doing more for customers.
Koetsier: Daniel, thank you so much for your time.
