Security service provider incumbents beware: the Amazon juggernaut has set its gaze on the smart home market, and security is front-and-center. A quiet launch in late April 2018 of a portfolio of five professionally-installed, self-monitored, no-contract smart home security bundles shows Amazon is getting serious about its quest to expand its smart home footprint. Amazon’s business model thrives on disruption, and its professionally-installed, one-time fee, no-contract approach to smart home security is a significant disruptor to how many smart home solutions are sold today.

As discussed by Strategy Analytics in an Insight report published earlier this year (Following the Acquisition of Ring, Amazon is Primed to Enter the Smart Home Security Business), this move by Amazon has been arguably hiding in plain sight. The groundwork was laid in July 2017 with the launch in seven U.S. cities of Amazon Smart Home Services, a smart home device consulting and installation extension of Amazon’s more traditional Home Services portfolio.

The countdown to launch was shortened by the $90 million acquisition of smart home camera maker Blink in December 2017, and further accelerated with the $1.1 billion acquisition of video doorbell vendor Ring in February 2018. In tandem with this rollout of security-focused smart home device bundles, Amazon’s Smart Home Service is now more widely available compared to July 2017. As of April 2018, it is now available in Washington, Oregon, California, Arizona, Texas, Nevada, North Carolina, Georgia, Illinois, New Jersey, Florida, and Washington, D.C.

So does Amazon intend to compete head-to-head in the U.S. with the likes of ADT, Vivint, and Comcast? Strategy Analytics believes an answer is “not exactly”, or “not yet”. Over the long-term, Amazon could, and Strategy Analytics believes it likely will, offer a professionally-monitored smart home security by rolling out a modified version of Ring Protect, the security service Ring was planning to launch prior to being acquired by Amazon. An acquisition of a professional monitoring or smart home device company is not out of the question. For example, some of the device bundles announced by Amazon include Wink’s smart home hub, making Wink a potential candidate for acquisition by Amazon.

In the near-term, however, Strategy Analytics believes Amazon is more interested in finding new ways to attract customers that will boost growth of Amazon’s core offerings, especially Prime and the services included with that subscription. Amazon additionally benefits as it will claim revenue from the installation fee and sales of the devices included in each bundle. A no-contract, one-time fee for installation approach to smart home security is a powerful way to raise consumers’ interest as well as remove their objections to the price of traditional home security services, arguably the largest barrier in consumers’ purchasing processes.

And security service incumbents are taking note. As Bill Ablondi, director of Strategy Analytics’ Smart Home Strategies service, discusses in his recently published report “US Interactive Security: ADT, Vivint and Comcast Brace for Competition with Big Tech Brands”, the competitive landscape in the interactive security market is rapidly changing as big technology brands enter this market. Brand recognition is becoming an important differentiator as security service providers look for new ways to increase their market share. Contract-free smart home security solutions from MONI (soon to be Brinks) and Google’s Nest, ADT and Samsung’s SmartThings, and now Amazon, show how the dynamics of this market are evolving.

In much of same way that Amazon became Walmart’s strongest rival, Amazon is seeking to expand its empire into a new segment of the consumer market. In retail, Amazon’s missions arguably weren’t to offer lower prices or more goods than Walmart – its goals were to provide better shopping and customer service experiences than Walmart that encourage customers to make more purchases.

By disrupting the way smart home security devices are purchased, as it did for retail in general, Amazon will quickly open more doors into the consumer market than if it engaged incumbent security service providers head-to-head.  Additionally, Amazon’s brand exudes reliability and trust built on years of providing easy-to-use services backed by high-quality customer service. The company’s latest initiative for the smart home market will have a positive impact on nearly all smart home vendors as consumer awareness or smart home devices and services will climb, expanding the addressable market in the U.S. When combined with Amazon’s massive base of Prime customers and its brand strength, Amazon will be a force to be reckoned with for smart home device vendors, especially big-box retailers such as Lowe’s and Home Depot, and smart home service incumbents.

Additionally, bringing these smart home security device bundles to other regions where it has a presence will be easy for Amazon, as it can leverage its existing infrastructure. This would put Amazon in direct competition with the recently launched smart home partnership between Vodafone and Samsung’s SmartThings (read Strategy Analytics' take on “V-Home by Vodafone” here), as well as complicate the smart home go-to-market strategies of smart home service provider incumbents such as the U.K.’s Hive and Germany’s Deutsche Telekom.

Strategy Analytics would welcome the opportunity to discuss the ramifications of Amazon’s latest move and its implications on companies’ smart home strategies with prospective and current clients of our Smart Home Strategies research service. Please feel free to contact Bill Ablondi, director, Smart Home Strategies, or Jack Narcotta, senior industry analyst, Smart Home Strategies.