Ring creates video-enabled doorbells, which enable homeowners to see who is outside via their smartphone © EPA
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When Jamie Siminoff pitched his start-up DoorBot on Shark Tank, he walked away empty-handed. The reality television show’s panel of investors were unimpressed by his idea to squeeze a video camera into a doorbell, letting people see who is at their front door from anywhere via their smartphone.

Last week, Mr Siminoff sold his video-doorbell company — now called Ring — to Amazon for more than $1bn.

The deal was as much of a shock to the connected home industry as it was to the “sharks” who missed out in 2013.

As recently as last June, even Mr Siminoff was confident that his company — which had by then grown to more than 1m customers — could go it alone.

“I do think that the future of Ring is to be a public company,” he told the Financial Times in an interview. “I don’t want to sell it to another company.”

He also admitted that the prospect of competing with the likes of tech giants such as Samsung and Google in consumer electronics was “maybe even impossible”, as consumer expectations for the quality of any new gadget and its accompanying support rose.

Yet just months after that interview, Ring found itself on a collision course with both Google’s smart home unit Nest, which unveiled its own Hello video doorbell, and Amazon, which launched a Cloud Cam security camera as part of Key, its in-home delivery system. Both products were launched last year.

By selling to Amazon, Ring has ensured its survival. But other makers of connected devices for the home are worried that the ecommerce behemoth, once seen as a partner and distributor, is rapidly turning into a competitor.

Thanks to its Echo smart speaker, Amazon has quickly become a dominant player in the smart home market. Echo owners can control a huge variety of lightbulbs, thermostats and security systems, simply by talking to its Alexa virtual assistant.

Many electronics companies, which already rely on Amazon’s online store for distribution, have spent years tying their technology into the Alexa system. A lot of them will be “really uncomfortable” with the idea of Amazon becoming a “smart home” device maker in its own right, says Alex Hawkinson, chief executive of SmartThings, Samsung’s connected-home unit.

For instance, Amazon’s $120 Cloud Cam is priced aggressively to undercut rivals such as Google’s Nest Cam or Netgear’s Arlo. In December, Amazon quietly acquired Blink, which makes battery-powered security cameras and creates custom chips for low-powered, efficient video.

A prime driver for Amazon’s acquisitions is speed to market, says Jason Johnson, chief executive of August, a maker of smart locks that was acquired by ASSA Abloy, parent group of Yale locks, last year. “Right now the smart home is a land grab,” he says.

Acquisitions also buy talent. “These systems are much more complicated than meets the eye,” says Fred Bould, whose Silicon Valley-based design studio has worked on well-known products including Nest’s thermostat and smoke detector. “There is a lot of know-how and expertise that only comes with years of experience, so the acquisition short-cut makes sense if the price is right.”

The price Amazon paid was about three times Ring’s revenues last year of roughly $400m, according to people familiar with the company’s finances.

While Ring is still believed to be lossmaking, that $1bn-plus price may prove to be a small one if it can help Amazon solve a growing problem for its retail business: package theft.

Estimates suggest as many as 30 per cent of US consumers have had a parcel stolen from their doorstep or apartment building hallway, something that doorbell cameras such as Ring’s could help deter.

Amazon has started experimenting with Key, a system of connected door locks and cameras that allows a specified delivery person to drop off a package inside a customer’s home when they are out.

“Being able to receive packages when you are not there is a behaviour shift that incentivises people to order things online that they never ordered before,” says Luke Schoenfelder, chief executive of Latch, which makes “smart access” systems for apartment buildings.

He sees Amazon buying Ring as a “huge validation” of this concept. “Every major ecommerce provider, security company and tech company wants to be in this space in some way,” he says, pointing to Latch’s recent partnerships with Airbnb’s Niido residential concept and Walmart’s Jet.com subsidiary.

SmartThings’ Mr Hawkinson agrees that preventing package theft is Amazon’s main motivation for the Ring deal.

“That’s a multibillion-dollar opportunity for them,” he says. “That alone justifies” the acquisition.

But others see a sharper competitive focus to Amazon’s move.

“Delivering packages inside the home is important but there may be a higher-level goal here about competing with Nest,” says Gene Munster, a tech investor at Loup Ventures.

Previously run as an independent unit under the Alphabet umbrella, Google recently brought Nest back in house under its own hardware team, suggesting it is redoubling its focus on the internet of things.

“The smart home has suddenly become the domain of Amazon and Google,” says August’s Mr Johnson.

Smaller tech companies and traditional security providers could be collateral damage as the giants battle it out. Shares in security companies ADT and Alarm.com fell when Amazon’s Ring deal was announced.

On a recent earnings call, Stephen Trundle, chief executive of Alarm.com, dismissed the threat from what he described as “DIY” competitors such as Nest and Amazon, whose customers generally manage the devices themselves. “I don’t think we’ve seen any real dramatic effect or any sort of predatory impact from the DIY products,” he said, because Alarm.com’s 5m customers want more service and support. “The reality is that our customer prefers a do-it-for-me solution.”

Even so, with Amazon and Google investing billions of dollars in the smart home, perhaps the investors on Shark Tank were right to be cautious about the prospects for a small start-up looking to compete with them.

“It’s a tough market to pick the right investment,” says Mr Munster.

Copyright The Financial Times Limited 2018. All rights reserved.