What does Ring mean for Amazon?

Source: Ring
Mar 14, 2018
Chris Petersen, PhD.

Through a special arrangement, presented here for discussion is a summary of a current article from the IMS Results Count blog.

Amazon.com in late February acquired Ring, a maker of internet-connected doorbells and cameras, for about $1.1 billion.

Ring is best known for its Wi-Fi enabled doorbells that are equipped with cameras to detect when someone is at the door. Users receive an alert and then are able to view and talk to the individual outside their door through their smartphone.

On the surface, Ring is a powerful acquisition, which launches Amazon further into the home security space. Last year it began selling Amazon Cloud Cam, an indoor security camera of its own design. In December it acquired Blink, a maker of inexpensive internet security cameras and doorbells. Amazon also moves further into the IoT space with more popular products that can connect to Alexa. Google’s Nest also offers a home security system.

The apps and Ring subscriptions will create recurring revenue. All well and good in itself, but several reports on the acquisition focused on how Ring’s technology may build on Amazon Key, a service launched last October that allows Prime members to have orders delivered inside their homes to help deter theft and prevent fresh food from spoiling.

Amazon (and most every e-commerce player) needs a more comprehensive solution for secure home delivery. Beyond opening doors, Ring can be programmed to open a door to a locker.

You can bet that this strategy has crossed Jeff Bezos’ mind — when Ring gets established via Prime, Amazon can charge all of the grocers, pharmacies and retailers to use the Ring ecosystem as the way to make, document and secure deliveries to your door and all the way to your pantry or locker.

The rest of retail needs to take note: Ring is much like Amazon’s cloud. Not only will it generate revenue in itself, it has the power to offer incredible value to end customers. On top of that, Ring can become a powerful portal for secure delivery, ultimately enabling Amazon to charge all players a “toll” for secure delivery. Paying a billion for Ring sounds like a steal for creating another cog in Amazon’s ecosystem.

DISCUSSION QUESTIONS: What do you think was behind Amazon’s acquisition of Ring? Does it make sense that Amazon’s ambition is to support home delivery of packages well beyond its own?

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"I have a feeling this acquisition is just the beginning of what will become a significant strategic move by Amazon."
"From a business perspective, Amazon will live in every home. From a privacy perspective, Amazon will surveil every home."
"Amazon acquired Ring for edge data. This data will help them improve customer experience through a more integrated delivery assurance..."

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23 Comments on "What does Ring mean for Amazon?"

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Lyle Bunn (Ph.D. Hon)

As the home security market continues to grow, firms like Amazon will naturally want to enjoy a piece of the pie. But the big benefit lies in owning a slice of the connectivity hub to which different devices (think Internet of Things) can be connected. Marketing is increasing driven by life pattern awareness, and the next “Big” of Big Data is focused on knowing how somebody spends their time at home. Ring has the potential to reach beyond the entrance and into the home.

Nikki Baird

I think the relationship with Key is a side benefit, not the driver. This is about wiring up consumers’ homes with sensors, and providing services using those sensors to further lock consumers in to a relationship with Amazon. Key is one such potential service, but it’s not the only one, and I have a hard time believing it’s even the main one.

It’s funny, I didn’t see the same backlash at this announcement that we saw from Google’s acquisition of Nest. But to me, it comes down to the same thing: Amazon is one data-hungry organization, and this is yet another way of collecting data about consumers. I guess, to the company’s credit, it has used that information to offer even more convenience and services, so far.

David Katz

Nikki: An excellent call-out. For Amazon, Ring is more than friction removal for Amazon deliveries, it’s about data collection and consumer loyalty. Ring is watching and recording motion 24/7, collecting and analyzing the data, and using Machine Learning and A.I.

Ben Ball

Chris hits it on the head — this will be a tremendous boon to the secure home delivery aspect of Amazon Key. Consumer confidence will go up considerably with the ability to visually identify the Key delivery person. Add the ability to capture a digital image of the delivery person in case your TV is missing when you get home and the psychological comfort of a strong deterrent to mischief could be enough to put many consumers over the edge for Key. Amazon may make a push into home security as well, given the logical extension of the consumer’s willingness to trust the system to let someone into their home. But the focus here has to be on the core business.

Art Suriano

I think the article is spot on with why Amazon may have purchased Ring. Every day there’s another new technology and another further convenience. The idea of having a method of allowing a delivery person access to someone’s home is an excellent one and, of course, the concern is security. It sounds like Ring may be Amazon’s solution, so the purchase certainly makes sense. In time all retailers will be offering these same services so, for now, it is more of seeing who will be the first in the game. Throughout history it has always started with the idea, then the invention, then the execution and eventually all the imitators. It will be no different with the technology of today.

Max Goldberg

With the acquisition of Ring, Amazon will set a new standard for home delivery. Not only will the company be able to secure its own packages, but it will be in a position to charge competitors for doing the same. Consumers will not have multiple secure entryways into their homes, so Ring allows Amazon to gain a huge leg up on its competitors.

Bob Amster

As the article aptly points out, Amazon is going to license, sell or rent this service to e-tailers and wholesale distributors. Its success in the in-home delivery portion of this offering will depend on the rate of acceptance of in-home delivery by the consuming public which, I predict, will not be high. As part of a security ecosystem, it has a good chance of becoming a revenue producer for Amazon. This one falls under the wait-and-see category.

Dave Bruno

While the IoT, security and recurring revenue aspects of this transaction are certainly important, I think Ring represents an important next step for Amazon. Ring is an entry point (pardon the pun) into an emerging “enhanced delivery” market, beginning with more secure delivery options, particularly in high-density buildings. Ring will also allow Amazon to offer value-added services to both consumers and other shippers, as well as deliver confirmation records. I have a feeling this acquisition is just the beginning of what will become a significant strategic move by Amazon.

Paula Rosenblum

It means that Amazon is inching towards that breakup Scott Galloway keeps asking for: Amazon Electronics, Amazon Retail and Entertainment and Amazon Web Services.

Of course Amazon wants to pull the whole home into their ecosystem. Personally I think Key is DOA but, you know, I’ve been fooled before.

Still, this is all about owning the home. Amazon Electronics: A profitable division of Amazon.

Dick Seesel

The article discussed the myriad benefits of the Ring acquisition nicely, so not much to add there. It’s all about the ecosystem! Apple has built an entire business on an ecosystem linking its computers to its smartphones, and from there to its App Store and iTunes store. Amazon has learned this lesson well, and is a big step ahead of its competitors as it links its e-commerce businesses to the growth of IoT.

Neil Saunders

The Ring acquisition is part of a broader strategy to create an Amazon ecosystem which becomes an everyday part of consumers’ lives. This will generate both subscription revenue and stickiness and loyalty around the Amazon proposition.

In this case, it is not difficult to see how Ring might link to Echo devices or become part of a wider home delivery solution with door unlocking.

As usual with Amazon, this is a small piece of a much bigger jigsaw.

Ed Rosenbaum

Not only will Ring improve the home delivery part of Amazon’s business; but it will set a new standard for home security. In fact, it already has people talking over dinner or coffee about how impressed they are with this new device. It will change the way people think of home security and their ability to monitor from afar. We are seeing the beginning of new methods of home security never thought of before.

Gene Detroyer

Good M&A strategy means playing dominoes. This is the perfect domino play. It is a new extension of the business that connects to the business at hand.

We will continue to see more of this thinking from Amazon. Amazon is Amazon because of great strategy, simply.

Shawn Harris

Amazon acquired Ring for edge data. This data will help them improve customer experience through a more integrated delivery assurance, including better management of false no delivery claims. This immediately expands Amazon’s IoT at-home solutions making Alexa your personal doorman; with ingress and egress knowledge, including the leveraging of face recognition and identification for access control and other smart notifications. Lastly, I can only imagine what can be teased out from the collateral data capture of video and sounds, utilizing deep learning.

Back in 2016, I predicted this would happen:
I wouldn’t be surprised if @amazon bought @ring. #retail— Shawn Harris (@SmarterRetailer) December 18, 2016

Ryan Mathews
As frequent readers are no doubt tired of reading me say, Amazon’s strategy is to build a digital ecosystem around consumers, one so efficient and complete that there really is no reason — and perhaps a penalty — to deal with alternative retailers. Ring — combined with Key — is a perfect example. Who wants to have a package sitting out on a porch where it can be stolen, soaked, etc. when it could securely be placed inside a house? Who doesn’t want to have complete surveillance of their property when they are gone, or the ability to turn lights on and off , adjust the temperature, etc.? And who wants to have these services provided by more than one company? And yes, Amazon should support home delivery of competitive lines because — if it does a credible job — one day there may not be any competitive lines. I always think of the value proposition to the ultimate consumer. In this case it is security, accountability, convenience and — if Amazon succeeds — a… Read more »
Dr. Stephen Needel

Amazon has a big problem leaving packages unattended. Key is a little creepy. Ring solves the problem.

Doug Garnett

Amazon realizes that AWS, content and its own devices are the way to make money. So they are gathering additional devices to own and to mine for profit. Hence, it makes complete sense.

Is there a connection to Amazon’s delivering goods? Certainly. But I don’t think that’s the main thrust. There is no solution for Amazon’s profit problem with retail-like sales and investing in Ring simply for that advantage doesn’t make sense.

That said, is the rationale I suggest also Amazon’s rationale? No way to know. Companies as big as Amazon (even when driven by someone like Bezos) create incredible internal mythology that is often reality-proof. So there’s no way to tell.

Chris Buecker

I agree with the author. The biggest challenge so far has been the last mile to the end-consumer. With the acquisition of Ring, Amazon can now deliver the purchased goods directly into the home of the consumer even though nobody will be at home. We all know that at present, convenience and speed are at the top of the list when it comes to consumers’ need. I am sure once somebody has tested this once and is satisfied, the consumer will get used to this true home delivery and leave her/his potential initial concern behind her/him.

Mohamed Amer
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
2 years 6 months ago

There is a “land and expand” mentality to everything that Amazon does, and they do so at an unprecedented scale and commitment. The current acquisition of Ring is another brick in their overall strategy.

Amazon wants to be fully integrated into the lives of their customers. Consider their historical investments in horizontal platforms such as AWS or expanding their original book-only e-commerce entry into an e-commerce platform for search, discovery and purchase of every imaginable product category. As earlier investments begin to show promise, Amazon expands with further investments that bring out additional value and even create new business models. Amazon has been brilliant in turning its investments into platforms for others to use and derive incremental value. This becomes a virtuous circle with a self-creating moat.

Solid strategic vision combined with well executed plans are making it more difficult to identify any significant chinks in Amazon’s armor.

Joel Goldstein

Behind the acquisition is not a technology driver but a network. The network of users that Ring has built by having their apps and notifications on phones around the world is the true value. With Amazon’s push to bring AI to people’s homes, what’s better than eyes and ears that are already in millions of homes?

Cynthia Holcomb

From a business perspective, Amazon will live in every home. From a privacy perspective, Amazon will surveil every home. Laughing Alexa and Ring will enjoy continuous observation of what used to be our private lives. But hey, groceries in the fridge are worth it!

Camille P. Schuster, PhD.

If consumers are not thrilled with the key service that allows someone to deliver packages inside their home and if consumers are not thrilled with knowing that a package was delivered but is sitting at their door for the rest of the day, then using a locker somewhere makes sense. This acquisition appears to be one in a series designed to solve the issues of home delivery and package theft. I look to see Amazon continuing to figure it out.

Anne Howe

What Amazon has wisely invested in are the anchors of consumer trust, the asset that will keep them in any type of delivery option they want to imagine and then execute.

"I have a feeling this acquisition is just the beginning of what will become a significant strategic move by Amazon."
"From a business perspective, Amazon will live in every home. From a privacy perspective, Amazon will surveil every home."
"Amazon acquired Ring for edge data. This data will help them improve customer experience through a more integrated delivery assurance..."

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