The Thing About Amazon (Premium)

I needed a few days to decompress after Amazon’s massive set of announcements on Thursday. There is so much going on here, but what I’d like to focus on today is Amazon’s general smart home strategy.

And it is brilliant.

Let’s not linger on the specifics. Yes, Amazon announced over a dozen new or updated hardware products on Thursday, not to mention a wide array of new and improved services that will make those devices even more valuable to its customer base. What’s more important, perhaps, is the net effect that all these changes will have on the Alexa ecosystem. And how Amazon’s strategy is geared specifically at growing and maintaining that ecosystem.

And, boy, does ecosystem matter.

Think back to when Windows phone first launched in 2010. I loved that Microsoft took a different and user-centric approach to mobile computing. But I was worried about a few issues. That Microsoft tried to ape Apple and pursued the consumer market first, rather than its core business customers. The immaturity of the new platform, which would repeatedly and belatedly add missing features years after the competition. And the lack of a major hardware player that was all-in on the platform. Yes, Samsung, LG, and others shipped a handful of Windows phones, but this was a hedging side-business, and not the focus (pardon the pun, Samsung fans). Their best phones ran Android.

When Nokia signed on to Windows phone, and not just to use the system but to partner on the platform itself, I saw a ray of hope. Here was a hugely popular mobile device maker that could turn things around. And Nokia was so thoroughly invested that it threw its weight behind a family of hardware peripherals, software applications, and services, all of which were unique to the platform. In this way, Microsoft and Nokia together closed the loop on my early worries. They created a true ecosystem that might rival Android and iOS.

OK, we all know the history there. But it wasn’t until Nokia signed on that Windows phone stood a chance at all, and while things didn’t exactly go their way, that collective effort is what was required. Both companies may or may not have made some bad decisions. But they were all-in on Windows phone.

By way of contrast, consider Microsoft’s approach to the smart home market. The software giant followed in Apple’s footsteps by releasing its own digital assistant, called Cortana, on its own smartphone platform exclusively at first. That Windows phone had crested at that moment and was already on the downward side of its lifetime was, at that moment, not clear. But by tying Cortana to a failing platform, it got off to a bad start.

Microsoft eventually brought Cortana to Windows 10, of course. But that just limited its exposure and popularity. And through a variety of circumstances—many more people use mobile devices than PCs, they are more engaged when they do so, and personal assistants just don’t make much sense on legacy PCs—doing so did nothing to further Microsoft’s goals for Cortana. And for years we wondered why Microsoft wasn’t trying harder to grow the ecosystem. To get Cortana in smart speakers and other smart home devices, or in cars. Or make its own Android smartphones where Cortana was the default. Something. Anything. But Microsoft did nothing. For years.

Now think about what Amazon did.

Also, consider this irony: Alexa and the Echo smart speakers and other smart devices that have arisen in its wake would never have happened if it weren’t for some former Microsoft engineers and executives who left the company and got jobs at Amazon. They sold Jeff Bezos on this technology, but it was only approved because they explained how voice could be used to make shopping easier for Amazon’s customers.

But Amazon didn’t just create Alexa, ship a single speaker, and let the platform coast. It continually upgraded Alexa with new skills and opened it up to developers to create their own. It created numerous new Echo speakers, and kept improving them each year with new versions. It created other smart home devices, like those we saw this year. It works with PC makers to get Alexa on PCs, with (some) smartphone makers to get it on handsets, and with automakers to get it in cars. It even reached out to Microsoft and partnered with them on Cortana integration so that it could gain access to the software giant’s enterprise base. And now it’s going to use Skype too.

Amazon’s approach to the market compared to Microsoft’s is so stark, it’s almost not even worth describing. Where Microsoft pays lip service to consumers, Amazon is serious about consumers, which makes sense given its shopping roots. But Amazon is not sitting still, like Microsoft. Its devices and services are getting better all the time. And this year, I think, they have crossed an important milestone.

Look at Amazon.com’s home page today.

All of the products shown there that are new models of existing products—like the Echo Dot, Echo Show, and Echo Plus—are of dramatically higher quality than the products they replace. Of the new products, virtually of them—with the obvious exception of the Amazon Basics Microwave—are likewise high-quality products that look great and don’t have a low-rent vibe. Amazon is upping the quality. But it is not raising prices.

In this way, we might think of Amazon as an Apple for the masses, at least from a hardware perspective. Where Google is busy chasing Microsoft down the “must copy Apple at all costs” rabbit hole and raising the prices of its smartphones and releasing other expensive hardware devices, Amazon is calmly targeting the masses. You know, normal people.

I really like that.

There is an exclusivity to Apple’s products, and to Google’s hardware products now, that has always rubbed me the wrong way. Amazon uses a more human approach in which it serves every price level, ever need, over time. This is unlike Apple, which explicitly ignores poorer people. Period.

This also ties into my theories about it being easier to go upmarket than downmarket. I’ve discussed this before in terms of mobile platforms vs. PCs, where Apple and Google are making iOS and Android ever more powerful, but Microsoft is struggling to make Windows simpler.

But it’s not just technology. There are great examples of this kind of thing all over the place.

Let’s talk cars for a moment. I often use Mercedes as an example. In Europe, Mercedes sells tons of low-end A- and B-series vehicles because cars there are so expensive. But in the US, where cars—and gas—are much less expensive, Mercedes only sells upscale cars because it’s afraid those A- and B-series cars will devalue the brand.

On the flip side, makers of affordable car brands—starting with Honda, but also including Toyota, Hyundai, and many others—started pushing their own luxury brands (Acura, Lexus, Genesis, and so on) after many years of success with mainstream customers. There are far more examples of this than there are of luxury brands going downmarket.

All of this speaks to Amazon’s unique strengths. As I’ve noted in the past, only Amazon can offer its unique blend of physical and digital goods to customers, and it can offer services that benefit customers on both sides of that equation. This just feeds into the strength of the broader Amazon ecosystem, of which Alexa and Echo are just a part.

Another strength is Amazon’s ability to leverage its site search, much like Google does on the web. Where Google is the gatekeeper to the Internet, gaining unique insights into what people are searching about, Amazon is the gatekeeper to people’s pocketbooks and wallets: It knows what they want to buy. And it knows what people are buying. This is huge, and as is the case with Google, it allows Amazon to easily enter new markets. Its “Amazon Basics” lineup is only one result of that unique advantage.

Of course, this advantage may eventually land Amazon in trouble with legal or antitrust authorities. But thanks to the slow-moving nature of such things, nothing bad will happen to the company until it’s too late. And Amazon has tons of legal precedent to fall back on, thanks to Microsoft, Google, Intel, Apple, all of which have already tripped up with regulators from around the world.

I am super-impressed with what Amazon has accomplished, but even more so by the aggressive way by which it keeps improving the Alexa ecosystem. This market, like so many in tech, is very much a two-horse race. And while I feel that Google, thanks to its search and AI acumen, will likely emerge as the number one player here, Amazon will be number two in a field of two. And unlike in the smartphone market, this will be a more closely-competitive market, too, with neither dominating over the other. Both are solid bets for the future. And it’s just breathtaking to watch this happen.