Tech

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

For decades, the technology industry has been chasing a white whale: Becoming the operating system for the home. No one has harpooned the beast yet, but stunningly Amazon may be coming the closest. 

Everyone wants to be the digital brain at the center of our automated homes. Just as Microsoft's Windows became the software nervous system of nearly all personal computers, the thinking goes, some company will eventually become the Windows of the home. It will rule everything, from automatically recording a TV show to remotely unlocking the front door for a handyman.

The company that figures out the home operating system may, like Microsoft did, bask in riches and shape the direction of the digital world. We're far from achieving this Jetsons-like vision, but tech companies aren't giving up. Apple's new iOS 10 software for iPhones puts the company's HomeKit home operating system front and center, and CEO Tim Cook proclaimed it "a huge moment for home automation." Expect Google to soon push hard with Google Home, one of the company's multiple, chaotic attempts to become the digital controller for our homes.

Somehow, surprisingly, Amazon has outmaneuvered Apple, Google and all the other tech industry big guns with its two-year-old Echo line of digital-activated speakers that had cost $180. As pitched by Alec Baldwin in Super Bowl ads, the Echo will tell you the weather while you get dressed in the morning and play a Janet Jackson song at a voice command. The broader ambition, of course, is to connect users to Amazon shopping and to become a home operating system through connections to lights, door locks, refrigerators and any other imaginable thing that can be implanted with a computer chip.

Can Echo Hear Me Now?
A survey of Amazon shoppers found growing awareness of the company's Echo home digital assistant
Source: Consumer Intelligence Research Partners
Note: CIRP surveyed 2,000 people in the U.S. who had purchased from Amazon in 2015.

On Wednesday, Amazon announced that it would sell its Echo Dot model for $50 -- a price low enough to push many more curious people to buy one and plant Amazon's home software brain in a room or two (or six) in the house. It also made an Echo model available outside the U.S. for the first time.

If the smart home ever becomes a reality -- and tech history is littered with predictions of digital revolutions that never happened -- it's premature to pick winners and losers. Amazon's biggest disadvantage is that the smartphone is still the center of the world's digital life, and that makes smartphone-based home automation approaches like Apple's and Google's the better bet. The Echo has been a hit so far only among a niche of technophiles, and Amazon's reported goal of selling as many as 10 million of them next year is dinky compared with the 1 billion Apple devices in use worldwide. 

But when Amazon devotes itself to a mission, it can bulldoze everything it sees. The key to becoming a dominant operating system is persuading as many other companies as possible to tailor their products to your operating system, just as Microsoft did with Windows and Apple with iPhones. That's what Amazon is doing by slowly convincing makers of air conditioners and thermostats and home security cameras to tailor their products to work with Amazon's home software brain. The company is also planting its Echo-powering Alexa software into other companies' home products and onto smartphone apps for iPhone and Android. That will help build the rationale for adapting home products for Amazon. 

Way More Than a Bookstore
Amazon's stock market value has quadrupled in five years as the company's ambitions have grown
Source: Bloomberg

Amazon is also devoting its considerable resources to push more people to buy Echo devices, including by offering a discount on diapers and a cut-price music service exclusively for Echo owners. Quietly, including in recent days, Amazon has been folding Alexa into its Fire TV streaming gadgets, into its Amazon Video apps for movies and TV shows and into its Fire tablets. These are all stealth ways for Amazon to make its home automation-capable software more intelligent and to spread it into more places. Even if Echo sales are only in the tens of millions, seeding Alexa everywhere may be enough for Amazon to become a dominant home operating system.

Amazon has never been content to be the world's biggest bookstore. It became a store for everything. It transformed shopping into a membership club. The company invented a new model of computing with Amazon Web Services and planted its flag to become a global television network. And so we should never count Amazon out as the company that might land that white whale of taking over our digital homes.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Amazon is literally encouraging people to buy Echo Dot by the six pack. The company did the same with the $50 Amazon Fire tablet as well, though it's hard to imagine people actually bought them by the half dozen.

To contact the author of this story:
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net