Amazon’s strategy for Alexa Calling & Messagingby@jorge.serna
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Amazon’s strategy for Alexa Calling & Messaging

by Jorge SernaMay 19th, 2017
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Last week Amazon<a href="" target="_blank"> announced their new Amazon Echo Show</a>, and with that their new<a href="" target="_blank"> Alexa Calling &amp; Messaging service</a>. While the main attention has been brought to the video-calling capability for the Echo Show, calling and messaging is already available for the existing Echo devices and the Alexa phone application.
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Last week Amazon announced their new Amazon Echo Show, and with that their new Alexa Calling & Messaging service. While the main attention has been brought to the video-calling capability for the Echo Show, calling and messaging is already available for the existing Echo devices and the Alexa phone application.

But, what are Amazon’s goals for this new capability?

In this post, I take a brief look at the four options that I think Amazon is considering for the service, which will drive its evolution and new announcements in the future. These are options, but not alternatives, in the sense that Amazon may pursue several of them simultaneously.

Option 1: Cover the basics

The first aspect to consider is that the new communication capability was something needed for the Echo device family. I already discussed this in my previous post, but the ability to send and receive simple messages or make hands-free calls is something that the products were lacking and was actually expected for a while. So offering this capability seems like a basic need that was required to keep the relevance of the Echo hardware line in market, and Amazon may be doing this simply to sell more Echo devices. And we also need to understand that selling more Echo devices is not about hardware sales, but getting Alexa — and the opportunity to sell more Amazon product and services — closer to their users.

The interesting thing is how Amazon has chosen to do this: by building a closed communication service. In this context “closed” refers to the fact that the service can only be used to communicate to other users of the same service, either via the Alexa app or using other Echo devices.

This is the same approach that Apple used when it launched FaceTime with iPhone 4, and serves to bring value to the specific device and differentiate it from other alternatives. But in this case the situation is quite different, because while Android has not offered a native alternative to FaceTime yet (you can do video using apps, but it is not something specific to the device or the OS), the competition for the Echo line is already providing communications.

Google has announced in their IO conference that Google Home will also support voice calls, but by allowing outbound calls to any US or Canada phone number. Google’s approach is in some ways more flexible (and can be used, for instance, to simply locate your home phone, something that Alexa offers only via specific skills), but also more limited, as it does not — yet — offer the messaging capability — that I expect will be the most used communication option by Amazon users for a while — or inbound calls.

If Amazon was just looking to provide the basic capability of communications needed by their Echo line, they could have done this in a different way. Following the FaceTime example again, they could have limited the service only to Echo to Echo communications. But instead they also enabled communications capabilities in the Alexa app, which opens another option for the Amazon strategy.

Option 2: Compete in the Social Communication space

The Alexa app communication capabilities allow you to send and receive voice messages and calls to Echo devices, but also to communicate with other app users, with no Echo hardware needed. Going beyond Echo-to-Echo communications seems reasonable even if the value proposition is built around the device, and they show that in their own video advertisement (look at minute 1:48):

But still these use cases are around reaching your close family, and always have an Echo as an endpoint. If Amazon’s goal was “simply” to sell more Echos — as mentioned above — , they could have restricted the Alexa service in several ways:

  • Only allow calls/messages from apps to Echo endpoints
  • Use a specific address-book, with a limited list of devices (like home, parents, a specific friend…) for communications
  • Do some process of authorization, or linking, of the Alexa app with the specific Echo it is allowed to talk to

In general, an “intercom” approach, oriented to use the Alexa app, and the Echo itself, just to communicate with 3 or 4 “usual suspects”.

Amazon has chosen to do something else, and they upload to the cloud your whole phone address-book so you can communicate with anyone there, based on their phone number. This approach, which is the same followed by other generalistic communication applications like WhatsApp, has lead to some initial criticism.

That anyone with your phone number can call you is a well known provacy issue with traditional telephony, and that’s why services and capabilities in phones to be able to block callers have been developed over time. But for a new device like the Amazon Echo to come with this issue is a problem, particularly when it could have been addressed with some address-book management options in the Alexa app itself, or using a different approach for identity.

If the whole point of Alexa Calling and Messaging service is to bring additional value to the Echo device line, there would be no need for some of the people I can see in my Alexa app contact list to show up there. This makes me think that Amazon considers it interesting to keep the “Alexa network” open so that it can be used with more generalistic communication goals than just inter-family calls. If your plumber has the Alexa app, you can actually call him using your Echo… or directly from the Alexa app in your phone.

The way it is designed, the Alexa communication service does not require any Echo device, and Amazon could use this characteristic to drive value in the communication space directly, so that Alexa could compete directly with Viber, Skype, WhatsApp and the like. And with the visual approach that Echo Show brings into the equation, consuming and interacting with video communication offerings, the “stories” approach that SnapChat started and that Facebook has brought to their whole social communications line, could bring some interesting elements.

But the existing competition is why I don’t believe this is Amazon’s objective. It would be very difficult for an app like Alexa as it is today to compete against Facebook, and the device angle rather than a differentiation can simply reduce the scale compared to the billions of users of other social communication services. As I mentioned in my previous article, I see the approach of mixing communications and Alexa service management capabilities a bit confusing, and this is a serious limitation to be able to bring a good communications-app interaction that could come close to Messenger or WhatsApp.

Option 3: Echo devices as a communication platform

So rather than consider that the current Alexa Calling & Messaging service as and end-goal by itself, what if Amazon is using it as a reference implementation?

Amazon strategy around turning every component of their offering into a platform is one of its biggest strengths, so it feels wrong that they would keep this capability closed in their devices. Following the previous FaceTime example, Apple offers that video-calling experience in every iPhone, but allows iOS developers to also provide video communications in their apps. The same thing could be expected from Amazon.

In fact Amazon has already started to open some of this capabilities, with the announcement of their notification API for Alexa Skills. Using this capability developers could extend existing messaging services to Echo devices, providing a similar experience to Amazon’s own native messaging. But voice and video support are still missing, and this would be something that Amazon should also open, so that existing players in the social communication space can extend their services into the Echo devices.

This would keep the existing Alexa service as a basic option, that any Echo user would get out-of-the-box, but open the environment so that it can be extended via apps (skills) to connect to any other communication network, including — like the Google Home — the regular phone network.

Making a WhatsApp or Skype call via the Echo feels like something very natural, but opening the capabilities of the Echo Show to developers will create new use cases beyond the initial ambition from Amazon, and in turn make their device more valuable for customers. And a more valuable Echo means more Alexa endpoints in which Amazon can sell additional products and services.

Think about consuming Instagram stories in the Echo Show, or the opportunities of being able to use HouseParty in that device. From students joining a long study session together via video, to attending an actual house party by being present via the Echo Show.

Option 4: Alexa communication service as a platform

But with the out-of-box communication capability available on every Echo device, and the potential additional capillarity of the Alexa app, the Alexa communication network itself can become more valuable over time. And there may be a B2B business for Amazon allowing third parties to connect to it.

So maybe you can call your bank or your realtor using your Echo Show, or to a home repair company, and show them in the device exactly what is your issue.

If Amazon goes forward with option 3 there would also be an space for the bank, the real state agency, or anyone to build their own Alexa skill to create this kind of interaction, but this would be:

  • a higher friction model, that would require the end user to find and install the skill in Alexa, rather than to simply say “Alexa call my bank”
  • more expensive than to get the service directly from Amazon, as building and maintaining a software application is not trivial, particularly for some businesses
  • a worse solution than a full B2B-focused service, that could also include CRM functions, and potential integration with other business capabilities, like their Amazon Chime capabilities.

In the same way that I expect WhatsApp to leverage their network to include B2B communications, a strong network from Alexa would enable Amazon to follow that same route.

So, what is the best option?

As I said at the beginning, these are not alternatives, so that means that Amazon could be pursuing several at once. But each option comes with additional work. In particular:

  • Option 1 is arguably already done. Still they will need to adress the issues in the basic proposition (like the contact blocking capability) or even shift the identity model completely if they do not expect to go into Option 2 in the end.
  • Option 2 would need a lot of work, probably starting by splitting the communication capabilities out of the Alexa management apps, and start to think of additional relevant and differentiating communication capabilities like multi-party video or richer messaging capabilities (think of the SnapChat filters, but for voice messages). And even with that, Alexa Calling & Messaging would still be several orders of magnitude behind the main players in the social communication space (namely Facebook). So probably not the best bet.
  • Option 3 requires opening new APIs for audio and video calling support in the ASK (Alexa Skills Kit) and working with a couple of relevant partners (big like Facebook, or that can bring something differential, like HouseParty) to showcase the opportunity of communications on the Echo devices. Supporting something more complex than the basic Skill approach currently in place will be tough, but I think it will be worth it.
  • Option 4 probably needs to get some more information on the market demand for reaching business, so I would suggest a wait-and-see approach. Wait to see the uptake of the devices and usage of the communication service in either options 1 or 2, and for option 3 see if businesses invest in creating skills with communication capabilities. That would be a great market validation to drive the creation of Amazon’s own B2B product.

So, if I had to push for something, I think the key aspect is to keep working on fixing the basics for option 1 and start opening capabilities (as they have done with messaging) for option 3. But depending on how these two dimensions evolve, there may be further opportunities for Amazon to create a new model for communication services in connected devices, and leverage it to be a general player in that space.

And what will Google Home do, or what will be Apple’s approach to their rumored Siri connected speaker? Well, maybe that is a topic for a future post.

[June 8th update]: Want to read about Apple’s plans in this space? Take a look at what was announced a month later in HomePod and Social Communications