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Amazon Looks Beyond Speakers With Alexa-Powered Home Robots

Leo Sun, The Motley Fool

Amazon.com (NASDAQ: AMZN) gave birth to the smart-speaker market five years ago when it launched its first Echo device. Alphabet's Google, Facebook, Apple, and others all subsequently launched their own speakers, but Amazon still controlled two-thirds of the U.S. market last year, according to eMarketer.

The smart-speaker market still has room to grow, but Amazon is already exploring the next step for Alexa -- a mobile home robot that can freely roam around a user's home. Reports about the robot, codenamed Vesta, surfaced last year, but more details about the device have emerged recently.

A cute robot peeks around a wall.

Image source: Getty Images.

Bloomberg claims that Amazon initially planned to launch Vesta this year, but it still isn't ready to be mass produced. The report, which cites people familiar with the matter, claims that the prototypes are waist-high and navigate autonomously with computer vision cameras. An engineer summoned the Vesta with his voice during an internal demo, and the final version should be integrated with Alexa.

The Bloomberg report didn't mention a launch date, but noted that Amazon was pulling engineers from other teams to work on Vesta at Lab126, its R&D arm that develops hardware devices like the Kindle, Fire TV, and Echo. The Vesta sounds like an intriguing device, but will it be a game changer like the Echo?

Does anyone actually need a home robot?

Amazon wouldn't be the first company to produce a home robot. Early movers in this market include Jibo and Asus' (NASDAQOTH: ASUUY) Zenbo and Zenbo Junior. These robots have similar features -- a virtual assistant for scheduling tasks, taking pictures, and making video calls; specialized software which makes the robots seem more lifelike; connectivity to smart-home device; and computer vision chips for identifying their surroundings.

However, Jibo's servers were recently shut down, despite attracting a niche market of dedicated users. Zenbo remains in production, but it's only available in a limited number of markets. Other hopefuls, like Kuri and Aido, were abruptly canceled.

These home robots didn't gain traction for three simple reasons. First, they weren't cheap -- the Zenbo costs $600 and the Jibo launched at $900. Second, most of these robots' features could be replicated in smart speakers (especially ones with screens) for a fraction of the price. Lastly, these robots weren't tethered to a broader ecosystem of cloud services and skills like Amazon and Google's speakers.

Asus' Zenbo, an oval monitor displaying a face, connected to a spherical body..

Asus' Zenbo. Image source: Asus.

But Amazon has some major strengths

Amazon, however, can leverage several strengths to build a home-robot business. It already dominates the U.S. smart-speaker market; Alexa has over 80,000 skills, and that assistant is tightly tethered to Amazon's e-commerce and media streaming services.

Amazon's takeover of Kiva Robotics in 2012 also gives it plenty of experience developing automated robots for warehouses. Amazon can mass-produce Vesta robots at a lower cost than start-ups like Jibo, and it can afford to sell them at paper-thin margins or losses to expand its Prime ecosystem.

That's the strategy it used with its Kindle, Fire TV, and Echo devices, and it hasn't dented its earnings growth yet. Instead, selling those low-margin devices expands its Prime ecosystem, which has over 100 million U.S. subscribers, and enables Amazon to squeeze more e-commerce and digital revenue out of each customer.

Echo owners spend $1,700 on Amazon annually, compared to $1,300 for non-Echo owners, according to research firm CIRP. Therefore, customers who buy a Vesta robot might make even more purchases than Echo owners.

Rise of the robots

Amazon made a big splash with the Echo, but I'm a bit skeptical about its home-robot plans. Consumers who own multiple Echo devices could consider the Vesta a redundant device, and Amazon might struggle to justify its existence amid an increasingly crowded lineup of Echo devices.

However, many people called smart speakers redundant gadgets when Amazon introduced the Echo, so I'll reserve judgement until I actually see the product. If the Vesta catches fire like the Echo, we'll likely see Google, Apple, and Facebook follow suit with similar home robots.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon, Apple, and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.