As a retail and consumer expert who analyzed this deal back in 2018, I have a unique insider‘s perspective on Amazon‘s motivations for acquiring Ring and how this billion-dollar acquisition has evolved over time. This comprehensive guide will unpack everything consumers need to know about Amazon‘s ownership of this home security leader.
Why Amazon Pursued Ring – A Strategy Years In the Making
Amazon didn‘t wake up one day in 2018 and randomly decide to buy Ring on a whim. This acquisition was years in the making as Amazon sought to penetrate the home security market. What drove Amazon‘s interest?
Expanding Amazon‘s Smart Home Ecosystem
A centerpiece of Amazon‘s strategy is building out an ecosystem of compatible smart home devices that all connect with and are controllable by Alexa. Acquiring Ring gave Amazon a WiFi-enabled video doorbell to anchor its smart home offerings.
But Ring also brought established partnerships with over 1,500 smart home brands and access to a vast customer base already using smart home tech.
Supporting the Amazon Key Initiative
In 2017, Amazon launched its Key service allowing delivery drivers one-time access to place packages inside customer‘s homes. This built on their Cloud Cam indoor security camera.
Acquiring Ring‘s video doorbells, outdoor cameras, motion sensors and alarm systems supplemented Amazon Key‘s capabilities and gave customers a wider, integrated smart home security system.
Gaining Valuable User Data to Improve Offerings
A goldmine of user behavioral data comes from Ring devices monitoring home activity patterns around the clock. Amazon eagerly gained access to this data to improve product development and personalization across its sites based on privacy settings.
Rapid Growth Potential from Combined Customer Bases
At acquisition, Ring had sold over 1 million units. Combine this with Amazon‘s 310 million customer accounts globally, and the cross-selling opportunities were tremendous.
Wall Street loved this deal, as Amazon could quickly gain market share in home security by promoting Ring across its properties.
How Owning Ring Benefits Amazon‘s Bottom Line
Amazon has enjoyed significant financial upside since acquiring Ring for a reported $1.2 billion. With majority market share in video doorbells and growing sales of other security devices, Ring is estimated to generate over $500 million in 2022 revenue for Amazon.
And by integrating Ring into their fulfillment network and AWS backend systems, Amazon has optimized costs. Compared to standalone Ring, Amazon slashed warehouse and data storage costs substantially.
Due to these synergies, Amazon‘s purchase price valued Ring at nearly 15 times yearly revenues. After just a few years, Amazon has likely recouped its investment in Ring several times over.
The Evolution of Ring Pre and Post-Acquisition
How did Ring‘s product offerings, prices and customer experience evolve since Amazon bought them out? Let‘s analyze key changes.
More Budget-Friendly Products Released
Under Amazon, Ring has prioritized expanding product selection to reach more price-sensitive consumers. They‘ve now augmented premium video doorbells and cameras with more affordable security lighting, sensors and alarm components.
Industry sales data shows that Ring‘s cheapest products have seen the highest growth rates after Amazon optimized pricing.
Deepening Alexa and AWS Cloud Integrations
Pre-acquisition, Ring already utilized Amazon Web Services for storage and bandwidth needs as an independent company. But post-acquisition, engineers have developed deep integrations between Ring cameras and Alexa.
Features like two-way talk, quick replies for visitors, and camera access via Echo Shows demonstrate tight interoperability. Ring leveraging AWS and Alexa is a blueprint for Amazon‘s future smart home efforts.
Expanded Third-Party Partnerships
Amazon has accelerated Ring‘s partnerships with third-party smart home brands seeking security and camera access via the Ring API. Brands like Schlage, Yale, Chamberlain and Lutron now integrate with Ring.
This demonstrates Amazon‘s partner-friendly strategy to make Ring ubiquity for home developers. Alexa Fund has also invested millions into startups building on Ring.
How Amazon is Optimizing Ring‘s Business Model
As Ring‘s new owner, Amazon moved quickly to optimize their business model. While maintaining hardware sales, Amazon also exploited more profitable revenue streams.
Driving High-Margin Recurring Revenue from Subscriptions
Ring charges $3 per month per device for video storage on user accounts. Amazon realized this predictably recurring subscription revenue stream was extremely profitable.
Now Amazon actively bundles long-term Ring storage subscriptions to incentivize users into ongoing plans alongside device sales. This contributes significantly to services revenue growth.
Cross-Selling Across the Amazon Platform
Amazon constantly exposes Ring to its hundreds of millions of shoppers via cross-promotions across its sites. Targeting based on shopping behaviors has led to higher attach rates on Amazon.com.
And integrating Ring product offers into marketing for Amazon Key, Alexa devices, Amazon Home Services and related categories has rapidly grown user acquisition.
Enterprise Sales Channels via AWS
Expanding beyond consumer sales, Amazon made Ring available via AWS Marketplace for business users in 2021. Now various enterprises can purchase and manage Ring devices through their AWS console.
Given Amazon‘s dominant mindshare with developers and IT teams, this represents a new distribution channel for Ring.
Industry Impacts: Heightened Competition Post-Acquisition
Amazon buying Ring for over $1 billion dollars signaled massive growth potential in the video doorbell market. Other technology heavyweights took notice.
Google acquired rival Ring competitor ADT in 2020 for $450 million with plans to tightly integrate with Nest devices. Apple has also accelerated development of HomeKit-enabled secure video cameras to compete with Ring.
And upstart brands like Arlo, SimpliSafe and Wyze are leveraging low prices to gain share. So Amazon‘s big bet on Ring has drawn more tech industry competition.
But Ring and Amazon will counter by leveraging integration with Alexa, AWS and established selling channels to defend their lead. Advertising, subscriptions and enterprise sales will also fund increased R&D spend.
So thanks to Amazon‘s backing, expect Ring to continue raising the innovation bar in home security while keeping competitors at bay.
The Verdict: Being Acquired by Amazon Has Been a Big Win for Ring
As an industry expert, I believe Amazon‘s timely acquisition and subsequent optimization of Ring has put the company in an extremely strong market position.
Sales, profitability and brand reach have vastly expanded thanks to Amazon‘s infrastructure, selling channels and innovation focus. And the home security company is now empowered to widen its moat against rivals.
For the consumer, Ring products tying into Alexa andAWS enables the home of the future today. And Amazon has balanced cost optimization with feature improvements fairly well since the buyout without compromising quality or support.
So four years later, this marquee acquisition can undoubtedly be judged as a big win both for Amazon and Ring. Consumers are also reaping benefits from this blockbuster billion dollar deal combining two innovative brands.
