Amazon Enters Wi-Fi Router Market: Why Now and Why Mesh

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On Monday, Amazon.com Inc. (AMZN) revealed that it acquired Eero, a San Francisco-based maker of mesh-networked Wi-Fi routers. In a press release announcing the deal, Amazon noted that Eero invented a Wi-Fi solution that makes connected devices work and shared a similar vision for creating a “smart home experience.”

The Seattle, Washington-based company didn’t disclose financial terms, adding that the deal is subject to “customary closing conditions.” News of the purchase led fellow router-maker Netgear Inc.’s (NTGR) stock to plunge 12% the next day.

Amazon’s latest acquisition is a significant one for several reasons. Over the past few years, the tech giant has developed a vast line-up of smart home hardware offerings, including speakers, TV streaming boxes and internet-connected doorbell cameras.

Buying a router company marks the next logical step in its mission to take full control of the modern-day home. As TechCrunch put it, it gives Amazon the opportunity to sell the supply having already built demand.

“Eero is definitely a part of the overall portfolio play that Amazon is making with the smart home,” said Mark Hung, a vice president at research firm Gartner, according to Wired. “It started out with Echo speaker, and then they bought Ring. Eero serves as the networking backbone.”

Mesh-router systems are no longer a niche technology used by big businesses and government agencies. Placing several routers in and around the home has become necessary as the number of connected devices sharply increases. Amazon’s smart products rely on there being no dead Wi-Fi spots in houses and Eero, a leader in the Mesh space, comfortably ticks those boxes.

The acquisition of Eero offers other potential benefits, too. Router systems have access to data on how people use their connected devices, information that could be priceless for Amazon.

In 2017, Nick Weaver, co-founder and chief executive of Eero, said in a Recode podcast, reported on by Wired, that data is collected and analyzed to improve software. “Every Eero that’s connected ends up spitting out data to help us understand how our iPhone’s performing, how our Sonos speaker’s performing, how is Alexa performing, and we use that aggregated data to keep improving our software,” he said.

In a tweet, Eero sought to calm fears that user privacy was at risk, claiming that the company “does not track customers’ internet activity” and doesn’t plan to change its policy now that it has been acquired. Information on how devices are performing is still collected though, which could also prove to be very advantageous for Amazon.

Source: Investopedia

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