The smart speaker ecosystem land-grab is in full-swing, and if the history of American tech can teach us anything, it’s that there will be only one winner. From Google Home to Amazon Echo to Siri, the major players have all set up flags, and are currently engaged in a neck-and-neck race to see who will own the greatest market share.Whoever has their device in every home in the world will end up winning the conversation. Click To Tweet
We talked with a group of 15 current and former senior executives from leading global tech companies including Amazon, IBM, Apple, Samsung, and Microsoft to determine what place the smart speaker will hold in the technology ecosystem of the future.
What Are The Stakes
Amazon currently controls 70 percent of the smart speaker market — which may sound impressive, but is actually a sign of the company’s dwindling market share: in Q3 of 2016, it had 94 percent market share. Google Home has been steadily infringing on Amazon’s territory, and currently holds 24 percent of the market. Add to this the fact that Apple (Siri’s mother) is launching a smart speaker called HomePod in 2018, and you have a fairly evenly split looking market for the coming year.67% of companies will brave a loss in order to gain market share Click To Tweet
But how big is this market, really? The number of Americans using Siri (the most popular virtual assistant with 40k monthly users) decreased by 15 percent since last year, and only 39 million Americans currently own smart speakers — just 16 percent of the population. While adoption has skyrocketed in the last year (nearly 35 million smart speakers shipped in 2017) 30 percent of the panel of experts agreed that the object of smart speakers is actually not to drive revenue — but to “own the conversation,” as one panel member put it.
Consumer hesitance may very well continue in the near future, but the NewtonX panel explained that this is a long-term investment. 67 percent of the NewtonX panelists declare that their company is ready to make a loss in the space for the next 2-3 years in order to capture market share. The goal of smart speakers is not sales, but rather collecting data directly from consumers to use in all other parts of the organization. Because of this long-term goal, these organizations are fighting each other tooth and nail for market ownership.The goal is not to drive sales; it's to own the conversation. Click To Tweet
This is not to say that sales won’t happen, though — a former executive at Samsung tablets who is now part of the NewtonX Smart Speaker panel predicted that it’s likely we will see a similar trajectory with smart speakers to that of tablets. Despite initial consumer hesitance, tablet usage has steadily grown since 2011, and now over 50 percent of the population uses one. A former senior member of the Amazon IoT team on the NewtonX panel agreed: “Initially they may appear superfluous to the average American,” he says, “but, particularly with the rise in smart homes, they will become steadily enmeshed in our everyday lives. And whoever has their device in every home in the world will end up winning the conversation.”
In fact, investing in smart speakers is a top 3 priority for the 5 largest tech giants in the world, according to NewtonX insiders at these companies. “It’s obvious to my team and the rest of the organization that the benefit of getting our smart speaker in every household would extend to every single aspect of our company, and that the impact would be huge,” said a former Amazon SVP.
To further the tablet comparison, we saw a few of the same major players battling out market share: Apple and Amazon. As of the fourth quarter of 2017, Apple’s iPad held a 26.6 percent share of the global tablet market — down from 60 percent market share in 2011. Amazon’s Fire tablet accounts for 5.7 percent of market share (an increase), while Android operating systems hold 70 percent of market share. Apple’s initial market hold and then steady decline as usurpers entered the market will likely be replicated in the smart speaker ecosystem: while Amazon’s Echo initially dominated, other players have now entered, and are offering various differentiators to consumers.
It’s Too Early To Call A Winner
Despite Amazon’s initial market win, it’s likely that as other brands improve their systems’ sophistication they will gain market share, indeed as they already have — particularly if they undercut Alexa in terms of price (although currently Amazon’s Echo is $15 cheaper than Google Home). That said, Amazon Echo isn’t in trouble: usage has gone up 325 percent in monthly active users and its user engagement also increased from 10 percent to 22 percent during the same time frame.
But there’s a larger market penetration problem: smart speakers don’t make that much sense in a disconnected home.
Currently, the most replaced activity from smart speakers has been listening to traditional radio or listening to music from services such as Spotify. But more than 90% of our panelists agreed that the true value of smart speakers won’t be fully realized until the speaker has other devices to connect to — from lights, to front door locks, to navigation systems, to thermostats, to coffee makers. When the connected home becomes a reality is when we will see Google Homes and Amazon Echos become more than a novelty, or a slight bump in convenience. And this is also the point at which their value will become apparent in every aspect of whatever organization wins the conversation.
The Smart Speaker Market Will Take Off With IoT
The Internet of Things, despite its massive hype, has not reached market penetration — in part because of issues with real-time data processing in the cloud. As we’ve previously written, though, IoT will have a huge spike in usage once edge computing hits the mainstream, and data processing happens in real time. When objects like smart shoes and self-driving cars are more mainstream, smart speakers will be a requisite and indispensable part of this ecosystem.
The number of Americans using a voice assistant device is projected to grow 129% to 36 million this year, according to eMarketer. 78 percent of the NewtonX IoT experts (a panel of 55 VP-level executives) agreed with the prediction that global IoT revenue will surpass $7B by 2020 (up from $2.712B in 2015). It should come as no surprise that the two are growing in tandem with one another. After all, the true power of a smart speaker comes out when it can do more than just search, play audio, or make purchases.
Amazon’s former IoT senior team member predicts that the early smart speaker pioneers will also likely have the opportunity to sell their technologies to car manufacturers. Currently, the biggest use case would be navigation, temperature control, and audio, but with self-driving cars the possibilities are endless — voice recognition for unlocking the car, for changing destination, etc. And as more and more people begin using voice control for their cars, we will once again see that this affords whoever owns the smart speaker a vast wealth of customer data.
While 2018 may not be quite the year of the smart speaker, we’re not that far off from the time when they will be as ubiquitous as desktops and laptops currently are. And in preparation for that time, businesses would be wise to integrate their products with various smart speakers — or to develop proprietary voice command capabilities. The turf war will continue, but one thing’s clear: the smart speaker market will expand, and become increasingly important to modern life.
The data and insights in this article are sourced from NewtonX experts. For the purposes of this blog, we keep our experts anonymous and ensure that no confidential data or information has been disclosed. Experts are a mix of industry consultants and previous employees of the company(s) referenced.