The Smart Speaker Wars

To me, one of the most perplexing tech products growing with momentum is the smart speaker. Before experiencing the product, my initial thoughts were “who would ever want to spend money on one of these things?”. I could not understand why someone would spend over $100 for a product that just does whatever your phone does.

My first in person experience with a smart speaker happened this summer. One of my friends has an Echo that he frequently uses rather than playing music off his phone or hooking his phone up to a speaker. The ease of talking to Alexa and having her play the song of your choice is not only convenient, it also prevents you from picking up your phone and getting lost in it. I could see how this item became a hot commodity, and began to think about getting one for myself. However, before such a purchase, I thought I’d do some research to see what has separated the major competitors over the years.

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Although Amazon continues to hold the lion’s share of the smart speaker market, Google is rapidly gaining ground. Google’s biggest bet is that the IoT, specifically its Nest home automation product, will be the future of smart speaker use. This month’s earlier release allows users to create commands such as “good night” which would trigger Home to turn off your lights and set your alarm system. They’ve also introduced a command system that allows you to make an announcement through every Home speaker in your house (something that could get annoying for those with kids). Some of the best phone related updates include displaying your number when calling through Home (rather than a blocked number) and a find my phone option that will make Androids ring even if they’re on silent (probably useless for anyone reading this but cool nonetheless).

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One of the biggest turn offs to the home when I first did my smart speaker research was that I could only get a regular one for $130 (much more than the small Amazon Echo Dot for $50). Thus, in my opinion, the biggest news from Google was the introduction of the Home Mini (pictured above). Coming in at a price of $50, this is a direct attempt to grab more of Amazon’s market share. In a similar fashion to the Home topping the Echo, the actual Mini’s speaker is vastly superior to the Dot’s. The Mini, like the Home, has a cloth cover that comes in multiple colors and has been judged to be more aesthetically pleasing than the Echo and the Dot (with one reviewer stating “the Dot is a hockey puck sized device that doesn’t inspire any feelings of warmth”).

Of course, both the Home and the Mini wield the powers of Google’s money maker: its superior search engine. When connected to a Chromecast, this search engine allows users to easily browse and stream YouTube videos or Netflix shows without a remote. Users can surf the web for recipes and have the Home walk them through the instructions, saving them from continuously opening their phone to see the next steps. With rapid improvements and an ever growing market share, how can Amazon hope to compete with the Home?

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Well, for starters, Amazon is still riding the wave of one of your favorite business school terms: the first mover advantage. Amazon brought the Echo to market two years before the Home. Thus, if anyone wanted a smart speaker, their only option was the Echo. This is visible in a recently conducted Edison survey: 43% of people who own a Home also own an Echo; in contrast, only 10% of people who own an Echo own a Home. This two year advantage also allowed Amazon to collect a massive about of data from smart speaker users. It has used this time and data to develop a ‘skill set’, consisting of everything from playing would you rather, starting a seven minute workout, and scanning flights through SkyScanner. Amazon also doubled down on Echo’s capabilities by partnering with Microsoft’s voice recognition, Cortana. As seen below, Home has not gotten close to Echo’s ability in this field.blog 3 5Like Google, Amazon is also betting that smart homes will be a major function of smart speakers. However, without its own home automation process, Amazon has used Alexa’s superior skill set to partner with a plethora of companies manufacturing smart home equipment. Although Google continues to add partners to their Home, Amazon still holds a distinct advantage in the smart home space.

Lastly, as Amazon did with their tablets, Echo has become a fantastic way to loop users into the Amazon marketplace. If I’m in the kitchen and notice I’m running low on paper towels, it’s very convenient for me to say “Alexa, order more paper towels”. Alexa will go through my past orders, see which paper towels I’ve purchased, and simply check them out on the marketplace. This saves the user the hassle of picking out a brand, size etc. It’ll be interesting to see which tech super giant wins out in the smart speaker space… or can a new entrant with speaker experience disrupt the market? Enter Sonos.

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Sonos was on pace to have $1B in wireless speaker sales in 2014 when it was suddenly caught off guard by the success of the Echo. Without the brand recognition of Amazon or Google OR their superior marketplace/search engine, one would think a competitor would not stand a chance. But, Sonos has a unique strategy: leveraging the power of the platform AND partnering with all of their competitors. Yesterday, Sonos announced its first smart speaker, the $199 Sonos One. It will be powered by, guess who, Alexa. They will partner with Google next year and hope to partner with Apple as well. As a consumer, you wont have to pick one giant; you can have them all (my concern is that I, as a price conscious college student, would rather pick one and save a boat load of money, but we’ll see how it plays out).

When it comes to the platform, Sonos will first partner with close to fifty developers in order to use smart home services. In 2018, in a similar fashion to Apple’s app store, Sonos will open up to all developers. Through this, they hope to get some more help with the smart phone and creative ideas to play music throughout a house. Sonos is banking on their high quality speakers that attracted customers only a few years ago to get the momentum rolling.

Although my bet would be on either Amazon or Google, it’s safe to say the smart speaker war rages on.

Sources:

https://www.voicebot.ai/2017/06/23/amazon-alexa-82-percent-smart-speaker-market-share/

https://www.cnet.com/news/google-home-vs-amazon-echo/

https://www.theverge.com/2017/10/8/16439458/google-home-update-feature-list-skills

https://www.tomsguide.com/us/google-home-mini,review-4733.html

https://www.wsj.com/articles/sonos-a-wireless-speaker-pioneer-plays-catch-up-1507127401

https://www.fastcompany.com/40476990/sonoss-secret-weapon-in-the-smart-speaker-wars-becoming-a-platform

10 comments

  1. It’s amazing that Google was able to grow from 7% to 18% market share in just 6 months. It really shows how much brand loyalty and trust consumers have towards Google and how competitive this market is. It will be very interesting to see how Sonos will do.

  2. It seems like Sonos is trying to enter this market as the “luxury” version of smart speakers. My family has Sonos in our house that we use through an app on our phones– basically just fancier built in speakers. Really interesting that Sonos plans to integrate with both Amazon, Google and potentially Apple. I’ll be curious to see if there’s space for them in the market.

  3. Hi, Andrew! Great post- I hadn’t heard much about Google Home or Sonos One. I agree that Amazon’s headstart gives them an advantage- they now have 8 different types of Amazon Echo devices available to meet the needs of all types of consumers. They have even come out with a new cloth-covered Echo, possibly in response to people’s preference for Google’s designs. I think Amazon’s September release of products, such as the Echo Spot alarm clock, demonstrates their intent to expand more into the IoT.

  4. I really agree with @hilarygould in terms of Sonos – as they have really made a name for themselves in terms of delivering high-quality sound with their speakers. I think if Sonos is smart with their advertising and how they choose to market / differentiate their speaker from the others they have potential to make a huge impact – especially if they are partnering with Apple. The extreme loyalty for all things Apple still continues to amaze me and I think Sonos could leverage this brand loyalty.

  5. The selling price of the smart speakers is really interesting. You mentioned the down side of the Google Home is price ($130 compared to the $50 for the Echo Dot) which is significant when you compare one to the other, especially with the Sonos coming in at $199. But, these prices are so much cheaper than the price of a smartphone, which you talk about as being a substitute. Their pricing suggests that they may be trying to attempt a razor and blade strategy (essentially give out the razor but overcharge for the blades) so I am interested to see if they can actually generate significant revenue through the use of the speaker.

  6. I still can’t get on the bandwagon for these. Personally, I think they’re an excuse for pure laziness. Your point about, saving the “hassle of picking out a brand, size etc” struck me because I think everyone has a specific brand and quantity they want. If I needed more toilet paper and wanted Charmin, I would be pretty disappointed if Scott showed up at the door. I don’t think this luxury market of speakers will last for too long especially if the substitute is a smartphone. If everyone already has a smartphone, why do they need this too?

  7. I was in the same boat as Britt for a while but after staying with some friends who have it in their homes it seems like such a valuable convenience that will become expected in homes as the years go on! Not sure which one I want, but this post helped. Interested to see how much Sonos makes a dent in this market and how all smart speakers will improve!

  8. Amazon was obviously the first mover into this category. But Google might have seen an advantage of being a first follower because technology advances allow them to leapfrog Amazon. While Amazon has the success in market share, I believe this will dwindle as Googles smart speakers begin to have multiple generations especially since it will be paired with google search engine. Outside of price it seems like the choice comes between either linking the speaker to Amazon or Googles search engine. This will be something that I invest in once the two start competing in price.

  9. Very interesting competition going on right now. I am quite surprised to see just how many more total skills the Alexa speakers have over the Google ones– I would have thought that Google could catch up quicker considering its resources. However, I guess the first to market advantage is very real. In addition, I am quite excited to see how Apple’s home speaker changes the whole playing field once it is released. Many people use the iOS/OSX technology ecosystem, so a fully integrated speaker with those devices will likely be super successful!

  10. I’m a huge Amazon Echo fan. I got the first one on release day. We now have 5 in the house. I had thought about switching to Google for the reasons you mention, but the killer feature for me is Audible.com integration. My kids listen to books as they are going to bed and Google can’t provide it. Might get a new echo release, though.

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