Will a High Volume Strategy Win the Smart Speaker Market? (Premium)

Microsoft’s high volume, low-cost strategy was the winner in the PC market. But will it work with smart speakers too?

I think it will. And the goal here for any platform maker—Amazon and Google being the key players, but also Apple, Microsoft, and Samsung—is to get their technology in front of as many consumers as possible. And in doing so, may their digital personal assistants more essential to those customers’ day-to-day lives.

So far, only Amazon and Google are making a credible play. And each is doing so via a similar strategy, which involves creating a range of first-party smart speakers at different price points and capabilities. And, as crucially, engaging with third-party hardware makers so that they can provide even broader access to their assistants, in smart speakers and in other products.

On that note, it may be easier to explain what the also-rans are doing. Which is to say, not much.

Samsung was the last major platform maker to enter this market: It introduced its Bixby assistant alongside the Galaxy S8 and S8+ back in March 2017. As I noted at the time, Bixby is unnecessary, given the glut of digital personal assistants. And in a tough start, this technology didn’t even ship in the United States until late July 2017.

As originally envisioned, Bixby was a unilateral move on Samsung’s part. And it probably expected that its market power as the world’s largest maker of smartphones would be enough for it to shoehorn itself into this new field. But that didn’t happen: Bixby is loathed by Galaxy users, and they spent much of 2017 trying to disable this technology or use Google Assistant instead. So Samsung switched gears, announcing in October that it would open up Bixby 2.0 to third-party hardware partners too. It’s too early yet to know whether this effort will pay off. Spoiler alert: It will not.

Microsoft fans spent much of 2016 fretting about whether the software giant would ever get serious about competing with Amazon Echo and Google Home devices in homes. We were treated to various rumors and leaks of coming smart speakers, but nothing solid. So Brad and I were quite interested to meet with Microsoft’s Ryan Gavin to talk Cortana strategy at CES 2017, about one year ago.

Microsoft had no plans to sell its own Cortana smart speaker or device, we were told: Instead, it would follow its original PC strategy and leave that to third-party hardware makers. Not having to compete with Microsoft was a key selling point for the platform, we were told.

But that lack of competition resulted in exactly one Cortana-based smart speaker in all of 2017, the surprisingly solid (from a hardware perspective) Harman Kardon Invoke. Ironically, the problem with the Invoke is Cortana: Microsoft’s digital personal assistant just isn’t as sophisticated as Alexa or Google Assistant, so it can’t do as much. There are examples of this—Cortana can control individual Philips Hue lights, but it can’t handle the roomfuls of lights you may have configured; the competition has no trouble doing so—but Mary Jo Foley provided the pertinent data point in late 2017: Cortana ended the year with 230 skills, compared to over 25,000 for Alexa. Yikes.

Apple is fairly credited for jump-starting the digital personal assistant market, since it launched Siri—exclusively on iPhone at first—in October 2011, years before any of the competition. But Apple also gets a demerit for half-assing it at every step.

Siri has always been functionally terrible, and it is been artificially constrained by two factors: Apple’s lack of cloud-based Artificial Intelligence (AI) and Machine Learning (ML) acumen, and its paternal aversion to “violating” user privacy. That last bit is particularly hilarious, since the very point of a personal assistant is that they know everything about you, and most Apple users would gleefully give up their personal data if the company just asked. I feel that Apple uses its supposed feelings about privacy as an excuse to hide its lack of capability, frankly.

Regardless of my opinion, the firm slowly pushed Siri to other iOS devices and then to the Mac, over time. And in mid-2017, it belatedly announced that it would enter the smart speaker market with its expensive HomePod. More speaker than smart—again, a move that was designed to hide its AI/ML weaknesses, plus bolster its music efforts against Spotify—HomePod is currently vaporware: It was supposed to ship in time for the holidays, but Apple nixed those plans. Now it won’t ship until some time in 2018.

To recap, of the three also-rans, only Microsoft has a (single) smart speaker in the market as of the beginning of 2018. Samsung and Apple have none. (That these firms are the two biggest makers of smartphones, respectively, is interesting.)

And that leaves the market leaders: Amazon, which today sells more smart speakers than any other firm. And Google, which I feel will quickly surpass Amazon to become the leader in this market.

Both have similar strategies to get their digital assistant technologies to as many users as possible. Google has the edge, overall, because Google Assistant and its predecessors ship on most Android devices. But in the home, both are doing what they can ensure success. This is the model its competitors should have followed already.

It starts with products—the Amazon Echo Dot and Google Home Mini—that are so cheaply-priced they’re sometimes literal give-aways with other purchases. Both are nominally priced at $49, but both were also sold for just $29 over the holidays, making either the ideal stocking stuffer.

But it’s not just the low-end: As we see in the PC market, diversity is key, and both Amazon and Google, and their partners, offer a wide range of smart speakers to meet every need. This includes premium, high-end devices like the Echo Show, which sports a 7-inch display for video conferencing and other users, and the Google Home Max, which provides Sonos-like sound quality and capabilities.

Alexa and Google Assistant are both highly-compatible with virtually every third-party service and smart home device, too. And while there may be some gap between the two, with Alexa in the lead, that gap is closing. I would be surprised if the two weren’t essentially interchangeable by the close of 2018.

By providing a wide range of first- and third-party devices at a variety of price points, Amazon and Google have locked up this market very quickly. But it’s not just them doing the right thing: This also required their competitors to move too slowly and to not partner with others. That is, Amazon and Google earned this victory as much as Apple, Microsoft, and Samsung let it drift away.

Could things change? Maybe. I’ve argued in the past that digital assistants aren’t that “sticky,” that once you fill your house with smart devices, any assistant will (or should) work with them. Switching should be relatively simple, and certainly easier than switching from a Mac to a PC or vice versa.

But most mainstream users tend to stick with what they’ve got. This gives Amazon a nice bump in the home, but it gives Google an even bigger advantage—like an order of magnitude bigger advantage—thanks to its dominance in smartphones. With billions of users to Amazon’s tens of millions, this is Google’s market to win, I think.

And it is Apple, Microsoft, and Samsung’s to lose. And on that note, I will argue that they already have lost.