It’s easy to imagine a world in which “Alexa” is synonymous with talking computers, or Echo with smart speakers—just as Kleenex is synonymous with facial tissue, Xerox with copy machines, or Google with online search. (These are called genericized trademarks, or proprietary eponyms, by the way. They need a better name.)
That’s almost the world we live in today, thanks to the dramatic early success of Amazon’s pioneering smart speaker and the surprisingly capable digital assistant that animates it. Almost, but not quite.
It’s true that voice-powered smart speakers are on the path to ubiquity: Analysts predict that most U.S. households will eventually have one. But at a time when sales are booming around the world, it’s becoming clear that Amazon’s first-mover advantage wasn’t built to last.
While there are no official sales figures, mounting evidence suggests that Echo devices have been losing ground in the past year to competitors on multiple fronts. Assemble the pieces from an array of market-research reports with different methodologies, and the picture is that of a rapidly shifting landscape in which no single company is likely to dominate long-term—but if anyone does, it might be Google. That matters not only to industry watchers and investors but to anyone who cares about the business models and privacy practices of the tech goliaths that mediate what we say, learn, buy, and do.
Amazon, Google, and Apple don’t report sales of the Echo, Home, or HomePod, respectively, preferring to shelter them from investor scrutiny by lumping them into categories such as “Other Products” when they report earnings. What we know of their sales, then, comes largely from third-party market-research firms, plus tidbits and hints that the companies occasionally drop. The market-research firms’ estimates can vary, sometimes widely, based on their methodology.
With that caveat aside, a consensus has emerged on the broad trends. Here are three of the big ones:
• Google Home devices are rapidly catching up to Amazon Echo devices in worldwide sales, and may have already surpassed them.
• Apple’s HomePod isn’t selling as poorly as some initial reports suggested, and Samsung just launched its own smart speaker.
• China is the fastest-growing market for smart speakers, and neither Amazon nor Google is a significant player there.
The common thread: Alexa is losing its edge. And the obvious question: What happened?
As recently as a year ago, Amazon single-handedly controlled the global smart speaker industry, with a market share upward of 75 percent, according to estimates from two of the leading market watchers, Strategy Analytics and Canalys, based in Singapore. Amazon itself boasted in a February earnings report that it had sold “tens of millions” of Echo devices in 2017. That figure included not only its flagship Echo smart speaker but the Echo Dot, Echo Show, and other Echos, the company clarified to me (though not other Alexa-powered gizmos, such as the Tap or Fire TV). It makes sense that Amazon was crushing the competition, because there wasn’t much competition yet: Google had just launched the Home in late 2016, and Apple’s HomePod was not yet on the market. The Echo has been available since 2014.
Would-be rivals faced an uphill struggle. Amazon’s head start in smart speakers resembled the daunting leads that Apple famously built in portable MP3 players, smartphones, and tablets. But Apple’s high prices at least gave competitors an opening to build cheaper alternatives for the mass market. Not so with Amazon. Because it viewed Echo partly as a path to Amazon purchases, the company sold its smart speakers at affordable prices, opting to maximize sales rather than profit margins. How could latecomers compete?
Yet visions of an Amazon smart speaker monopoly faded faster than almost anyone expected. Google in particular has been catching up in a hurry. That could be partly because its Assistant is “smarter” than Alexa, by some metrics. But the Echo is more capable in other respects, and it continues to be a top-rated device in the category.
Analysts say the secrets to Google’s success lie elsewhere. A big-budget marketing blitz, an aggressive push to partner with retailers and makers of smart home gadgets, and the company’s reputation for answering search questions got it off to a good start. It didn’t hurt that the company was also pushing the Google Assistant—its equivalent of Alexa—onto hundreds of millions of Android devices. Perhaps most importantly, Google has experience, partners, and language capabilities in overseas markets where Amazon is less established.
Oh, and perhaps you’ve heard that brick-and-mortar retailers aren’t big Amazon fans. “Retailers are more open to the idea of arranging Google’s smart speakers, because Google isn’t seen as such a direct competitor,” said Vincent Thielke, research analyst for Canalys.
By early this year, according to multiple industry reports, the tide was turning in Google’s favor. One firm, Strategy Analytics, estimated this month that Amazon’s global market share dipped from 76 percent to 41 percent over the past year, with Google’s rising to 28 percent. The firm projects Google’s smart speaker sales to surpass Amazon’s by 2020, said Bill Ablondi, director of smart home strategies.
For Amazon, those numbers would be ominous enough. But Canalys reckoned in an Aug. 16 report that Google has already eclipsed Amazon in quarterly sales.
It’s worth noting that Canalys counts devices shipped to retailers, even if they haven’t yet been purchased by consumers. Canalys derives its estimates partly from suppliers, vendors, and other third parties, while Strategy Analytics relies on sources within the companies that make them. A third report, from the news and research site Voicebot, used consumer surveys to estimate how many users each firm’s smart speakers have. It found that 62 percent of U.S. smart speaker owners had an Amazon Echo, while 27 percent had a Google Home, as of May. That methodology favors Amazon by counting devices purchased in the past. But even there, Google was rapidly gaining ground, tripling its market share in the first half of 2018.
While Google appears to be beating Amazon at its own game, Apple is playing a different one. Its HomePod starts at a cool $350, compared to $100 for a Home and $85 for an Echo, and aims at audiophiles with the promise of hi-fi sound quality. Early reports of lackluster HomePod sales have dampened enthusiasm, but both Voicebot and Strategy Analytics said it’s too soon to write off Apple as a serious competitor. The former put Apple’s second-quarter market share at 6 percent, enough to dent both Amazon and Google’s growth.
More competitors are looming: Electronics giant Samsung has just launched its Galaxy Home smart speaker, and a bevy of audio companies are gradually getting in on the game. Meanwhile, smart displays are emerging as an alternative to audio-only speakers, and Facebook is working on a device called Portal that could focus on video calling.
In the long run, though, it isn’t just Silicon Valley that threatens Amazon’s smart speaker lead. It’s China.
A year ago, pundits were wondering why smart speakers weren’t catching on in China. No one’s wondering that anymore: It is by all accounts the fastest-growing market for smart speakers. And virtually none of that growth is going to Amazon or its U.S. rivals, which don’t offer Chinese-language versions. It’s going instead to Chinese giants such as Alibaba, Xiaomi, and Baidu, which are pumping out smart speakers that go for a fraction of the price of the Echo or Home. These aren’t just cheap knockoffs, either. At CES this year, Baidu showed off high-concept smart speakers that look like lamps, ceiling lights, or even a colorful stack of blocks. Amazon and Google’s devices look outdated by comparison.
The smart speaker wars aren’t just an industry story. Yes, these firms are vying for slices of a sales pie that could top $23 billion by 2023, according to Strategy Analytics (or $30 billion by 2024, according to Global Market Insights). But smart speakers, like smartphones, aren’t just about the hardware. They’re about the platform that powers them—in this case, the voice A.I.—and how it shapes users’ behavior.
When you buy an Echo, you’re paying Amazon $85 today. But it also gives you a strong incentive to pay it $120 a year for Amazon Prime, and perhaps another $80 per year for Amazon Music Unlimited. On top of that, it makes it very easy to buy things on Amazon, and plays nicely with other Alexa devices like the Fire TV.
Purchase a Google Home, on the other hand, and it will fit right in with Chromecast, YouTube, your Gmail and Google Calendar, and the Google Assistant on your Android device. A HomePod will deepen your relationship with Siri and iTunes, and so forth.
And all the time, whichever A.I. assistant you choose will be getting to know you intimately—not just your voice and your way of speaking, but your habits and preferences. In a blog post this week, Google vice president of engineering, Scott Huffman, reported that queries of Google Assistant tend to be action-oriented, like “Turn on the lights and play some music” or “Create an appointment for noon on Saturday.” Google, whose business revolves around targeted advertising, already knows what we’re searching for on the web and what we’re doing on our Android phones. It would love to know what we’re up to in our kitchens and living rooms too.
So an Echo-filled world would expand Amazon’s retail empire; a Home-filled world would broaden Google’s surveillance network and feed its A.I.; a world of HomePods would keep people ensconced in Apple’s ecosystem (especially if they’re well-off). And one shudders to think what a world of Facebook Portals might do. (Rumor has it the company delayed the device’s launch due to the Cambridge Analytica scandal.) The only darker scenario might be one in which the censorship-friendly Chinese tech companies ultimately prevail.
That Amazon no longer looks poised to monopolize smart speakers might reassure critics wary of its online retail dominance. But the prospect of Google’s dominance should give privacy advocates pause. What we have for now, thankfully, is a hotly competitive industry—the kind that is unlikely to give rise to any proprietary eponyms at all.
Correction, Aug. 27, 2018: This article originally mislabeled two columns in a chart titled, “Global Smart Speaker Market by Vendor: Q2 2018.” The third and fourth columns should have been labeled “Q2 ‘17 Shipments” and “Q2 ‘17 Market Share,” not “Q2 ‘18 Shipments” and “Q2 ‘18 Market Share.”