In a 2016 interview with Walt Mossberg, Jeff Bezos famously said that he not only thought that voice assistants were in an early stage of development, he used a baseball analogy saying, “It’s the first inning. It might even be the first guy is up at bat. It’s really early.” Well, it’s no longer early. In fact, we can confidently conclude phase one of the voice assistant market is over. That is not to say the industry is yet mature—far from it. However, there are several signs that point to a market past its early adopter phase.
Demand Side Signals
If we simply take an empirical view we see that more than 20% of U.S. adults claim to own a smart speaker. The traditional model of technology diffusion says that early market comprises the first 16% of product adoption. We have clearly passed that threshold in the U.S. In Canada, Australia and Japan, we are still well under 10%. Germany is a little ahead and the UK is very close. However, I don’t look at the 16% threshold as a strict marker in a sector as large as voice assistants because that simply reflects the demand side of the equation. Then again, it is a signal to watch and at least three countries will pass the threshold in 2018.
Supply Side Signals
The supply side provides us more evidence. First, we see an emerging set of minimum market requirements emerging. It is easy to get distracted by the Amazon Alexa and Google Assistant race to introduce more features. The shift to feature competition is a hallmark of an early majority market not a early adopter market. But, that’s not all. What these two products have done collectively is set a standard that all newcomers must match. When Samsung introduced Bixby on Galaxy S8 in 2017, it was immediately compared to Google Assistant. When Apple introduced HomePod, it was the inadequacy of Siri compared to Alexa and Google Assistant that was the most frequent criticism. Complaints on Reddit over the new Bose 500 smart speaker center around its lack of multi-room audio. That is despite the fact that the Bose 500 has Alexa as the resident voice assistant. Close is not good enough. Consumers expect Alexa on Bose to include the same features of Alexa on Echo. That is a standard now.
Despite these consumer demands or maybe because of them, many traditional device makers are looking to either introduce a smart speaker or launch their own voice assistant. Everyone sees the market adoption and wants a piece of the action. This has led to both copy-cat products and new ideas in the smart speaker segment. In the smartphone segment, it has led to device manufacturers contemplating whether they can deliver their own assistant (e.g. Orange, Huawei, Samsung) to compete with the existing players, should just adopt another flavor from an up-and-comer (e.g. DuerOS, Cortana, Hound) or just fall in line and work with a leader.
Then there are the third-parties looking to use voice as a channel. Amazon announced this past weekend that there are now 50,000 Alexa skills and 20,000 Alexa compatible products. The compatibility figure has grew 5x in eight months. The bandwagon effect is in full swing. Product makers want to have the Alexa halo on their products. Then there are the 3,500 brands that Amazon claims support the ecosystem, up from 1,200 in January. Combined, this represents a lot of third party energy that generally signals a market beyond the days of early adopters.
Adjacent Market Signals
We also see the migration of voice assistants into existing products. Televisions, media consoles, appliances, lamps, light fixtures, thermostats, WiFi routers, ear buds, headphones, watches and more are getting microphones so they can incorporate voice assistant features. Voice has such utility it wasn’t going to stay trapped in a plastic cylinder for very long. This shift of voice beyond smart speakers and early versions for smartphones is in full swing. Smart speaker adoption will continue to grow at a rapid pace, but the new action is already shifting to other surfaces. That includes smartphones.
It is fair to say that phase one of voice assistants is over on both smartphones and smart speakers. Although smartphone-based voice assistants had a three year head start on smart speakers, what we saw was a longer incubation period. It may be that the start of phase two on smartphones is still several months off, but it will be close enough that we will be able to call phase two of voice assistant adoption officially underway on both device types. Smartphone users will expect similar capabilities of their voice assistant as when using a smart speaker as well as features optimized for mobile use cases.
Why should we care what adoption phase we are in? Well, it impacts consumer expectations and the types of strategies you need to employ. If you are in the smart speaker device segment, welcome to a crowded market with well established players, others looking to solidify their footing and some just getting started. If you are in the smartphone segment, it’s time to rethink how voice will change the touch and swipe paradigm. If you are in software or content, you need to think not only about becoming voice accessible, but also how to work seamlessly across surfaces and which assistants to merit more attention. We will come back to this topic to discuss strategies in future newsletters, but suffice to say you should be thinking about this market differently today than a few months ago. The dynamics have changed.
Something you probably don’t know / pro tips
One of the biggest factors of Amazon Echo’s early success can be attributed to Amazon’s merchandising competence. The promotion techniques combined with a broad portfolio of products with different capabilities and price points. Amazon is first and foremost a retailer. It is good at selling things. However, Amazon has another significant competency in media. That is important when it comes to smart speakers, because the most popular use cases by a wide margin involve media.
Years of building up Amazon Prime Video, Amazon Prime Music, Amazon Music Unlimited, Amazon FreeTime for kids has taught the company a thing or two about media. One of those lessons is the importance of having proprietary content. Amazon reportedly plans to spend $5 billion on video in 2018, largely to support the Prime Video product. This same model appears to be coming to Alexa.
Multiple sources have told me that Amazon is approaching independent developers and offering exclusive licensing deals for them to build only for Alexa. I have not been able to verify the size of these licensing deals (drop me a note if you can shed some light on this for me), but it appears Amazon has created another way for content developers to monetize through Alexa.
Our friends and Invoked Apps came across a deal code for Amazon Fire TV Cubes. Normally $119.99, $50 off with code FIRETVCUBE50 at checkout. $69.99. Nice. But, does that mean they are having trouble moving inventory? The code should be good today, but not sure how long it will last.
The Weeks Ahead
- Let’s start with the month ahead. We have officially entered hardware season. IFA kicks it off although Samsung used early August as a pre-launch.
- The next stop is Apple’s September 12th event. We might see a new, less expensive HomePod, but don’t count on it. More likely Siri-related announcements will be for the follow-on to iPhone X and for AirPods 2 and Watch 4.
- Last year, Amazon had a short-notice hardware event the last week in September and the past two years Google has opted for early October. Current speculation Google will hold its event either on October 4th or 9th.
- We are also waiting on Sonos to announce support for Google Assistant. That should come before September ends.
- If you know about other upcoming announcements, events or milestones you think will be helpful to the Voice Insider community, drop me a note [email protected] or on Telegram or Twitter @bretkinsella. Thanks.
- No big people moves to announce this week. Send them my way when you hear about them.
- Last week we announced moves at Google, Amazon and BBC. More to come.
- September 5th I’ll be speaking at Sonic CDX Voice and Audio Summit in NYC. More information here. A lot of big brands presenting at this one for chief digital officers including: Sony, HSBC, JPMorgan Chase, Samsung, Pandora, Nestle. Some voice industry pioneers will also be there including Doug Robinson (CEO of Fresh Digital) and Nithya Thadani (CEO of RAIN). Not sure if there are any tix left. I think it’s sold out, but hope to see you there if attending.
- On October 1st, I’ll be at Advertising Week in NYC. I will be moderating a panel that includes Suzanne Grimes (President of Westwood One and SVP Cumulus), Pat Higbie of XAPPmedia and some other guests from leading agencies. The focus will be how brands and media are embracing voice and what is working. Should be a great crowd. Hope to see you there.
- I will also be keynote speaker at The Alexa Conference on January 15th in Chattanooga, TN. This is looking like it will be a pretty big conference, 4-5x larger than 2017, is sponsored by Amazon and will be right after CES so lots to talk about. It will also include a Fortnite Tournament. You can learn more here.
- Will have new additions here next week.
Interesting Stuff to Read
- Teaching the Google Assistant to be Multilingual - This comes from the Google AI Blog. It walks through the addition of a language recognition engine that sits in front of two parallel speech recognition engines. This is not simple feat.
- So, Umm, Google Duplex’s Chatter is Not Quite Human - Scientific American spoke with Timo Baumann of Carnegie Mellon Technology’s Language Institute about Duplex.
- CNET Review of the New JBL Smart Display - Definitely check out page two where the reviewer embeds some Twitter videos showing Echo Show, Lenovo and JBL smart displays playing the same music. Great side-by-side comparison.
Chart of the Week
- The Japanese Smart Speaker Market - Our friends from Smartio.life in Japan offered us an intriguing look into smart speakers adoption in the country. Google and Amazon are fighting with LINE for early market share among about 5.7% of Japanese adults.