Right now, two heavyweights are vying for control of your living room. Google and Amazon are battling it out with their smart speakers, and so far, consumers are the winners.
The smart speaker war is the topic of a new report from Consumer Intelligence Research Partners. The report is bringing some surprising findings, like the total number of smart speakers sold and just how dominant Amazon has been so far. As of September 2017, Google has shipped 7 million Google Home products, whereas Amazon has shipped almost three times (20 million) as many Echo devices. Keep in mind that these numbers are just through September and don’t take into account the holiday shopping season.
The question is why? Why is there such a disparity between the two companies? What is Amazon doing so well that Google isn’t?
One of the biggest reasons for Amazon’s healthy lead is that it was on the market first. When people think of smart speakers, the Echo lineup is likely what they think of first simply because it has been around longer and they have had more exposure to it. The first generation Echo hit the market in June 2015 and Google didn’t release the Home until November of 2016, giving Amazon almost a year and a half head start.
That head start gave Amazon time to come up with other products too. When it added the Echo Dot to its lineup in March of 2016, it gave customers a much cheaper way to get a smart home speaker. The results speak for themselves: the Echo Dot has been Amazon’s biggest seller. That’s despite not going on sale for more than a year after the original Echo.
The lessons Amazon learned with the Echo Dot have spread to the rest of its lineup. Products like the second-generation Echo are cheaper than ever before. You can now get an Echo for as little as $79, even though they were upwards of $180 when they launched. Temporary price reductions are also getting more extreme, like the Echo Show which you can get for $80 off its normal asking price.
Google is doing its best to keep up. It dropped the price of the Google Home Mini, which competes with the Dot, to $29 for the holiday season. It also slashed the price of the original Google Home down to $79 for the same period. To fill out its lineup, it finally released the Google Home Max that it announced earlier this year. The Home Max is a $399 smart speaker that offers all of the functionality of the Google Home or Home Mini but with a premium audio experience. Amazon currently has no competitor for the Home Max.
Why is Amazon so intent on beating Google to the bottom? It all has to do with getting people into the Amazon ecosystem. You might be shocked to learn that the Amazon doesn’t make much off the products it sells. It currently sits at a 3% operating margin, whereas Google is at 26% and Apple 27% this fiscal year.
The Echo Dot is an opportunity for Amazon to sell even more products, and thus, make more money. Discounting it to $30 entices shoppers to throw it in their cart since its so cheap. Once the Dot is in their home, they’re more likely to subscribe to Amazon Prime for things like music streaming or to purchase more items from Amazon’s marketplace.
While the two companies are sitting pretty with almost 100% of the market share right now, Apple is coming. The HomePod was announced earlier this year and will start shipping early in 2018.
The speaker will be priced at $350 and compete with the Home Max for the premium smart speaker crown. With Apple customers willing to pay more for the company’s products, can it challenge for control of the living room or will its lack of competition for the at the low end of the price range hurt its chances? We’ve yet to hear plans for a cheaper speaker that would compete with the Dot/Home Mini or the Echo/Home.
If you’re looking to pick up a smart speaker for yourself or a loved one this holiday season, check out the links below.