Video: Alexa rules at home but is the business world ready for smart speakers?
Despite big mishaps like Alexa recording a private conversation and emailing it to a person on a contact list, the excitement around voice-first devices is on the rise.
Juniper Research estimates that voice assistants used to control smart homes will grow from 25 million today to 275 million in 2023 and predicts that connected appliance shipments will rise 80 percent per year, on average, over that period. And even with big mishaps in these early days of smart speaker adoption, four out of five online conversations about smart homes are positive, according to a recent MediaPost article.
Admittedly, these numbers pale in comparison to the billions of smartphones already on the market today. But adoption of voice-first devices like smart speakers is growing much faster than smartphones. These numbers add up to a potential "disruption within a disruption" scenario, as digital transformations currently taking place today might be disrupted tomorrow if voice-first is not a consideration already accounted for. And here areas where Amazon, already one of the most -- if not the most -- disruptive force in business today, may lead the voice-first category into even more disruption.
Device Types: Number and Velocity
Amazon doesn't do well going into mature device categories that already have a clear set of leaders (remember the Fire Phone?). But they've had much better success with things in early stage categories with no clear leader (Kindle, Fire TV devices, Fire tablets to a lesser extent). And to date they've had their biggest device success in the smart speaker category which they've led the charge in. So much success that 67 voice-first devices are sold every 60 seconds in 2018, according to Cumulus Media.
But it's the frequency and variety that they're adding new device types to the Echo line that is accelerating change in consumer behaviors, expectations, activities and temperament -- BEAT if you will. Just this month, Amazon has made generally available the following devices:
The DeepLens AI camera is designed to teach and make it easier for developers to build their own deep learning applications. It's part of the AI capabilities Amazon is rolling out with machine learning services tying into SageMaker and AWS Lambda. It doesn't have "Alexa inside" yet, but...
The Fire TV Cube is being billed by Amazon as the "first hands-free streaming media player with Alexa, delivering an all-in-one entertainment experience." You can ask Alexa to search, play, pause, and fast forward. You can also control your TV, sound bar, cable or satellite box, and audio receiver, with your voice. I got mine last week and it's pretty nice to ask Alexa to turn on the TV and start playing Luke Cage on Netflix where I left off watching, without having to push buttons on a remote. It isn't a perfect device as its speaker is not nearly as good as the original Echo devices, and there are a limited number of TV apps that work with Alexa at the moment. But you can see where things are going, as replacing a bunch of remote controls with your voice -- at least for a good portion of your content streaming activities -- is coming closer.
The Echo Look is a hands-free depth-sensing camera with LED lighting built in to an Echo device that will take a photo or a video, using Alexa to make recommendations on clothing styles. It uses a mix of machine-learning algorithms and human advice from fashion experts to offer personalized recommendations for items you can buy on Amazon.
I received an invite to buy the Look last year before it was generally available this month. But anybody who knows me knows that I'm not into fashion (outside of my Rams gear and my collection of Negro League caps and t-shirts) and am in no need of a "style assistant". So I took a pass on this one. But just because it's not for me and my fellow fashion-challenged citizens of the world, it's still interesting to me for a few reasons. The fashion recommendations coming from Alexa on the Echo Look link directly to sellers on Amazon's marketplace. And while Amazon doesn't charge merchants for the recommendation currently, you have to think the possibility is there for a new ads model for Amazon.
Speaking of ads... At this point most people know Amazon dominates online commerce. But what some might not know is its digital advertising business ranks fifth among U.S. companies, according to eMarketer. A JPMorgan estimate says Amazon's ad business brought in $2.8 billion in 2017, and that number is expected to balloon to $6.6 billion in 2019. Of course, that still pales in comparison to Google at $40.1 billion and Facebook at $21.6 billion, according to eMarketer. But the growth is nothing to sneeze at.
With almost have of all product-related searches on the web starting on Amazon.com, they've been giving more prominent placement to sponsored products in search results. And by 2021, advertising on websites and mobile devices will account for half of all ad spending in the U.S., capturing greater share than television, radio, newspapers and billboards combined, according to eMarketer. Which brings us back to a few things brought up with the Echo Look.
Amazon's ability to test out new devices and revenue stream models is beyond impressive. With the Echo Look the idea of intermingling AI and human expertise -- identifiable domain experts and input from your own personal social network -- to deliver more personalized recommendations, would anyone really be surprised if Amazon started monetizing this effort beyond the actual transaction that comes from a person buying the recommended item?
This has the potential to go well beyond assisting folks with style recommendations. With more devices, and more interactions going through those devices, there are more opportunities to impact sales as well as marketing models. And people in general are blasted every minute with ads that for the most part have very little realtime relevance. But, as more of our interactions come through devices infused with AI-driven insights -- devices we can talk to with screens that provide visual responses -- the opportunity to rapidly impact an ads model already transitioning towards higher digital budgets is out there for them. And they stand to be big winners with the potential to take a significant slice of the digital advertising pie well beyond where they are today.
Back in 2011 Steve Yegge, who spent years working at both Amazon and Google, wrote one of the most fascinating blog posts agonizing over how Amazon "got" the importance of creating a platform and how Google, his current employer at the time, didn't. It's still well worth the read if you have some time....okay, a lot of time.
Since then it's obvious Google has made that ground up. But, as important as platforms are today, the role of creating ecosystems for your platform in order to quickly scale your reach and influence is just as important. This to me is the biggest disruptive opportunity for Amazon leading to an accelerated trajectory into a voice-first driven era.
Amazon Prime has one hundred million members buying lots of things as well as streaming music and videos. Millions of those members are buying Echo devices -- streaming music and videos on them...and connecting all sorts of appliances to them to give voice commands; and now some of those devices are providing personalized recommendations from AI and expert advisors.
Millions of them are also shopping at Whole Foods and now getting benefits to buy even more there with their Prime membership. And growing the developer side of the ecosystem with things like the Alexa Fund, Alexa contests, working on monetization opportunities for developers to capitalize on creating skills is also an important piece of the puzzle.
I don't know if the ecosystem gap is worthy of a Yegge-esque post, but platforms and ecosystems working together and feeding off each other -- at a scale that companies like Amazon and Google can operate -- definitely have the opportunity to accelerate voice-first adoption into the mainstream. Combining digital with traditional bricks-and-mortar (which still makes up about 86-90 percent of all transactions) like what Amazon is doing with Prime and Whole Foods, with a little help from Echos and Alexa, is creating a roadmap for companies to use, and also follow.
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