21 August 2019
Google is pushing its smart speakers aggressively, challenging the dominance of Amazon in that fast-growing segment. Photo: Reuters
Google is pushing its smart speakers aggressively, challenging the dominance of Amazon in that fast-growing segment. Photo: Reuters

Rivalry in smart speaker market heating up

The “Hey Google” slogan could be seen everywhere during the 2018 Consumer Electronics Show in Las Vegas last week, as the internet giant tried to make a big statement about its Google Assistant smart speaker.

Back at 2017 CES, Amazon was the biggest winner with its Alexa virtual assistant.

There used to be no direct competition between Google and Amazon, as search engine is the core business of Google, while online shopping is the focus of Amazon. But now, the two tech titans are competing with each other in the smart speaker market.

The main reason comes down to the strategic importance of the device.

To Amazon, it’s not so much about the sales revenue of smart speakers, but more about strengthening the bond with its customers.

Amazon’s smart speaker users are more loyal, even more loyal than Amazon Prime members, according to research institution CIRP.

Such users spend US$1,700 on average, compared with US$1,300 spent by Prime members. Compared with other non-Prime customers, the spending is seven times higher.

Through the data collected by the device, Amazon gets to know better what customers are interested in, which is essential information for Amazon and sellers on its platform to find target clients. Smart speaker can also be used as an advertising channel.

Smart speakers might gradually challenge the dominance held by smartphones as the main device used by customers to access internet.

A study showed that nearly two thirds of users spent less time on their handsets after buying a smart speaker.

Meanwhile, Google has to pay billions of dollars to Apple each year to have its search engine installed on iPhones. Having learnt the importance of the gateway to internet, Google wants to build up its own user base through smart speakers.

Both Google and Amazon have seen strong sales of their smart speaker products recently. They are probably going to be the major winners.

But between Google and Amazon, the latter, which controls about 80 percent of the smart speaker market currently, may have an upper hand.

Amazon’s smart speaker has a portfolio of unique functions, such as booking a car, ordering food delivery, checking bank balances, etc., something Google’s device cannot match yet.

Japanese car manufacturer Toyota announced at the CES show that it will install Amazon’s Alexa in some of its car models.

This article appeared in the Hong Kong Economic Journal on Jan 17

Translation by Julie Zhu with additional reporting

[Chinese version 中文版]

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Columnist at the Hong Kong Economic Journal

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