Android Intelligence Analysis

The fascinatingly familiar march of the smart speaker market

When you look closely at Google's escalating war to win the smart speaker market, it's hard not to feel a slight sense of déjà vu.

Smart Speaker Market
PIRO4D, OpenClipart-Vectors, modified by IDG Comm (CC0)

Tell me if this sounds familiar: A big company gets a head start on a new type of tech product. It manages to gain a lot of momentum and market share in those early months and wins over countless headlines of "owning" the market and being an unstoppable force.

Then, Google moseys along into the arena. It's a latecomer to the game and an underdog to start — but it has a not-so-secret weapon no other player can match: an underlying ecosystem and army of high-profile partners. Those partners will soon create their own products for Google's platform and push its standard ever further into the world.

Despite some initial skepticism, then, Google ends up dominating the dojo and becoming the largest player in that market — by a long shot. Everyone else ends up being a niche (if potentially still quite relevant and profitable) player in comparison.

This tale absolutely should sound familiar: It's exactly what we saw happen with Android, years ago — and if early signs are any indication, it's what we're about to see happen with smart speakers, too.

Seem crazy? Maybe. But let's take a look at the data, and you'll see what I mean.

Early on in the smart speaker market, Amazon was the company to beat. Hell, it was pretty much the only player for the market's first few years of existence. Amazon came out with its inaugural Echo speaker in 2014, coinciding with the introduction of its Alexa virtual assistant and leading to plenty of grand predictions.

Google, for some reason — despite having all of the elements right in front of it — by all counts didn't think of the idea for a standalone smart speaker until after the Echo arrived. The first Google Home device showed up nearly two years later.

Perhaps not surprisingly, then, Google's first months in the smart speaker market were marked by meager representation. Even a year after Google Home's release, Amazon was "winning the smart home speaker wars," as reports put it — by a "huge margin," at that, claiming 68% of the overall smart speaker market compared to Google's 24% as of late 2017.

But things wouldn't stay that way for long.

It's all about the ecosystem, baby

Even back in the ancient era of 2017, it didn't take much clairvoyance to see that Amazon's early success with smart speakers was mostly just the result of its head start in the market. By most objective measures, Google had the superior technology with its Assistant more or less right out of the gate — in terms of what it's able to do and how reliably it's able to understand you and provide answers. This shouldn't be too shocking, given that Google had basically been honing those systems for years via its search and voice processing investments.

And that gets at the real advantage Google has in this domain — yup, you guessed it: ecosystem. The same Google Assistant present on Google Home and the newer Smart Display devices is also present on approximately 400 bazillion Android phones (at last count), not to mention a fair number of TVs and a growing number of cars and Chromebooks. And that's to say nothing of Assistant's tight integration with Google's even more widely used services — Gmail, Google Photos, and the likes.

Ecosystem is where Amazon hopes to use its early arrival advantage to lock people in: You've had an Echo for years already, pal! You've got all these third-party device integrations set up and all these nifty Amazon Prime features at your fingertips. Why use anything else?

That may work for a while, at least in terms of existing user retention, but this is a rapidly expanding market — and winning over new users is going to be key. And, well, as I pointed out in my "Welcome to the post-OS era" analysis earlier this year:

Clearly, the goal for both companies is about more than turning an immediate profit: It's about getting people invested in the virtual assistant's ecosystem and committed to using it as their primary source of information. Amazon may have had the benefit of being first to the smart speaker race — and to be sure, the company shares Google's ambition to have its assistant exist "everywhere" — but Google is armed with a few powerful weapons no one, even Amazon, can match.

Think about it: Google has its suite of widely adopted services — Gmail, Photos, Google Calendar, and so on — that integrate seamlessly with Assistant in significant ways. It has its sprawling and unparalleled database of knowledge, both general and personalized (thanks to the existence of all those aforementioned services), and all of that info is available to Assistant and able to be provided instantly on demand. And it has an established army of Android devices and Chromebooks all around the world, the former of which already feature Assistant preloaded and the latter of which will likely follow suit soon. In terms of reach, ecosystem, and the resulting value provided, it's tough to see Amazon being able to keep up over time.

And that brings us to today: Fresh data from market research firm Canalys (best not to try to pronounce that) finds the smart speaker market grew a whopping 187% over the second quarter of this year — and in that same time period, Google saw growth of 449% over the previous quarter, while Amazon saw a 14% decline in sales. That put Google in the top spot of smart speaker manufacturers, with 32% of the global total compared to Amazon's 24.5% share.

(The rest of the pie is taken up mostly by China-based device-makers — Alibaba and Xiaomi — which, who knows, might further play into Google's interest in returning to that country. China aside, though, Google appears to have a meaningful edge over Amazon internationally, which is another factor we can't overlook.)

Trend thinking

Similar trends have been popping up for a while now. In the first quarter of the year, Strategy Analytics measured Google's year-to-year growth at an absurd-sounding 709%, while Amazon's was at a still respectable but significantly lower 102%. The exact numbers vary from one measurement to the next, but the trends are shaping up consistently in Google's favor.

And those trends are what are most important to watch, particularly as Google gets Assistant further into the Smart Display market — via a variety of manufacturing partners, like Lenovo, and perhaps soon via its own self-made device as well. The raw market share numbers mean something, to be sure, but the broader picture of how the market is progressing over time is what allows us to think logically about ongoing patterns and what they might imply.

So back to that whole déjà vu thing: In 2010, when I started this column, Android had a mere 12% of the U.S. mobile market. It was the latecomer to the scene — the underdog. But the same sorts of trends were starting to take shape: Month after month, quarter after quarter, Google was gaining share at a breakneck pace — something the other more established players simply couldn't keep up with. That didn't mean those other companies were doomed, of course. It just meant they were bound to be surpassed in market share dominance. All emotion aside (and believe me, there's never a shortage of that on these here nets of inter), it ultimately just came down to a matter of math and logic.

The smart speaker realm is certainly still young, and it's early days yet. Things could shift in any number of ways over the next several years, and no one can predict anything for sure.

But boy, oh boy, does this story feel familiar.

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