The Voice Speaker Tipping Point

With reports this week that Samsung is readying a Bixby-powered voice speaker for the home, and an announcement from Alibaba that its entry in the category will be launching next month, it feels as though we’re reaching a tipping point in the market pioneered by the Amazon Echo. It seems as though pretty soon every major platform and device vendor will have an entrant in the market, signaling a new phase in its development. But this market isn’t quite like other markets that have gone before.

A Tipping Point in Voice Speakers

Amazon, which arguably created the voice speaker market with its Echo device in late 2014, had the market largely to itself for a good two years. Then, Google entered the market with its Home device late last year, and this year saw a slew of announcements at CES, mostly of Amazon Alexa-powered speakers, with an announcement last month by Apple and this week by Alibaba, among others. Things certainly seem to be picking up steam, as the diagram below shows:

Apple’s HomePod should be with us later this year, while Tencent has said it’s working on something in this space, Lenovo’s Smart Assistant was announced at CES but hasn’t become available yet, multiple speakers from Microsoft partners including HP and Harman Kardon are on the way, and Samsung is reportedly working on a speaker powered by its Bixby voice interface. On top of all those, there are quite a few others from smaller companies.

A Different Kind of Market

Most markets in consumer technology go through multiple phases, often pioneered by one or two companies who prove out the opportunity, followed by a rushing in of new players as the opportunity becomes obvious to others, and an eventual thinning and consolidation of the market as the winners begin to emerge. In the last few years, the rushing in phase has been characterized by an influx of low-cost Chinese competitors in markets as diverse as smartwatches, drones, virtual reality headsets, fitness trackers, and more.

That hasn’t really happened in quite the same way in the voice speaker market, for one obvious reason: this isn’t just another hardware category where free, off-the-shelf software gets you an instant global presence. Even though Amazon has opened up its Alexa platform for others, and we’ve seen a number of not just speakers but other devices launched which incorporate it, that platform is still fairly severely geographically limited. The Alexa Voice Service which device vendors can use is so far only available for the UK, US, and Germany. And of course Amazon as a brand may be present in many markets, but is only really popular in less than a dozen countries worldwide.

The Google Assistant so far only works in English, though support for other languages is coming shortly, but even once those roll out much of the world will be left without a voice assistant platform that speaks its language. Apple’s Siri, at least on iOS, supports many more languages, but it’s not yet clear which HomePod will support, and of course Siri isn’t a licensable platform.

Localization Beyond Language

But language isn’t the only localization challenge with voice assistants. These assistants need to understand local accents and idioms, know the right conversions for locally-used measurements, be familiar with television shows, movie stars, and sports figures in each country, and so on. And they need to integrate with relevant local entertainment, information, and other services. That makes expanding into other markets particularly challenging, and it’s yet another reason why most successful voice assistants will be part of broader ecosystems coming from big companies like Amazon, Google, Microsoft, and Apple.

However, that means the broader opportunity for voice speakers is nothing like as large as for other recently hot consumer electronics categories, with the long tail of cheap Chinese vendors in particular likely to remain largely absent. It’s possible that, with the entry of players like Alibaba into voice speakers and Tencent and Baidu into voice assistants, we’ll eventually see some expansion into lower-cost tiers. But this is likely to remain a highly regionalized market, to a far greater extent than any other recent consumer electronics category.

That’s important because there’s already a false narrative around a global market in voice speakers. Several of the news outlets that covered Alibaba’s announcement this week said it was a competitor to Google Home and Amazon Echo, but of course since those devices don’t work in China and Alibaba’s won’t work outside China, they’ll never actually go head to head.

Business Models Will Vary Too

The other interesting thing about the voice speaker market is that, for at least some of the players, it will be a means to an end rather than a lucrative business in its own right. It’s already clear, for example, that Amazon sees the Echo family and the Alexa platform as an opportunity to sell more stuff on, while Google plans to use advertising to create additional revenue streams on the somewhat cheaper Home. Apple, meanwhile, will take its usual tack of monetizing the complete package of hardware and software, though it will likely see some uplift in services like Apple Music off the back of HomePod sales as well.

In China, meanwhile, we’ll likely see these and other business models play out, with Alibaba’s device named after one of its popular online stores, and Baidu’s and probably Tencent’s efforts likely to be more ad-focused. All of this will lead to different pricing strategies for the hardware itself, with the early Chinese examples hitting price points roughly half those of the two early leaders in the US market, and Apple in turn pricing its premium speaker at roughly double those devices.

This is going to continue to be a fascinating market to watch unfold, one that won’t necessarily follow any of the established patterns from other recent hot devices. It will be more regionalized – even balkanized – and more varied in the business models than other device categories. And as a result we’ll likely see several major players taking leading positions in different regions around the world, rather than global winners as in smartphones, tablets, or PCs. Over time, we’ll certainly see the usual thinning and consolidation as some winners do emerge and smaller players fail to gain traction, but in the meantime it feels like we’re going to see lots more new entrants and interesting devices and business models.

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Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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