Smart speakers with voice assistants have accomplished one key goal. At a low cost, consumers were able to bring some smarts into their homes on the cheap. And that has led to a surge in the sales of other connected devices to actually control by voice. Think how many more smart outlets, light bulbs, switches, and cameras were bought because they work with smart speakers.
But aside from that, have any companies offered truly compelling reasons to chat more with our in-home digital assistants? So far no, except when it suits them. Hey Alexa, notify me when that changes.
This situation is manifesting itself in low engagement with Alexa, according to a recent Bloomberg report. According to what it says is internal Amazon data, Bloomberg tells us that Amazon’s effort to flood the market with low-cost smart speakers isn’t equating to revenue stream growth based on our fewer and fewer conversations with Alexa. Amazon may be surprised by this, but I’m not.
Goodbye smart speaker sales growth
It’s not a stretch to say that the growth of the smart speaker hardware market has basically ground to a halt. We experienced a few years of sales growth well into the 30 and 40 percent range. Amazon now forecasts a meager 1.2 percent annual sales increase in smart speakers for the next few years, according to the internal documents cited by Bloomberg.
I expected this: Low-cost speakers and deals that include a free speaker with some connected device purchase made it easy to saturate the market. In many homes, the number of these speakers have multiplied like Tribbles in Star Trek. (Or “like rabbits” if you’re not a Trekkie). Most of us simply have all of the connected speakers we need, if not more than that.
Amazon doesn’t mind if we don’t buy more Alexa devices though. Here’s why, again from the Bloomberg article:
In 2018, Amazon projected it would lose $5 per device in 2021 and said it hoped to improve that to a $2-per-unit profit in 2028. The company says its goal is to make money when people use Alexa to access other Amazon services.
So the company built up its Alexa footprint at a loss in order to gain future revenue on services. That’s not an uncommon strategy, particularly for Amazon. But there’s a problem: That pesky data showing that engagement with Alexa is very low.
The reported internal Amazon data representing the past few years notes that 15 to 25 percent of new Echo device owners stopped speaking to Alexa in just the second week of device ownership. That’s no way to treat a new houseguest.
People mainly use Alexa for three things
More alarming is the data on reported use-cases. I bet you can guess them: Mainly to voice-control connected lights in the home, set timers, and play music. There’s little to no additional revenue in such services. But wait, you say: What about the massive number of Alexa Skills available that could generate income? Back in 2019, there were a reported 80,000 such skills, and this year that number is estimated to be more than 100,000.
Like I said in 2019: There are a few reasons that this growth in skills hasn’t equated to similar engagement we’ve witnessed in the mobile app explosion. The reasons range from limitations of voice-only apps to all of us collectively trying to figure out what we need smart speakers to actually do for us; a question similar to “what do we want our smart homes to do?”
Discovering features on a smart speaker is hard, with little benefit
Discoverability of skills is a major sticking point as well. How easy is it to find and install an Alexa Skill that does what you want? (Hint: It’s not easy, or at least not as easy as it is for finding good mobile apps for your phone.) You might disagree with me on that, but Amazon does. Why else would it be proactively surfacing more and more capabilities on its smart speakers? Stacey has been getting annoyed with those “By the way, did you know I can…” nags from Alexa, and Google Home devices, since February. It’s clearly an approach to boost engagement.
This strategy isn’t a compelling one though. When chatting about this with Stacey, she said none of these “by the way” chats have shown a potential benefit to her. Instead, it’s Amazon that gains value because the suggested services only benefit it.
After buying something on Amazon, for example, her Echo has prompted her to review the product. That’s great for Amazon, but what does she get out of it other than another voice in her home doling out tasks for her to complete?
Smart displays have a better interface for many
Due to the limitations of a smart speaker, there’s no interface to “see”. Yes, using natural language, you can ask the digital assistant whatever you want. But it gets back to discovery again: How do you know if the speaker is capable of handling your voice request?
For this reason, I stopped accumulating smart speakers a few years ago. Instead, I turned to smart displays, which complement the existing voice interaction with a visual interface. And kudos to Amazon and Google: Both have improved that interface over the past year or two with cleaner menus, leveraged existing screens in the home such as FireTVs, and more relevant “at a glance” data.
By the way, did you realize I didn’t mention Apple?
That’s because it’s not likely losing revenue on a per-device basis since the Apple HomePod mini costs $99. And you’re not getting one free unless you spend hundreds, if not thousands of dollars on some other Apple products. Plus it has no smart display: Something I think it will rectify in 2022 with what I’m calling the “Apple HomePad”. You don’t need much more hardware capabilities for such a smart display than you can already find in a $329 iPad.