Smart speakers with voice assistants have achieved a key goal. At low cost, consumers were able to bring smarts into their homes inexpensively. And this has led to increased sales of other connected devices that can actually be controlled by voice. Think about the number of additional outlets, light bulbs, switches, and cameras that have been purchased because they work with smart speakers.
But other than that, have any companies offered any really compelling reasons to chat more with our digital home assistants? So far no, except when it suits them. Hey Alexa, let me know when things change.
This situation manifests itself in a low engagement with Alexa, according to a recent Bloomberg report. Based on what it says is internal Amazon data, Bloomberg tells us that Amazon’s effort to flood the market with low-cost smart speakers does not equate to revenue growth based on our fewer and fewer conversations with Alexa. Amazon may be surprised by this, but I cannot.
Say goodbye to smart speaker sales growth
It is no exaggeration to say that the growth of the smart speaker hardware market has all but come to a halt. We have seen a few years of sales growth ranging from 30 to 40 percent. Amazon is now forecasting a meager 1.2% increase in annual smart speaker sales over the next several years, according to internal documents cited by Bloomberg.
I expected it: low-cost speakers and offers that included a free speaker with the purchase of a smart device have eased the saturation of the market. In many homes, the number of these speakers has multiplied like the Tribbles in Star Trek. (Or “like rabbits” if you are not a Trekkie). Most of us just have all the smart speakers we need, if not more.
Amazon doesn’t mind if we don’t buy more Alexa devices. Here’s why, again in the Bloomberg article:
In 2018, Amazon predicted it would lose $ 5 per device in 2021 and said it hoped to upgrade it to reach a profit of $ 2 per unit in 2028. The company says its goal is to make money. when people use Alexa to access other Amazon services.
The company has therefore built its Alexa footprint at a loss in order to generate future revenues on the services. This is not an uncommon strategy, especially for Amazon. But there’s a catch: this pesky data showing that engagement with Alexa is very low.
Amazon internal data reported representing the past few years shows that 15-25% of new Echo device owners have stopped talking to Alexa within the second week of owning the device. This is no way to treat a new guest.
People use Alexa primarily for three things
The data on reported use cases is more alarming. I bet you can guess them: mostly for voice controlling smart home lights, setting timers, and listening to music. These services generate little or no additional revenue. But wait, you say: what about the massive number of Alexa skills available that could generate income? In 2019, there were 80,000 of these skills reported, and this year this number is estimated at more than 100,000.
As I said in 2019: There are several reasons why this growth in skills has not been synonymous with a commitment similar to what we saw during the explosion of mobile applications. The reasons range from the limitations of voice-only applications to the fact that we are all 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 difficult, with few benefits
The discoverability of skills is also a major sticking point. 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 finding good mobile apps for your phone.) You might disagree with me on this, but Amazon does. Why else would it proactively surface more and more capabilities on its smart speakers? Stacey has been pissed off since February with those “By the way, did you know I can…” from Alexa and Google Home devices. This is clearly an approach to stimulate engagement.
This strategy, however, is not convincing. While chatting about it with Stacey, she said none of these “casually” talks showed her any potential advantage. Instead, it is Amazon that gains in value because the suggested services only benefit them.
After buying something from Amazon, for example, her Echo prompted her to review the product. This is great for Amazon, but what does she get other than another voice in her house giving her tasks to do?
Smart displays have a better interface for many
Due to the limitations of a smart speaker, there is no interface to “see”. Yes, in natural language you can ask the digital assistant what you want. But it still comes down to the discovery: how do you know if the speaker is able to process your voice request?
For this reason, I stopped accumulating smart speakers a few years ago. Instead, I turned to smart displays, which complement existing voice interaction with a visual interface. And kudos to Amazon and Google: both have improved this interface over the past two years with cleaner menus, taking advantage of existing screens in the house. like FireTV, and more relevant ‘at a glance’ data.
By the way, did you realize I didn’t mention Apple?
That’s because it probably doesn’t lose revenue per device since the Apple HomePod mini costs $ 99. And you don’t get one for free unless you spend hundreds or even thousands of dollars on other Apple products. Plus, it doesn’t have a smart display: something I think it will rectify in 2022 with what I call the “Apple HomePad”. You don’t need much more hardware capability for such a smart display than you can already find in a $ 329 iPad.