Why Amazon’s Echo is totally dominating – and what Google, Microsoft, and Apple have to do to catch up – Business Insider


amazon echo dot kid
Amazon Echo Dot
YouTube/f0t0b0y

We’re barely halfway through January of 2017, and it’s already
looking like this is going to be the year of Amazon’s Alexa, the
virtual assistant at the heart of the Amazon Echo.

In 2016, the
Amazon Echo line of devices appeared to have a great sales
year
, with the cheap Echo Dot smart speaker
finishing out the holiday shopping season as the
best-selling item on all of Amazon.com
. Forrester research
estimates that 6 million Amazon Echo devices were sold by the end
of 2016.

And at the Consumer Electronics Show in the first week of
January,
Amazon dominated the conversation
. LG, GE, Ford, and
lots more companies announced gadgets, home appliances, and even
cars that can connect to Alexa. The market for the
Echo is

still small compared to smartphones, but it’s growing
fast
.

It’s all led to the conventional wisdom that Amazon is winning
the race to rule the growing market for voice assistants and the
apps that run on them, and, by extension, the still-very-young
market for smart home gadgetry. And so far, Alexa has run
this race largely unchallenged.


amazon alexa lg refrigerator smart fridge
LG
announces its new Amazon Alexa-powered smart fridge at CES
2017

David Becker/Getty
Images


Unchallenged until now, that is. With the
Google Home device and its Google Assistant
, the search giant
is looking to eat Amazon’s lunch. Microsoft is
positioning its Cortana personal assistant
as the
artificially intelligent way to get work done. Even
Apple is said to be working on an Echo-esque device
.

Here’s a look at how Amazon propelled itself into this leading
position in the first place, where its biggest rivals still have
room to overtake it, and why Apple needs to move in on this
sooner rather than later.

Why Amazon leads

“[Amazon Echo] took us all a little by surprise,” says Gartner
Research Director Werner Goertz. 

A big part of Amazon’s
early success with the Echo, launched in 2014
, is due to
the fact that the company didn’t oversell it. After years of
iPhone users getting let down by Siri, the first
truly mainstream voice agent, Amazon billed the Echo as
a speaker that, by the way, has a few smart voice commands built
in.

Then, just as people got accustomed to the idea of
talking to Alexa, and positive word of mouth spread, Amazon added
more capabilities. Alexa
now boasts thousands of “skills”
that allow it to connect
with apps like Uber and Twitter, or Nest thermostats.
Suddenly, Echo went from a novelty to a whole ecosystem unto
itself.

Meanwhile, Echo plays right into Amazon’s core retail business by
making it “frictionless” to buy things, Goertz says. Indeed,
Goertz says that he hasn’t been to the grocery store in three
months because he’s made all his food purchases on Amazon
via shouts at Alexa. 


EchoBI Intelligence

The overall play for Amazon, says Forrester Principal
Analyst Thomas Husson, is to continue to make Alexa more
useful with more smart home integration and more media
capabilities. Why? The more people use Alexa devices, the more
likely they are to spend money on Amazon. And so, unlike many
rivals, it can afford to take a loss on the gadgets.

Amazon will increasingly subsidize Echo by bundling
content (think music, video) with the device,” Husson says. “They
can afford this since this is not core to their business model:
the end-goal is to facilitate interactions.” 

And not only does Echo encourage you to shop more, Husson
notes, but it also feeds more data back into Amazon’s
all-important recommendation machine, so the website and apps
can, again, encourage you to buy more.

Where Google can compete with Alexa

Google has two key advantages over Amazon as it pushes its
Google Assistant strategy.

First, “Google benefits from its huge search
inventory, and has invested for longer in machine learning than
its rivals,” notes Forrester’s Husson. The search giant is better
than anyone else at, well, search. And it’s better at delivering
answers to questions, which is basically the major thing a
voice assistant needs to do.

Second, there are estimated to be over 1.5 billion Android
users out there in the world, all of whom have phones that could
theoretically get upgraded with Google Assistant (whether they
will or not is a different story). Plus, Assistant is built into
Google Allo, the company’s latest messaging app, and Google
Pixel, the company’s flagship phone.


Google Home
Google
Home

Google

These are both things Amazon presently struggles with. In
Business Insider’s own tests,
Google Assistant outmaneuvers Alexa and the other voice
assistants when it comes to performing everyday tasks
.
And while Amazon’s Alexa is only now starting to appear on

phones
and
TVs
, Google’s Android is everywhere.

Though it’s not entirely yet clear how the Google Home or
the Assistant will play into Google’s advertising-driven model,
it’s important that they keep with this market until it
bears fruit. “For them, this is vital since this is simply
about the future of search,” says Husson.

Where Microsoft can compete with Alexa

The strategy,
Microsoft recently explained to Business Insider
, is to make
its Cortana virtual assistant the voice agent of choice for
businesses and busy professionals. 

Like Google, Microsoft has been
investing heavily in artificial intelligence
, and boasts some
of the most advanced technologies for
having human-like conversations
 with virtual
agents like its own Cortana, which comes with every
installation of Windows 10. 

But Microsoft has a special ity all its own: It’s been the
dominant player in business productivity software for the last
several decades, with deep hooks into Microsoft Office, Microsoft
Dynamics sales software, and soon, the LinkedIn professional
social network.


microsoft windows 10 cortana
Microsoft Cortana in
Windows 10

Matt Weinberger/Business
Insider


And because of that dominance, it has relationships with
companies like Nissan and Volkswagen, both of whom are embedding
Microsoft technologies in their cars.
Nissan is even going so far to embed Cortana in the dashboards of
its next-gen cars
. Microsoft sees Cortana as helping you be
productive anywhere, even in the car where your hands aren’t
free.

Microsoft has its own challenge, though. While Microsoft’s
Cortana is starting to come to outside devices, including Nissan
cars and a
Harman Kardon-manufactured Echo-like speaker
, it’s still
primarily on Windows 10 devices. And as of September 2016, there
are only 400 million of those, compared to the billion-plus of
Apple iOS and Android.

Why Apple needs to get started now

“[Apple has] all the pieces of the puzzle: an
installed base of more than one billion devices, Apple Music,
Beats, Siri, et cetera,” says Forrester’s Husson. “They
could very well combine these and deliver a more intuitive user
interface.”

And yet, the clock is ticking for the most valuable company
in the world, as the aggressive moves made by the other major
players could squeeze Apple out before it even has a
chance to get in the game.

“The room for Apple to enter the space gets smaller and smaller
every day,” says Gartner’s Goertz. 

Look at it this way: If you buy a new fridge that has Amazon
Alexa built in, you’re probably not going to even look at
competing virtual assistants until it’s time to replace it.
Otherwise, you run the risk of your fridge not talking to your
smart bulbs, or not talking to your home security system. Or
at least, you’d have multiple voice assistants talking at
you across your house, which could get annoying.


Apple TV Siri
Siri on the Apple
TV

Apple

In that situation, “Alexa has you locked in for the next several
years,” Goertz says. 

Meanwhile, the promise of Apple’s own HomeKit connected home
solution is still “underdeveloped” and “not that cohesive,”
Goertz says, encouraging customers and smart home vendors alike
to look elsewhere. And while the company has pitched the Apple TV
as the hub of the smart home, thanks
to its Siri integration
, it’s less convenient than the
always-on Amazon Echo or Google Home experience.

Still, Husson is optimistic: “Apple is rarely a first
entrant into a market, but they could well create a
differentiated experience like they did for touchscreens,” he
says. 

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