Owners of Amazon.com, Inc. (NASDAQ:AMZN) Echo Show smart speakers have discovered what it’s like to be stuck in the middle of a fight between two tech giants. Yesterday afternoon, Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google abruptly yanked its YouTube video streaming service off the Echo Show smart speaker.
The action removes access to the web’s largest source of streaming video from a $230 device with a display that’s used largely for watching streaming video.
That the move was made by a company that’s Amazon’s biggest competitor when it comes to selling smart speakers is probably not a coincidence, and it has potential long-term implications for AMZN stock.
Google Shuts Down YouTube on Echo Show
Echo Show owners suddenly lost access to YouTube late yesterday afternoon. It was clearly not a technical glitch because Alexa told users that Google was currently not supporting the feature.
The Verge spoke to Amazon about the issue and received this response:
“Google made a change today at around 3 pm. YouTube used to be available to our shared customers on Echo Show. As of this afternoon, Google has chosen to no longer make YouTube available on Echo Show, without explanation and without notification to customers. There is no technical reason for that decision, which is disappointing and hurts both of our customers.”
When contacted by The Verge, Google pointed out that Amazon’s use of YouTube on the Echo Show violated terms of service “creating a broken user experience.”
The Amazon Show still plays Amazon video of course, but loss of access to YouTube means the largest source of content like how-to videos and shared content is cut off.
What Might be Going On
This particular feud may have multiple layers. On the surface, there is the possibility that Google is kneecapping a competitor. The company may not offer a video screen option yet, but it’s trying to catch number one Amazon in the rapidly growing smart speaker market with Google Home. Suddenly yanking a key feature from Echo Show may make consumers think twice about automatically reaching for an Amazon Echo when they buy a smart speaker.
Google could also be using leverage with Amazon to adopt Google Search for its smart speakers. Currently, they use Microsoft Corporation’s (NASDAQ:MSFT) Bing search engine. That means the dominant player in a rapidly growing product category is not only making Bing “smarter,” it’s denying Google potential ad revenue.
Amazon has been refusing to carry Google’s popular Chromecast TV streamer. In fact, if you search for Chromecast on Amazon, the first result you get is Amazon’s own Fire TV Stick. Amazon also refuses to carry the Google Home smart speaker, instead offering searchers a selection of Amazon Echo smart speakers. Google’s move could be leverage to try to force the internet’s largest retailer to sell its products.
Finally, as The Verge points out, the Echo Show didn’t fully support some YouTube features like subscriptions and autoplay that Google considers important to its business model. The move might merely be the stick wielded to get AMZN to implement those features.
Potential Implications for AMZN Stock
Sales of the Amazon Echo Show — or all Echo speakers — don’t have a direct material impact on Amazon’s bottom line. At least not at this point. But with data suggesting Echo owners spend more buying products from Amazon than non-Echo owners, the ongoing success of the Echo smart speakers does factor into the value of AMZN stock in the long-term. In that case, Google’s move to cut YouTube access could be bad news for Amazon investors as well as Echo Show owners.
The irony of the current showdown is that it comes on the same day that AMZN settled another longstanding feud with a competitor. After refusing to sell Apple Inc.’s (NASDAQ:AAPL) Apple TV since 2015, yesterday Amazon resumed selling the competitor to its Fire TV streamers.
One big fight at a time.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
