5 Top Stock Trades for Thursday: S&P 500, NFLX, FDX, ROKU >>> READ MORE

Amazon.com, Inc. (AMZN) Echo Is Dominating the New Smart Speaker Market

AMZN Echo will dominate the smart speaker market this year

By Brad Moon, InvestorPlace Contributor

http://bit.ly/2qSWCZO

Amazon.com, Inc. (NASDAQ:AMZN) created the market for voice-activated speakers when it launched the Amazon Echo in 2015. According to a new report by eMarketer, that smart speaker market is going to boom this year, and despite new competition like Alphabet Inc’s (NASDAQ:GOOGL, NASDAQ:GOOG) Google Home, Amazon Echo market share will still top 70%. That dominance will pay off for AMZN, not just in device sales, but also in additional revenue from shoppers.

Amazon.com, Inc. (AMZN) Echo Is Dominating the New Smart Speaker Market
Source: eMarketer

eMarketer: Amazon Echo Market Share to Remain Tops

On May 8, eMarketer published a report on the users of digital assistants, spiking out results for smart speakers. According to eMarketer’s numbers, AMZN currently dominates the voice-activated speaker market, and Amazon Echo market share is expected to be 70.6% of all users for 2017.

The closest competition is Google Home. Google’s smart speaker — on sale since last November — is expected to capture 23.8% of users this year. The remainder of the smart speaker market is made up of smaller players such as LG Display Co Ltd. (ARD) (NYSE:LPL) and Lenovo Group Limited (ADR) (OTCMKTS:LNVGY).

Considering that many of these third-party smart speakers (including at least some LG offerings) feature Alexa integration, AMZN will still benefit from their adoption, despite losing the actual hardware sale.

The voice-activated speaker market is also growing at a rapid pace. eMarketer says usage of the devices will grow by nearly 130% in 2017, pointing out:

“Consumers are becoming increasingly comfortable with the technology, which is driving engagement. As prices decrease and functionality increases, consumers are finding more reasons to adopt these devices.”

eMarketer’s report forecasts 35.6 million Americans will use a voice-activated speaker at least once a month in 2017, an increase of 128.9% for the year.

Amazon Echo Sales Boost Shopper Revenue for AMZN

Amazon doesn’t release sales numbers for the Echo, but sales of the smart speaker add to its revenue, if not profit (AMZN is infamous for selling its devices near or below cost to drive adoption). Having an Echo in the home makes it easier than ever for consumers to order products directly from amazon.com, boosting the company’s overall sales revenue.

Reuters reports that device sales and additional revenue generated by shoppers using an Amazon Echo could combine to add $10 billion to AMZN’s bottom line by 2020. Amazon’s strategy is to push that consumer adoption and use of its smart speakers by every means possible. In addition to the Echo, the company released the inexpensive Echo Dot last year (plus, AMZN just unveiled the camera-equipped Echo Look) and is rumored to be working on an Echo smart speaker with an integrated display.

Increased usage of Alexa-powered smart speakers also makes AMZN’s digital assistant “smarter,” and more competitive with both Google Assistant and Apple Inc.’s (NASDAQ:AAPL) Siri. That’s important because those two companies in particular have the advantage of hundreds of millions of smartphone owners using their digital assistants to drive improvement.

While Amazon Echo market share remains dominant, Google Home took nearly one-quarter of the users. And, Apple is expected to release a Siri speaker this year, possibly as soon as June. AMZN needs Alexa to continually improve.

Users Don’t Necessarily Equal Buyers

It’s important to note the eMarketer numbers are specific to users, and that’s a different metric than sales. So, the 70.6% Amazon Echo market share does not necessarily mean that 70.6% of all smart speakers sold are Amazon Echoes.

However, usage is, in many ways, the more important metric. If consumers buy your product, that drives up your market share — and revenue — but if they don’t find it compelling enough to actually use, sales will quickly decline. It’s usage that determines long-term sales and overall market share, and with the Amazon Echo dominating the smart speaker market in terms of use, that bodes well for AMZN’s future in selling (and leveraging) voice-activated speakers.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/amazon-com-inc-amzn-echo-dominating-new-smart-speaker-market/.

©2019 InvestorPlace Media, LLC