Top Trades for Monday! SBUX, NVDA, ETSY >>> READ MORE

Smart Speaker Sales Are Growing Faster than Smartphones in the U.S.

AMZN stock stands to benefit from Amazon Echo’s big lead, but don’t count out Google and Apple

By Brad Moon, InvestorPlace Contributor

http://bit.ly/2DlfbPT

Source: Amazon

Amazon.com, Inc. (NASDAQ:AMZN) missed out on the smartphone rush. And other than shoppers on its website, it’s not really a player in search or search ad revenue. But thanks to the Amazon Echo and voice assistant Alexa, the company dominates smart speaker sales, a product category that is growing at a remarkable pace.

A new report says smart speaker sales are outpacing the adoption rate of both smartphones and tablets with consumers. People are increasingly using their smart speaker in place of a smartphone for many tasks, with voice search rapidly rising.

The rise of the smart speaker poses a potential threat to the current business models of technology giants Apple Inc (NASDAQ:AAPL) and Alphabet Inc’s (NASDAQ:GOOGL) Google. But it represents a big opportunity for Amazon, with significant upside for AMZN stock, if the company can keep the Amazon Echo and Alexa on top.

National Public Media Report on Smart Speaker Sales

National Public Media just released its Fall/Winter 2017 Smart Audio Report, which includes data from the holiday sales period. According to NPR, 16% of adult Americans (one in six) now own a smart speaker.

Smart speaker adoption rate is up 128% from this time last year, showing smart speaker sales are hot. So hot, in fact, that three years after the launch of the Amazon Echo, consumers are adopting the technology at a faster pace than they took to smartphones or tablets.

Gartner is predicting that by 2020, 75% of U.S. households will have smart speakers. And while there were just over 23 million in U.S. homes at the end of 2017, Gartner projects growing smart speaker sales will result in an install base of over 138 million by 2020. If the Amazon Echo continues to dominate at anywhere near its current rate, that is very good news for AMZN stock.

Consumers Are Increasingly Using Smart Speakers Instead of Smart Phones

According to the Smart Audio Report, smart speaker sales are hot, but it’s how consumers are using them that could really disrupt the current status quo.

Source: National Public Media

Respondents to a survey in the report say the device they’re putting down the most in favor of their smart speaker (other than an old-school AM/FM radio), is their smartphone. 34% of the smart speaker owners surveyed said the time they spend using their Amazon Echo or Google Home is in place of time spent using their smartphone.

This trend isn’t lost on marketers, who are exploring ways to better engage consumers via smart speakers. By 2020 an estimated 50% of search will be using voice assistants like Alexa. And that has a huge potential to disrupt Google’s primary source of revenue — search ads.

Alexa currently uses Microsoft Corporation’s (NASDAQ:MSFT) Bing for search. Even if Amazon doesn’t go all in on its own search engine in the next few years, the sheer volume of voice search coming through Alexa-powered devices could mean a nice bonus for AMZN stock — in the form of a bidding war between search engine owners. Google gave Apple $3 billion last year to be the default search engine for the iPhone.

The Challenge for Amazon

For smart speaker sales, Amazon is in the driver’s seat right now because consumer reaction to the Amazon Echo caught the competition off guard. But recent the recent boom in smart speaker sales could change that.

Google is having success with its Google Home line, and Apple will be launching its HomePod smart speaker shortly. Google is reportedly so determined to crush Alexa that it’s working to let consumers buy products and services using their Google Home.

In other words, the pace of smart speaker sales is good news for Amazon, especially considering that somewhere around 70% of those are an Amazon Echo. If it can remain dominant, the upside for AMZN stock — from hardware sales, amazon.com voice shopping and possible payment for the right to be Alexa’s default search browser — is considerable.

But with 138 million smart speakers expected to be in U.S. homes within the next few years, the competition to woo consumers away from the Amazon Echo is just ramping up.

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

More From InvestorPlace:


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/smart-speaker-sales-faster-smartphones-u-s/.

©2018 InvestorPlace Media, LLC