2019 was another record year for smart speaker sales.
And, once again, Apple (NASDAQ:AAPL) remains stalled with a market share of under 5% for its HomePod …
Why isn’t Apple doing more to gain ground in this hot product category?
After all, with iPhone sales continuing to slip, the company needs revenue from other sources in order to maintain growth in its stock price. The HomePod seems to have been left to drift.
HomePod: Premium Smart Speaker a Missed Opportunity?
Apple focused on premium audio quality with the HomePod. That won accolades, but both Google and Amazon have pivoted to offer premium versions of their smart speakers in response. Other than a minor price cut last year (from $349 to $299), Apple hasn’t touched the HomePod since its launch, more than two years ago.
Where’s the smaller, more affordable HomePod to take on the $49.99 Echo Dot? Where is the support for streaming music services other than Apple Music?
And at a time when people are increasingly suspicious that their smart speaker is “listening” too much, and recordings are being used in criminal investigations, why isn’t Apple pressing its advantage in data privacy? Apple has a reputation as a brand that protects personal data — unlike Amazon and Google, which are suspected of using it for commercial purposes.
The answer may be as simple as the company feels it’s just not worth the effort. At least not at this point.
Is the HomePod a ‘Hobby’ for Apple?
Daniel Ladik is an Associate Professor of Marketing in the Stillman School of Business at Seton Hall University. We asked him about Apple’s privacy advantage:
“We are in agreement that, of the FAANG stocks, Apple has the strongest brand in protecting personal data … [but] Apple does not monetize its consumers via their personal data the way Google and Facebook do. Now that Amazon is the third-largest digital advertising platform, Amazon is looking to gain more revenue by selling ads to its millions of users.”
So why not invest some marketing budget to push that advantage with the HomePod over Amazon’s Echo and Google Home?
Professor Ladik has some perspective on that, comparing the popularity of smart speakers to smartphones:
“By 2010, one of the most common water cooler conversations was ‘I’ve got an app for that.’ The number of interesting and beneficial things you could do on your iPhone was a cultural phenomenon. In the last two years, has anyone made a serious recommendation for some skill on their Alexa that you must have? Probably not … Sure there are power users out there but mainstream consumers? In sum, it may very well be the case that Apple does not see this ‘smart speaker’ marketplace as something that is worth the resources (time, effort, money) at this given time.”
Ladik draws a comparison between the HomePod and the Apple TV — a product category that Apple left to languish for years:
“… just as Steve Jobs often called Apple TV ‘a hobby,’ Tim Cook is probably thinking the same way about the smart speaker marketplace.”
Focused on Wearables
While the company’s effort in the smart speaker space seems underwhelming, Apple has been doubling down on its wearables bet. Apple Watch continues to dominate the smartwatch market. Its estimated sales volume of 30.7 million units in 2019 outsold the entire Swiss Watch industry. Besides the hardware revenue (Apple Watch Series 5 starts at $399) Apple has a lucrative business selling fashionable bands to accessorize the smartwatch.
AirPods — Apple’s take on true wireless earbuds — were mocked when first released at the end of 2016. But they have gone on to dominate the market. Apple now sells multiple AirPods models including the latest AirPods Pro at $249. AirPods generated an estimated $6 billion in revenue last year and are projected to bring in $15 billion on sales of 85 million units in 2020.
With those sort of numbers, HomePod sales — which were goosed to 2.6 million units in Q4 by retailers slashing the price to $199 — are not going to get the same attention from Apple.
Has Apple Abandoned the HomePod?
While Apple hasn’t seemed eager to revolutionize the smart speaker market, some credible rumors suggest the company is far from abandoning smart speakers.
Bloomberg recently reported that Apple is considering opening up the HomePod to third party streaming music services such as Spotify (NYSE:SPOT). That may be about avoiding scrutiny over preferential positioning of its services as much as anything, but doing so would still open up the HomePod to a wider range of potential buyers. Rumors continue to fly that a smaller and more affordable “HomePod Mini” will arrive in 2020.
In the meantime, Apple’s focus on the AirPods and Apple Watch have paid off. Their success — along with a big growth in services revenue — have helped AAPL grow in value, and it has helped investors overlook the company’s iPhone challenges. The HomePod’s day may come, but for now Apple’s focus is elsewhere.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.