“Alexa, what is Amazon actually up to?”
Amazon launched the Echo in June of 2015 to excitement, a little ridicule, and some fear. It was a “smart speaker” that was home to their voice assistant Alexa. Alexa could help you play songs, create shopping lists, answer questions, and so on. Moreover, despite a roundly mocked launch video it caught on. Big time.
Since then, not only has Amazon added more Echo devices to their line up, Google has also jumped into the space launching Google Home just over a year later. Even Apple announced HomePod last year (though it has yet to hit the market).
It would seem the home “smart speaker” market is expanding. Except that is barely scratching the surface of what is happening.
When Amazon first launched the Echo, everyone focused on the personal assistant aspect. It was a novelty to many, a toy. However, just as Chris Dixon famously pointed out in 2010, “The next big thing always starts out being dismissed as a “toy.” Moreover, it is easy to dismiss smart speakers as just that. However, the power of the Echo is not the device itself but the technology behind Alexa, specifically the AI that seeks to understand your every desire.
Fast forward to 2017 and not only has Amazon expanded its Echo line of products, but they also have a never-ending string of announcements about how Alexa technology is being integrated into third-party products like mirrors, eyeglasses, microwaves, and just about everything else.
At first blush, it is easy to see how having voice technology integrated into everything would be a win-win for consumers and Amazon too. After all, anyone can simply buy stuff from Amazon from anywhere without having to unlock his or her phone or be on a computer. In fact, Echo owners spend more on Amazon than Amazon Prime members. All of which is pretty telling about the potential for success of voice. However, that is just the start.
The race to build the ultimate platform
The real potential of voice is about seeing who can create the first “real-world-as-a-platform.”
Today, many think of Google (and Alphabet) as a company that does many things. Moreover, they do. However, the bread and butter is their far-reaching ad network. Their “free” search product for consumers paved the way to create the most extensive and potent online ad network.
However, for them to monetize that ad network you have to be on a computer, phone, iPad, etc. What makes “voice” so potentially compelling, is that once it is integrated into everything, everything becomes a marketing, communication, and e-commerce touch point.
Wait, am I going to be “marketed to” everywhere?
Yes and no. There will be regular advertisements plus companies will also pay to “jump the line” as answers to consumers inquiries. However, it will not be just ads.
Consider the case of an Alexa augmented reality mirror. When trying on clothes, you could tell it that you want to see different styles or colors. Moreover, that is fun, but the mirror could also make algorithmic recommendations from other brands for you to consider that align with your tastes. Are you being marketed to in that case? Yes, but it is not purely an ad as you benefit from it just like you would from a recommendation on a website. Only now you can “see it on you” right there.
In reality, it is a way for Amazon not only to increase their e-commerce reach but also start to monetize the real world. The trend in marketing toward hyper-personalization and merchandising, whose current clunky manifestation is those banner ads that follow us around online, will continue to the point of being seamlessly integrated into all experiences.
Integration + first-mover advantage = the real story
First-mover advantage does not always mean that an edge is gained and maintained.
In 2007, Netflix pivoted strategy away from making a streaming device to attaining ubiquity (a presence on all devices). The goal was to have Netflix pre-installed on as many devices as possible. When a consumer fired up their Blu-Ray player or SmartTV for the first time, Netflix was there. It removed a significant amount of the friction of signing up (and of acquiring customers). Add in the fact that Netflix had the jump on practically everyone in the streaming space and you get the perfect storm that helped to propel adoption significantly.
By now, HBO, Hulu, and a seemingly infinite number of other streaming apps have made their way onto devices. So the power of first-mover advantage has mostly evaporated. When it comes to voice, however, first-mover advantage may lead to a more permanent gain.
Amazon launched Echo and Alexa a year ahead of everyone else. Which may not sound like a long time but it seems to have been enough for them to become the “go-to” for voice integration. Each day seemingly brings another announcement that bears that out.
Not to mention, there will likely be little to any incentive for third-party manufacturers who have integrated Alexa technology to switch to another service. Amazon has shown that they are nothing if not very comfortable not being profitable in the name of growth. Moreover, they are relentless in adding value. So unless something radically changes in their business model and strategy, it is hard to imagine any other voice service displacing them.
It is not over until it is over
Despite the first-mover advantage, the battle is not over yet. Google has deep pockets and has already integrated with a slew of products and services as well. Plus, Google Home works with other home devices such as the Nest thermostat.
The jury is still out on who will own the ultimate platform. However, one thing is for sure, not only is voice interactivity, not a toy, it is going to become a big part our everyday life very quickly.
This article was originally published on LinkedIn.
Thanks for reading. So what do you think, will Alexa take over the world? Let me know your thoughts in the comments below.
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Big thanks to my friend, and former Netflix colleague, Tom Willerer for editorial guidance and help.