Amazon's Lead in Smart Speakers at Risk Thanks to GOOGL, AAPL

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Amazon AMZN and Alphabet's GOOGL Google have been leading the smart speaker market for quite some time now with their Echo and Home devices, launched in 2014 and 2016, respectively.

Per a latest report by Strategy Analytics, Amazon leads the market with 43.6% of all smart speakers shipped during the first quarter. However, Amazon's share has come down drastically from the year-ago quarter, when it accounted for 81.8% of market share.

On the other hand, growing popularity of Google smart speakers with the introduction of Google Home Mini led to an increase in its share from 12.5% in the first quarter of 2017 to 26.5% in first quarter of 2018.

However, Amazon's leading position faces threats from new offerings from the likes of Apple AAPL , Alibaba BABA and Xiaomi, which hold 7.6%, 6% and 2.4% of market share, respectively. The firm believes that strong demand for smart speakers in China, where Amazon and Google do not have a presence, benefited Alibaba and Xiaomi, pushing them into the top five.

Alibaba's Tmall Genie and Xiaomi's Mi AI Speaker were both launched in July 2017. This is the first time that all these companies are in direct competition with Apple as the HomePod devices were launched this February after months of delay.

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote

Home Automation Picks Up Pace

Increasing demand for smart speakers is evident from the whopping 278% year-over-year improvement in global shipment of the devices. As a result, all companies are gearing up to provide quality products to users.

According to MarketsandMarkets, the smart speaker market will witness CAGR of 34.44% in the 2018 to 2023 time frame to reach $11.79 billion. Per the firm, the smart speaker market is currently led by North America and the region is anticipated to remain so in the next few years.

This is also evident from Yelp's YELP latest Local Economic Outlook, per which the number of searches for "smart home" witnessed a substantial increase and Home Automation businesses showed remarkable growth. Notably, demand for voice assistants and connected devices continue to increase.

In the first quarter of 2018, the share of new business openings was dominated by Home services throughout the top U.S. cities on the list.  Moreover, the company notes Home Automation to be one of the fastest growing Home & Local services subcategories on the platform.

Can Apple Outsmart?

As with all Apple products, price point remains a concern. HomePod carries a price tag of $349, heftier than Echo and Google Home, which are priced at $99 and $130, respectively. Both Google and Amazon have lower cost devices like Google Home Mini and Amazon Echo Dot, both of which are priced at $49.

Apple's hefty price tag resulted in lower-than-expected sales of the product, which increased inventory.

Per Chinese site Sina, the tech giant is now rumored to be launching cheaper "HomePod Mini", which will be priced at $200 and marketed under the Beats brand.

On the last conference call, management mentioned that HomePod, which was launched in the United States, United Kingdom and Australia, will be introduced to more global markets shortly. Addition of new features to the smart speaker is also in the pipeline, management added.

Nonetheless, we note that Apple's brand is something that gives it an edge over its competitors.

Apple commands a strong user base with exceptional brand loyalty. It is widely perceived that Apple users refuse to switch to any other platform that does not run on iOS.

Moreover, Apple believes its superior music quality to be the differentiator compared with other home speakers available in the market. In fact, a few months back it was reported that Apple was working on integrating the next generation of HomePod with Face ID technology.

By integrating Face ID, Apple would be taking HomePod to another level. The device would be able to scan the person nearby and automatically set up music, thermostat and more per user preference.

Apple Inc. Revenue (TTM)

Apple Inc. Revenue (TTM) | Apple Inc. Quote

Zacks Rank

While Amazon currently carries a Zacks Rank #2 (Buy), Apple, Google and Alibaba carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: AMZN , BABA , YELP , GOOGL , AAPL

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