Amazon Owns the Smart-Speaker Market, but Google Is Gaining Ground

Amazon Echo on kitchen counter (NASDAQ: AMZN) continues to dominate the smart-speaker market, benefiting from its first-mover status with its Alexa-powered voice assistants. But Google may be ready to surpass its rival soon.

The two tech giants have sucked most of the oxygen out of the room, owning a combined 94% share of the smart-speaker market. But Alphabet 's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google continues to flood the space with cheap Home and Home Mini devices that could help it become the dominant provider sooner than many expect.

Trouble on the horizon

Amazon still has a commanding lead with a 66% share of the market, compared to Google's 28%. Market research firm Strategy Analytics estimates that Google shipped 2.5 million devices in the first quarter compared to 4 million shipped by Amazon. Despite the lower volume, Google's shipments represented 700% year-over-year growth, while Amazon only doubled its shipments. Those types of numbers suggest that Google is focused on toppling Amazon as the leader in smart speakers.

One of the primary advantages of the Amazon artificial intelligence ecosystem has been its broad set of skills that allow it to perform a variety of functions. Its smart speaker's skills, combined with its large base of installed users has allowed Amazon to leverage the strength of its online marketplace and Prime ecosystem.

However, Google Home has been considered the "smarter" of the two platforms. With recent updates to Google Assistant, the brains behind the devices, Google Home might soon become integrated across the suite of Google services, making it an e-commerce powerhouse all its own. Businesses like Walmart and Target have already incorporated Google Home into their online marketplaces.

That may be helping Google Home narrow the gap with its rival, along with the fact that it has been giving away its devices with the purchase of various products. Buyers of Google's Pixel 2 smartphone, for instance, can get a free Home Mini. You can also get one if you spend at least $150 on eBay , and Walmart gives you one when you buy a Nest thermostat.

The future of the connected home

As connected homes becomes more commonplace, so will the use of voice assistants. Market research company eMarketer says no device other than the smartphone has seen a faster adoption rate than the smart speaker. It forecasts that by 2020, there will be 76.5 million units in use, a 47.9% compounded annual rate of growth. "Uptake has been so strong that the number of adult smart-speaker users will surpass that of wearable users for the first time this year." eMarketer says.

It likely won't be just a two-horse race for much longer, either. Alibaba (NYSE: BABA) has quickly become the third largest smart-speaker maker, because it and Xiaomi have the China market to themselves; Amazon and Google don't have a presence there yet.

Apple (NASDAQ: AAPL) began selling its HomePod speaker earlier this year , but it has only shipped some 600,000 units. The technology titan focused on superior sound quality as a defining feature of the HomePod, but its delayed introduction, its failure to support streaming music services, and a significantly higher sticker price have limited its market appeal. It is rumored, though, that Apple may offer a HomePod device at half of its current $349 price. remains the market leader, but Google's aggressive marketing, along with integration into online marketplaces, could make the Home and Home Mini essential devices for many. (And a recent incident in which an Amazon Echo secretly recorded conversations and then sent them to a third party may also cause some buyers to consider the other available options.)

It's a big market, and growing fast. And it may be Google, not Amazon, that winds up on top.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy .

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