An Overview Of The Smart Speaker Market

'Smart' and 'connected' are the two words defining the majority of devices around us today. One of the fastest growing categories with these two features lies with smart speakers. These devices can be defined as internet-enabled speakers integrated with digital voice assistants powered by Artificial Intelligence (AI).

Here’s an overview of the smart speaker market and how technology giants such as Amazon, Alibaba and Google are part of it.

The global smart speaker market grew at an impressive pace of 44.9% to reach 28.6 million units in Q3 2019 as per data by Canalys. The top five players are Amazon, Alibaba, Baidu, Google and Xiaomi. During Q3 2019, Amazon (AMZN) topped the chart by shipping 10.4 million smart speakers, capturing 36.6% of the market share. It registered an annual growth of 65.9%.

While smart speakers are currently being used to do routine tasks such as play music, tell weather updates, set alarms, or search for general information, there is a huge potential beyond these mundane tasks that they offer. A report by Deloitte points out, “Potential demand for smart speakers could be in the many billions of units. A speaker could be installed in every room in a house or a hotel, every office in a building, every classroom in a school, or every bed in a hospital.”

The hospitality industry is deploying smart speakers for better concierge services. Tasks such as playing music, ordering towels, controlling in-room temperature or lighting, finding local restaurants and attractions, calling, and even checking out are made easy by these devices. Amazon’s ‘Alexa for Hospitality’ for hotels, vacation rentals, and other hospitality locations is one such offering. Marriott International signed up for this service last summer; the hotel chain is also setting up Alibaba’s smart speakers Tmall Genie in its hotels in China.

Another major area where smart speakers are being seen are at hospitals, which can benefit patients, nurses and doctors. A report by IHS highlights the use of smart speakers in hospitals (patient rooms) as one of its most compelling use. The use of voice command will operate televisions and other appliances in patient rooms as well as forward patient requests and notifications to mobile devices used by doctors and nurses.

In February this year, a pilot project was undertaken by at Cedars-Sinai where patients are being access to an Alexa-powered platform known as Aiva to interact hands-free with nurses and control their entertainment. In April 2019, Alexa introduced new skills (subject to the U.S. Health Insurance Portability and Accountability Act of 1996) designed to enable users to manage a variety of healthcare needs. It enables using voice to book a medical appointment, access hospital post-discharge instructions, check on the status of a prescription delivery, and more.

In addition, it is believed that smart speakers can contribute immensely is that for the visually impaired, uneducated and the elderly by making their interaction with technology much simpler. Globally, at least 2.2 billion people have a vision impairment or blindness as per the World Health Organization.

Briefly mentioned earlier, Alibaba’s (BABA) smart speaker Tmall Genie is the most sold smart speaker in China and the second most popular globally. The control of home-devices through a smart speaker is one of the most popular ways smart speakers are used in China. Tmall Genie has been connected to 235 million home appliances from 900 brands, including lights, heaters and air purifiers, according to Alibaba A.I. Labs.

Alibaba reported that during it’s 11.11 Global Shopping Festival more than 1 million orders were placed and paid via Tmall Genie’s voice-shopping feature. In September 2019, Starbucks launched voice ordering and delivery capabilities within Alibaba’s Tmall Genie. Using this service, customers can now order their favorite Starbucks beverages and food simply by using their voice for delivery. 

The combination of smart speakers and car consoles is on the rise. Tmall Genie is being integrated in Audi, Renault, Volkswagen and Honda cars in China. It facilitates car owners with recommendations for nearby places to eat, buy movie tickets, order food for delivery, even make purchases on Alibaba’s Taobao and Tmall e-commerce platforms while on the move.

Baidu (BIDU) has been working on AI-powered devices. Its smart speaker doesn't just enable its users to connect appliances at home but even give directions to the car. Smart speakers and AI assistants are a very important part of the smart home market in China which is expected to close to $37 billion by 2025. During the recent quarter, Baidu overtook Google for the third spot globally by registering a 270% growth. It sold 3.7 million devices during Q3 2019, just behind its competitor Alibaba (3.9 million). Alibaba and Baidu captured 13.6% and 13.1% of the market globally.

Google (GOOG, GOOGL) and Xiaomi are the other two brands in the top five globally with 12.3% and 12% market share respectively. Some of the other players in the market includes prominent names such as Samsung and Apple, among others. Going forward, it is projected that the use of smart speakers to make calls to mobiles and landline will surge. A Juniper research forecasts that over 220 million smart speakers will be used to make calls to landlines or mobile phone numbers by 2024. It suggests that smart speakers “will enable new engagement channels which operators can offer to brands and enterprises.” 

Despite concerns over privacy and security along with challenges such as localization of languages spoken by the intelligent virtual assistant, the global smart speaker market is expected to grow by $14.35 billion during 2019-2023. As the ecosystem of ‘connected devices’ around us strengthens, smart speakers will play a more diverse and prominent role. Ultimately, demand will be determined by utility.

Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. 

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

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