Smart Speaker Market Continues to Grow, Despite Few People Regularly Using Them
The market for smart speakers continues to expand, according to new data from Canalys, despite research data also saying that only a minority of people actually use their voice assistants on a regular basis.
According to data from Canalys, there were 29 million smart speakers shipped during the third quarter of 2019 -- up 45% compared to the same quarter last year. Per their data, Amazon (NASDAQ:AMZN) was the winner of the quarter with 10.4 million Echo devices shipped and an annual growth rate of 66%. Google (NASDAQ:GOOG), in contrast, saw a steep decline as it shipped 40% less smart speakers, reaching only 3.5 million during this period.
In China, local giant Alibaba (NYSE:BABA) saw its shipments rise 78% year over year to 3.9 million, while Baidu was up 290% to 3.7 million and Xiaomi up 78% to 3.4 million.
With regards to market share, Amazon commands a 36.6% share of the market, up from 31.9% a year ago. Alibaba comes in second place with a 13.6% market share, Baidu in at third place with a 13.1% market share, while Google slid all the way down to fourth place coming in at 12.3%.
Canalys' Jason Low says a big part of Amazon's dominance this quarter has been the success of its Echo Upgrade Program, which lets users trade in old Echo or non-Echo Bluetooth speakers for newer models at a discounted price.
The fastest-growing segment of the market was devices with smart displays, crossing 20% of all smart home devices sold, hitting an install base of 6.3 million units.
Earlier this year, Canalys predicted that the global smart speaker market would top 200 million units by the end of 2019. In comparison, 114 million units were shipped in 2018.
The Rest of the World vs. China
An obvious problem with Canalys' numbers is that it groups smart speakers by vendors from China into the same category as devices from Google and Amazon when comparing market share. This is a pretty sizeable flaw in the methodology; devices from the likes of Baidu or Alibaba are going to have nill market share outside of China while devices from Amazon and Google will likely not work within China because of the Great Firewall. The only exception to this rule would be Xiaomi, as it has a particularly strong showing outside of China: its smart speakers are available in South East Asia and would compete alongside devices from Google and Amazon.
The Market Sometimes Kills Itself
The rise of the smart speaker has created a category of company that tries to provide the best of all worlds: a line up of high-fidelity speakers for those that want quality, a line up of devices that meld smart speakers with high-fidelity speakers, and simple old smart speakers that directly compete with the likes of what Amazon and Google both offer. But in the end, the result is that the companies that compete in this space don't really excel at anything and become reliant on Amazon/Google as a technology partner (and potentially being subjected to their terms) but also their victim too.
Think about Sonos. Before the introduction of devices like the Echo, Sonos was a big player in the smart speaker market which complimented its soundbar business quite nicely. Now, it barely registers on the RADAR. Here's Wccftech's Adrian Ip, editor of the Finance Section, on Sonos' IPO touching on this dilemma:
I’ve tried Sonos equipment (nothing too extravagant, just a Sonos Play 1) and it’s not bad but it also didn’t strike me as particularly game-changing. My wife is quite into gadgets so I figured she’d enjoy it but again, it didn’t really get a lot of use so that speaker got given to my dad and I believe it doesn’t really get much use at his house either.
Undoubtedly, it is a company setup by audio people to make an accessible and easy to use system with reasonably good sound quality (and to be clear, the audio world is famous for its lack of easy to use, high end systems), but it feels like it’s slightly missed a trick.
The bottom line is that many market share reports on the smart speaker market simply don’t even consider Sonos and look at the big traditional players. Voicebot has an analysis on market share including Sonos and Amazon unsurprisingly comes in first at almost 62% with Google taking 27% and Apple on 4%. Sonos came in at a paltry 3.8% which is probably decent considering the size of the market but also less than ideal considering that a few years ago, they probably were almost the entirety of the market for smart speakers prior to the Echo being introduced.
Smart Speaker Usage: Still Not Good
The one strength a Sonos smart speaker would have going for it is that at the end of the day it still is a solid mid-range speaker. The same goes for a higher-end dedicated smart speaker from the likes of Amazon and Google: they still excel at playing music.
But according to research from SUMO Heavy, that Wccftech reported on earlier this year, many of the smart speakers out there sit idle more often than not. Only 16% of US adults say they use voice assistants regularly, and that's primarily on a smartphone. 46% of US adults say they never use them, while 19% use them rarely. The most commonly used voice assistant? Siri.
The reason why the industry really wants to push these on the market is Alla Capella Commerce. Alexa could generate more than $5 billion per year in revenue by 2020, per RBC Capital Markets, and the advertising market, which covers the entire ecosystem (not just Alexa) and is believed to be worth $19 billion globally by 2022 according to Juniper.
For this market to come close to hitting forecasts, people are going to need to start using their voice assistants more to buy. SUMO Heavy’s data says that only 17% of all users had “browsed or shopped products using a voice-activated assistant.”
So while smart speakers might sell, particularly if they are at a lower price point or can do double-duty as a decent speaker for music, its likely that people aren't talking to them regularly.