The retail giant has a threatening lead over its rival with the Echo and Alexa, as questions remain over how the search engine can turn voice technology into revenue. Amazon and Google always thrive in the fourth quarter as people get out their wallets for Christmas. Both companies – or in Google’s case, its parent group, Alphabet – are therefore expected to announce booming revenues in their fourth-quarter results over the next fortnight, with Alphabet going first on Thursday and Amazon the following week. But analysts are already looking beyond the simple question of how many cardboard boxes Amazon filled and how many searches Google answered. They’re wondering which company will win the battle to control your home.
That battle is being fought by two carafe-sized cylinders from the respective companies. One is Amazon’s Echo, with its voice-operated “personal assistant”, Alexa; the other is Google Home, which responds to the phrase “OK Google”. Both are internet-connected, home-based devices which can be command to do things: give the weather forecast; play music; read out news headlines; update shopping lists; and control “smart” devices in the home such as light bulbs or power points. In theory, if a device can be linked to it, the Echo can control or monitor it, and keep you informed. And simply by saying “Alexa, add sugar to the shopping list”, users can keep up to date on house supplies and even purchase them directly.
Amazon is in the lead, having launched the Echo in November 2014, two years before Google Home came out. Though Amazon has not – and does not – release sales figures for any individual item, investment bank Morgan Stanley estimates that 11m Echos had been sold by the end of November 2016; other estimates suggest a further 7m have been sold since. About 700,000 were estimated to have been sold in the UK and Germany, the only countries outside the US where it is available.
The Morgan Stanley estimate would put an Echo in more than 8% of US households. This is a significant figure, especially compared with the best estimates for Google Home, which put its sales at less than a million since its launch in October 2016.
Why should Google care about Amazon? Because voice is seen as the next big field for computer interaction, and the home is a far better environment for voice detection than the great outdoors. Research company Gartner reckons that by 2018, 30% of all interactions with devices will be voice-based, because people can speak up to four times faster than they can type, and the technology behind voice interaction is improving all the time.
The risk to Google is that at the moment, almost everyone starting a general search at home begins at Google’s home page on a PC or phone. That leads to a results page topped by text adverts – which help generate about 90% of Google’s revenue, and probably more of its profits. But if people begin searching or ordering goods via an Echo, bypassing Google, that ad revenue will fall.
And Google has cause to be uncomfortable. The shift from desktop to mobile saw the average number of searches per person fall as people moved to dedicated apps; Google responded by adding more ads to both desktop and search pages, juicing revenues. A shift that cut out the desktop in favour of voice-oriented search, or no search at all, would imperil its lucrative revenue stream.
Amazon is copying one feature of Google’s success in smartphones: it is offering methods to connect and control smart devices via the Echo for free, rather as Google’s Android software was offered as a free platform for smartphones. There are signs it is paying off: Wynn hotels in Las Vegas announced in December that it would be adding Echos to all 5,000 rooms, for functions such as playing music and controlling curtains and blinds. That gained some notice, as much as anything because the life cycle of such hotels implies they will be there for a decade or so.
