If Amazon Can’t Be in Your Pocket, It Wants to Be on Your Head
September 27, 2019 | Contributed by: Mike Boland
This is the latest in LSA’s Skate To Where the Puck is Going series. Running semi-weekly, it examines the moves and motivations of tech giants as leading indicators for where markets are moving. Check out the entire series here, and its origin here.
As you may have read, Amazon launched a full hardware blitz this week during its Alexa event. For those unfamiliar, the company announced a string of new products that further extend Alexa’s reach to our ears, faces, hands and kitchens. The in-home integrations are notable, but the real story is in the wearables.
Specifically, its new Echo Buds are Bluetooth earpieces that compete with Google Pixel Buds and Apple AirPods. Echo Frames are similar to Bose Frames as mic and speaker-infused glasses. And Echo loop is an odd little ring with a mic and speaker to summon Alexa on the go, or to perform quick phone calls.
Stepping back for context, this fits Alexa’s crafty and less-discussed purpose to boost consumer engagement, pursuant to core e-commerce revenues. It’s a sort of loss leader in the same way Gmail, Google Voice, and several other Google products are an ecosystem play that drives search volume.
That’s not a new notion, but it’s important to acknowledge as an underlying motivation in Alexa’s ongoing conquests. One of its first plays was the Fire Phone. But failing to treat it as the loss leader it is — and charging too much for a phone that had no discernable edge over iOS or Android — it died on the vine.
This ended up as a costly mistake. Along with Facebook, Amazon was left with no direct hardware contact with consumers. It’s at the mercy of Google and Apple through which its mobile activity resides. Echo devices then became a beachhead in the home, and a successful one in terms of speaker market share.
But that only goes so far. As a home-only access point, it ceded lots of user mindshare to out-of-home activity where users are glued to their phones. Not only do Apple and Google own that hardware, but 20 percent of mobile searches are voice-based — a query volume that dwarfs smart speaker searches.
Backing that up, there are about 118 million smart speakers in the U.S. where Amazon leads. But there are 3 billion global smartphones and 120 billion annual mobile voice searches where it has zero market share. That’s where Google Assistant and the laughably inept Siri (distribution over merit) have the pole position.
Beyond penetration, there’s the matter of context and intent. Purchase intent is greater on mobile devices than stationary ones, and people don’t buy things on smart speakers. Moreover, a far greater portion of U.S. commerce happens with local out-of-home shopping than in-home eCommerce.
But despite the tech press’s misguided focus on smart speakers for voice search, Amazon knows where the scale is. So these new wearables are meant to bust out of the home and become part of our daily travels (and commerce-outcomes therein). It’s Amazon’s direct play at your senses, if it can’t be in your pocket.
Amazon is also smart with the timing. As hand-wringing in the tech world has made clear, smartphones are reaching market saturation and experiencing decelerated revenue growth. But wearables are on the rise, and could be a sort of successor to the smartphone (though reliant upon it) as a primary input.
Case in point: in Apple’s Q3 earnings, iPhone revenues were down $3.5 billion year-over-year. But its wearables unit (Watch & AirPods) brought in $5.5 billion. The growth in the latter isn’t enough to offset the former but it’s getting close. Wearables are where the iPhone once sat, offsetting maturing Mac sales.
Amazon’s timing is also right because of the advent of 5G, which will generally fuel the viability and connectivity of IoT devices. Sort of a subset of IoT, wearables will likewise benefit. Beyond faster speeds, 5G’s low-range, high-frequency signal will enable millimeter-level accuracy in positional tracking.
That unlocks lots of functionality for wearables like glasses and earbuds. For example, we’ll get textured audio content such as local discovery (“look to your left”), with precise UI inputs such as head nods. This is what I’ve been calling “audio-AR” as an alternative and less invasive modality than graphical AR.*
After failing to market a smartphone, Amazon now sees the device’s maturation as an opportunity to leapfrog to the next growth hardware: on your body. It could be experimenting to see what sticks, especially Loop and Frames. But Echo Buds are a validated product class, and likely Amazon’s next hardware hit.
*We’ll be back in part II of this series to go deeper on the concept of Audio AR, what it means for local commerce, and what others are doing in this area.