What’s Behind the Rise of Hearables?

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

A clear trend is emerging among tech giants: interest in hearables. A subset of wearables, these are wireless earbuds that deliver audio in subtle ways directly to your ears. Today that’s phone calls, tomorrow it’s deeper integration with voice assistants and other textured audio (more on that in a bit).

After covering Amazon and Microsoft’s market entrance over the past two weeks, it’s now time to step back and examine the trend’s larger implications. These two giants join Google and, more so, Apple in chasing the hearables opportunity. They’re each doing so in different ways, but for common reasons.

That reason is essentially to help future proof their core businesses. Each of the hearables products mentioned above trace back to the provider’s core business. Google’s Pixel Buds are a vessel for Google Assistant and its longstanding efforts in the smartphone era to redirect users from apps to search.

Apple is meanwhile big on Airpods — along with Watch and its developing wearables suite — to counterbalance decelerating iPhone sales.  Smartphones are reaching market saturation as iPhone sales declined $3.5 billion year-over-year in Q3. But wearables brought in $5.5 billion during the quarter.

As we examined in light of Amazon’s new hearables, it wants to gain direct touchpoints with users (like smart speakers, but better) to drive eCommerce. Hearables are particularly interesting for Amazon as smartphone maturity means it can leapfrog the technology (Fire phone) that it once failed to market.

Meanwhile, Microsoft got into the hearables game last week, as we wrote. Like the above moves, its hearables create a direct touch consumer touchpoint as a vessel for its core products. For Microsoft that’s enterprise productivity like controlling Office apps (think advancing .ppt slides) in sleek ways.

Local Guidebook in Your Ear

But beyond this “follow the money” exercise that’s a key tenet of our Skate to Where the Puck is Going series, another key question emerges: what does it mean for local commerce? This is where a key endpoint for hearables comes into the picture: textured and intelligent audio as a local discovery tool.

This is also what I like to call “audio AR.” Like graphical augmented reality, it can augment one’s reality but using a subtle audio whisper instead of obtrusive glasses or upheld smartphones. It could beat its graphical cousin to market because of less adoption friction and technological invasiveness.

That discreetness could in fact be audible AR’s greatest strength. Because AR glasses are held back by cultural and stylistic factors, the subtlety of ambient audio could fill an important gap. And the potential all-day use creates a massive addressable market (in the form of time) for content.

What will that content be? Use cases will range from social pings to professional networking to local discovery. We’ll all essentially become secret service agents empowered by ambient audio that informs us throughout our day. We’ll be able to opt-in or pre-filter the types of things we want to hear.

That could involve things like active navigation or passive notifications for local fare (“your favorite IPA is served at the bar to your left”). Live foreign language translation is another example of the breadth of use cases, and is already developed by Google using Pixel Buds in tandem with Google Assistant.

Speaking of Google, it’s probably the most likely of the above players to develop local discovery and commerce applications for audio AR. If we go back to the “follow the money” exercise, local search and commerce is more central to its business model than others, though Amazon and Apple will compete.

A Platform is Born

But the real dark horse could be Bose. Its business model, like Apple, is selling hardware and it’s likewise future-proofing itself by leaning into audio AR. It even launched a developer platform for audio AR apps — everything from audio Yelp reviews to local audio tours to meditation apps.

“We started to realize that there’s this whole world of audio content that you can pin to the real world,” said Bose’s John Gordon at January’s ARiA conference. “What’s the architectural tour of the city?… the blues tour? There can be layers and layers tied to the same physical space.”

The open platform approach will help it get there, and is already active. But the key that separates this from just having voice search on your phone is that the SDK lets developers build actions that tap into the IMU sensor bundle in the hardware. So it knows the direction you’re looking and pace you’re walking.

This is the direction Apple will likely follow to make audio content more textured and intelligent. The hardware will get more sensors, and the platform will open up to developers… just like iOS and tvOS. That would infuse more value into AirPods pursuant to, again, offsetting iPhone sales declines.

Apple sold an estimated 25 million Airpods last year, which means audio AR has a decent installed base on which to scale. Add competition from other tech giants, downward pricing pressure and commodity players entering the market, and hearables could become a thing. We’ll be watching closely.

See our past and ongoing hearables coverage here

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