It would be a mistake to assume that these three categories have jobs and use cases that will require three completely different sets of products. At the same time, it would be equally incorrect to assume the smartphone will remain at the center of our lives. Instead, there will likely be new products and some overlap as to how those products are used. One of the major sources of this kind of overlap is found with the body and home.
In some ways, the stationary smart speaker market resembles the early wrist wearables market. There was a significant amount of unknown found with where the wrist wearables market was headed: low-end fitness trackers, high-end smartwatches, or some combination in between. It took a few years and Apple’s entry into the market for the landscape to change.
There are three distinct possibilities as to the stationary smart speaker’s future.
- Low-cost hardware to push digital voice assistants. Consumers purchase cheap smart speakers solely based on the accompanying digital voice assistant. Smartphones, tablets, and smartwatches ultimately lose value in this scenario. The winners are services companies betting on intelligent digital voice assistants to capture as much customer data as possible.
- High-end accessory. Given how digital voice assistants are already found in smartphones, tablets, and smartwatches, consumers look for standalone speakers to offer something more. That additional capability would likely be superior sound quality.
- Disjointed space waiting for unknown catalyst. A number of players are able to coexist despite relying on dramatically different strategies and core competencies. While market share will likely be used to denote winners and losers, in reality, success will be determined by usage patterns and access to premium users.
Consensus currently thinks the first option is the most likely outcome for the stationary smart speaker market. This explains the sheer amount of skepticism pointed toward higher-priced speakers like Apple’s HomePod speaker. Meanwhile, Apple is placing its bet on the second or third options coming true. When introduced at WWDC 2017, HomePod was marketed as an iOS accessory that will serve as the best speaker people have ever owned. The $349 price certainly reflects this accessory mindset. While Apple briefly went over how HomePod will be able to serve as a type of smart home hub, it was almost more of an afterthought. At its core, Apple does not think the only function for stationary smart speakers is to pipe digital voice assistants.
I don’t think stationary smart speakers represent the future of computing. Instead, companies are using smart speakers to take advantage of an awkward phase of technology in which there doesn’t seem to be any clear direction as to where things are headed. Consumers are buying cheap smart speakers powered by digital voice assistants without having any strong convictions regarding how such voice assistants should or can be used. The major takeaway from customer surveys regarding smart speakers usage is that there isn’t any clear trend. If anything, smart speakers are being used for rudimentary tasks that can just as easily be done with digital voice assistants found on smartwatches or smartphones. This environment paints a very different picture of the current health of the smart speaker market. The narrative in the press is simply too rosy and optimistic.
Ultimately, smart speakers end up competing with a seemingly unlikely product category: wearables. In fact, stationary smart speakers and wrist wearables share a surprising amount of similarities. Each is ultimately based on handling tasks formerly given to smartphones and tablets. Two examples are delivering both digital voice assistants and sound. If the goal is to rely on a digital voice assistant, an Apple Watch wearer has access to Siri at pretty much every waking moment. When simply wearing an Apple Watch, Siri is instantly available everywhere in the home. The same kind of access to Alexa would require five, ten, or maybe even 15 Echo speakers spaced strategically throughout the home (another reason why Echo sales are becoming increasingly misleading – some consumers may be buying a handful of $20 speakers at one time). With a cellular Apple Watch, Siri is now available outside the home even when users are away from their iPhones. Meanwhile, Alexa is stuck within four walls – at least until Amazon unveils its Alexa smartwatch.
Wearables contain a much more attractive long-term value proposition than stationary smart speakers that have to be connected to a wall outlet. In addition, the presence of a screen provides even more value as it has become very clear that voice-first or voice-only interfaces just aren’t that efficient.
The writing is on the wall. The stationary speaker market is a stopgap measure taking advantage of relatively low wearables adoption. My estimate is that Apple Watch adoption stands at 3% of the iPhone user base (10% to 15% of iPhone users in the U.S.). As that percentage increases, my suspicion is we will start to see the stationary smart speaker market begin to experience usage and retention troubles. Just as every company seems to be moving into the smart speaker space today, pain and lackluster results will begin to spread, ultimately leading to most companies exiting the space.
There may still be a future for stationary smart speakers, but not as some kind of future computing paradigm. Instead, stationary smart speakers will become accessories to the very same wearables that they are competing against today. For example, when an Apple Watch wearer wants to listen to music, HomePod will be positioned as a way to provide a much better sound experience. In addition, the very same HomePod can be positioned in the home as a type of smart home hub for controlling devices while away. If voice interfaces evolve to the point of becoming more useful, wearables will be able to easily support an increased reliance on digital voice assistants. The current fascination with standalone smart speakers may end up being labeled as a steeping stone to mass-market wearables adoption.
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