Amazon.com's (NASDAQ:AMZN) intelligent, voice-assistant-enabled smart speaker, Echo, has been a surprising hit with consumers since the e-commerce giant launched it in 2014. Not only did it arguably introduce a new category of devices, but it influenced Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) to bring to market a similar AI-powered speaker. Clearly, these voice-controlled home assistants are here to stay.
In a move to stay in the lead in this nascent market, Amazon is reportedly working on a premium version of its Echo device, according to a Tuesday report from Bloomberg's well-connected Mark Gurman.
Here's what investors should know about Amazon's rumored plans, and why they could pose a threat to Alphabet and even Apple (NASDAQ:AAPL).
A premium version of Echo
"Amazon.com Inc. is developing a premium Echo-like speaker with a screen," Gurman said, citing "two people familiar with the matter."
The new device, which Gurman says could be announced as early as the first quarter of 2017, will feature a touchscreen measuring about seven inches, which tilts upwards. "This will make it easier to access content such as weather forecasts, calendar appointments, and news," Gurman's sources said.
In addition, Gurman noted the device will include better speakers than the Echo to help clearly differentiate it as a premium product.
A premium version of Echo would add to a growing list of Amazon products sporting the company's voice assistant. Amazon's voice-controlled home devices include Echo, a portable Echo-like device called Tap, and a smaller version of Echo made for connecting to external speakers called Echo Dot. The same voice assistant included on these home devices has also recently debuted on Amazon's Fire tablets.
The race is just getting started
With Amazon-branded smart speakers soaring to 5.1 million cumulative units sold in September, according to a November-released study by Consumer Intelligence Research Partners (CIRP), other tech companies are taking notice.
Google has acted quickly to address the opportunity, launching a lower-priced voice-assistant speaker called Google Home in October. Google Home features similar features as Echo but arguably boasts a more capable voice assistant. Google Home taps into Alphabet's existing artificial intelligence efforts, including "Ok Google" voice controls and Google Now. Priced at $129, Google's new voice-activated speaker undercuts Echo pricing by $50.
While Apple hasn't publicly announced any plans for a voice-activated speaker, the tech giant has recently stepped up its plans for an Echo-like device, according to a Bloomberg report in September. Apple's version of an Echo would, of course, integrate with the company's Siri voice assistant.
By aggressively cornering this market, Amazon.com has potentially carved out an important niche in the increasingly vital artificial intelligence segment. Further, plans for a premium product in the category will likely only solidify the e-commerce giant's early lead. Since artificial intelligence is growing in importance for Alphabet's and Apple's products as heightened competition makes differentiation more important than ever, the two companies risk missing out on a key opportunity to strengthen their product ecosystems and further entrench customer's in their hardware, software, and services if they don't compete effectively with Amazon's ambitious attack on the smart home.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon.com, and Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.