Please ensure Javascript is enabled for purposes of website accessibility

Apple Doesn't Get Why Amazon's Echo Was a Hit

By Leo Sun - Updated Jun 19, 2017 at 7:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple’s pricey, narrow approach with the HomePod could limit its appeal among mainstream consumers.

Apple (AAPL -5.64%) recently introduced the HomePod, a Siri-powered smart speaker that seems poised to compete against Amazon's (AMZN -7.16%) Echo devices and Alphabet's (GOOG -3.69%) (GOOGL -3.93%) Google Home. But here's the big difference: The HomePod will cost $349 when it arrives this December, compared to $140 for the Echo and $109 for Google Home.

It isn't surprising that Apple is launching the HomePod at a premium price, but its brand appeal might not be enough to win over mainstream consumers. Let's take a closer look at what Apple's HomePod strategy is and why it could fall short of expectations.

Apple's HomePod.

Apple's HomePod. Image source: Apple.

What Apple thinks will happen

Apple claims that the HomePod will offer superior sound to other smart speakers, thanks to its seven smaller "tweeter" speakers and a large 4" woofer in the middle. It can also sense the type of room that it's placed in, and automatically readjust its speakers accordingly.

Those specs, combined with its brand appeal and its cloud-based connections to Siri and Apple Music, could presumably convince customers to buy the speaker. After all, Apple recently revealed that Apple Music already reaches 27 million users -- up from 20 million last December. The HomePod could presumably capitalize on that growth, similar to how the Echo and Google Home stream songs from first-party and third-party services.

As for Siri, Apple's personal assistant could tether HomePod to the company's oft-overlooked HomeKit platform, which links smart home devices (like lights, fans, cameras, and doors) to iOS devices and Apple TV. By tethering all those devices to a single smart speaker, Apple can counter Amazon and Google's similar speaker-centered smart home strategies.

What Apple is missing

That plan sounds logical, but Apple still faces an uphill battle. First and foremost, audiophiles already have an elite list of speaker brands to choose from -- including Bose, JBL, Samsung's Harman Kardon, and Sennheiser -- to boost the audio of their devices.

Unlike those companies, Apple doesn't have a long-established reputation of producing great audio products. Audiophiles frequently ridiculed the build and sound quality of Apple's older EarPods. They blasted Apple's acquisition of Beats, a brand which critics claim use slick marketing campaigns and heavier materials to mask inferior audio hardware. Apple's new AirPods were also criticized for allowing ambient sound to leak in. Therefore, expecting fickle audiophiles to purchase the HomePod for its audio quality alone could be a big ask.

Amazon's Echo smart speaker.

Amazon's Echo smart speaker. Image source: Amazon.

Apple also doesn't really grasp why Amazon sold over eight million Echo devices to date. It wasn't about the audio quality -- it was about the e-commerce and cloud ecosystem to which the speaker was tethered to. Last March, Apple co-founder Steve Wozniak notably called the Echo "the next big platform for the near future," and praised its ability to buy consumable items like paper towels and remember a customer's last order on Amazon.

The HomePod can't accomplish those things because Apple doesn't have an e-commerce platform. In addition to ordering products, the Echo provides local news updates, hails rides, places orders for food, conducts web searches, streams music and audio books, and integrates with mobile apps and smart home devices. Simply put, it's becoming a must-own device for frequent Amazon shoppers. That's why Amazon subsequently expanded the Echo family with the cheaper Tap ($100) and Dot ($40) devices.

By comparison, the HomePod doesn't seem like a "must own" device for either iPhone owners or Apple Music subscribers. Some die-hard Apple fans will likely buy the speaker, but it's hard to see a compelling difference between using the HomePod and a comparable Wi-Fi speaker to stream Apple Music.

The key takeaway

I didn't expect Apple to match the Echo and Home's prices with the HomePod, but I also didn't expect it to cost more than many other high-end Wi-Fi speakers. Waiting until December to launch the HomePod could be another mistake, considering how quickly Echo and Home are adding new features to their ecosystems. By the time HomePod finally arrives, it could already be well behind the smart speaker tech curve.

It won't matter much if the HomePod flops, since Apple still generates the lion's share of its revenue from the iPhone. But it could represent a big missed opportunity for Apple to expand its aging ecosystem with a fresh hardware product.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$140.82 (-5.64%) $-8.42
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,237.99 (-3.93%) $-91.47
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,142.25 (-7.16%) $-165.12
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,248.02 (-3.69%) $-86.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
349%
 
S&P 500 Returns
122%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.