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As Expected, Amazon and Google Dominated the Smart Speaker Market Last Quarter

By Evan Niu, CFA - Dec 16, 2017 at 12:00PM

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The smart speaker market is going to heat up in 2018.

Last week, Strategy Analytics released its latest estimates on the smart speaker market. Surprising no one, Amazon.com (AMZN -2.06%) and Alphabet (GOOG -1.01%) (GOOGL -1.12%) subsidiary Google dominated the space. Asian rivals are starting to appear, and the Chinese market is beginning to see some growth. North America still represents the bulk of volume, though, with 75% of global unit volumes being sold in that region.

Google is starting to chip away at Amazon's lead, even though the search giant didn't unveil its latest additions to its smart speaker portfolio -- Google Home Mini and Google Home Max -- until a few days after the quarter closed.

Google Home Max on a bookshelf

Google Home Max launched last week. Image source: Google.

Amazon and Google still dominate the market (for now)

Here's how the top five vendors fared in the third quarter:

Vendor

Q3 2017 Shipments

Q3 2017 Market Share

Amazon

5 million

67%

Google

1.9 million

25%

JD.com

0.1 million

1.6%

Xiaomi

0.1 million

1.3%

Alibaba

0.1 million

0.9%

Others

0.3 million

3.9%

Total

7.4 million

100%

Data source: Strategy Analytics. Note: Unit numbers are rounded, so the market share numbers are different.

Amazon and Google collectively grabbed a whopping 92% of the market. Amazon's share fell modestly from 69% a year prior, mostly due to Google jumping into the market in late 2016 and expanding availability of its original $129 Google Home across different markets. The device launched in Canada, Australia, France, Germany, and Japan over the summer, shortly after launching in the U.K. earlier this year. Meanwhile, Chinese manufacturers are starting to release smart speakers, led by Beijing LingLong's DingDong. Beijing LingLong is a joint venture between JD.com and iFlytek.

Things will heat up in 2018

Following the introduction of the Google Home Mini and Google Home Max shortly after the third quarter closed, Google has an opportunity to continue chipping away at Amazon's lead, particularly as the Google Home Mini addresses the affordable $50 price point (same as the Echo Dot). Apple is about to launch its HomePod, though it's slightly delayed.

"The competitive landscape will heat up even further in 2018 and we expect to see the introduction of a new wave of third party devices that support one or even both of the Alexa and Google Assistant voice AI platforms. All of this activity will of course pile more pressure on Apple whose own Siri-based HomePod speaker failed to materialize in time for the holiday season and will now make its debut in 2018," said Strategy Analytics' David Watkins. "Apple is falling well behind Amazon and Google in the AI and virtual assistant race and its famed ability for hardware innovation may not prove enough to counter the fast-paced AI-software innovation of its rivals."

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of BABA and AAPL. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, AAPL, and JD. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.

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