Check out the latest Amazon earnings call transcript.
Over 74 million people in the U.S. will be using a smart speaker in 2019: some 26% of all internet users. While most of them will have an Alexa-enabled device from Amazon.com (AMZN 0.11%), the e-commerce giant is steadily losing its control over the market.
eMarketer data indicates that 63.3% of U.S. smart speaker users will have an Echo device this year, down from 66.6% in 2018, compared to the 31% who will use a Google Home device and 12% who will use some other device like an Apple (AAPL +0.10%) HomePod or Sonos (SONO 2.00%) One. Even though Amazon sold millions more Echo devices this Christmas, breaking records, and likely won't lose the top spot any time soon, the Amazon smart speaker is no longer the default choice for consumers.
Image source: Amazon.com.
Losing ground
Echo and Echo Dot devices are so ubiquitous because Amazon.com made the decision early on to flood the market with cheaply priced speakers. It was soon followed by Alphabet (GOOG +0.05%)(GOOGL 0.13%), which offered the Google Home and Home Mini devices, also at low price points. Together, Amazon and Google hold more than 90% of the domestic smart speaker market.
Smart Speaker User Penetration by Brand
| Brand | 2017 | 2018 | 2019 |
|---|---|---|---|
| Amazon Echo | 70.6% | 66.6% | 63.3% |
| Google Home | 23.8% | 29.5% | 31% |
| Other | 5.6% | 8.3% | 12% |
Data source: eMarketer. Totals may not equal 100% because users own more than one device. Table by author.
Apple and Sonos have largely ceded the low end of the field to Amazon and Google, preferring instead to concentrate on the high-end smart speaker market. Nevertheless, the anticipated market share growth for the HomePod and One devices indicates that they are continuing to whittle away at Amazon's lead by appealing to those looking for an enhanced experience.
Globally, Amazon is far less dominant than it is in the U.S., according to Canalys data, and Google often takes the top spot. In the third quarter of 2018, Amazon led the market with a 32% share of global smart speaker shipments, followed closely by Google with a 30% share. Alibaba and Xiaomi also have a meaningful presence, with a combined 21% share.
Global smart speaker demand also continues to grow. This year, China's installed base will surpass that of the U.S., with 85.5 million smart speakers in use, according to eMarketer estimates. Yet that would still translate to a penetration rate of about 10% of internet users: far lower than in the U.S.
More to come
The U.S. remains a breeding ground for smart speaker innovation, and more players are entering the market. For example, Facebook is expected to hit the market this year with its Portal device, which will advance the technology and utility of smart speakers by making them portals for streaming video content as well.
Still, research indicates that most people typically use smart speakers for mundane tasks like listening to music, checking the weather, or turning their lights on and off. This is not surprising, since Adobe says 63% of speaker owners have one in their living rooms, and 42% in their bedrooms. Another 37% have one in the kitchen, which may be why buying things through a smart speaker -- so-called "voice commerce" -- has yet to take off.
As more smart speakers from different manufacturers come onto the market -- Microsoft has been particularly lacking in this field -- we'll see late adopters begin to buy them. Those consumers might not automatically gravitate to Amazon devices in the numbers their predecessors did. The connected home is becoming more of a reality, and while Amazon will remain a big player in the smart speaker market with its Echo devices, it may not continue to dominate the market as it did previously.
