Most products are not capable of becoming the default for an entire category. But most products are not Amazon's (AMZN +3.47%) suite of Alexa-enabled home devices.
The tech giant's Echo, Echo Dot, and other products have essentially defined the smart devices for consumers and put Amazon in first place for smart speaker shipments. But Jeff Bezos and company aren't trying to make gobs of money off selling the products -- the whole offering is part of Amazon's larger plan to extend the reach of its ecosystem.
In this video from our YouTube channel, we break down exactly how dominant Amazon is in the smart speaker market and highlight the Chinese upstart that is trying to eat away at its market share.
A full transcript follows the video.
Narrator: Welcome to The Motley Fool's Bottom Line series. On this episode, we're going to dig into a huge shift that's going on in the smart speaker market and what is says about the future for some of the major players in the space.
Research firm Canalys is one of the leading "fingers on the pulse" for consumer tech, and they just released their mid-year update on device shipments in the smart speaker market.
For a long time, this category has been dominated by Amazon. The company's Alexa-enabled family of devices are often the first thing people think of when they hear "smart speaker" and that mindshare translates into a ton of devices sold.
The tech giant was hands down the best seller in the second quarter with 6.6 million shipments, up 61% year over year, and took about 25% of the market.
Amazon is happy to see the sales, but this is much less about the money they make on the individual units and much more about how these devices play into the company's overall strategy.
Research shows that Amazon Prime users spend more with Amazon that the average consumer -- and consumers with an Echo device spend even more than the average Prime member.
For Amazon, the smart speaker and smart home market is about creating another consumer touchpoint for their robust ecosystem of e-commerce, services, and media. Based on the data, it's clear the strategy is working.
But the story is a little murkier for another U.S. tech company -- Alphabet's Google (GOOG +1.44%)(GOOGL +1.71%) . They've historically been #2 in the rankings, playing the Robin to Amazon's Batman.
Recent data shows Google's grip on the smart speaker market is slipping. Google was the only major company to show year-over-year declines in devices sold, and saw their market share nearly get cut in half from where it was in 2018.
Some of that was due to year-over-year declines in the U.S. market where smart speakers and assistant-enabled devices have been available for a while.
But if we zoom out and take a bigger picture of the smart speaker market, we see that the space globally is also getting more crowded. Especially from Chinese competitors.
Chinese tech giant Baidu (BIDU +6.06%) has made a huge splash in 2019 with their smart display speakers. The company sold an estimated 4.5 million units in the second quarter, up from about 100,000 a year ago.
To give you a feel for just how out of left field Baidu has come -- the company grew smart speaker shipments 3700% year-over-year.
That kind of growth helped them take the number two spot by units-sold, outshining Google and fellow Chinese companies Alibaba and Xiaomi.
Interestingly, the rise of Baidu didn't cause declines for its local competitors. Alibaba (BABA +3.00%), Xiaomi (XIACF +0.51%), and Baidu were all able to grow shipments thanks to a huge surge in interest in smart speakers in China.
The country went from a nonexistent smart speaker market in late 2017 to half of all global shipments by mid-2019.
Like Amazon, smart speakers aren't going to be the core thesis for Baidu. The company nests speaker revenue contribution into its "other revenues" segment, along with cloud services, and revenue from video streaming property iQiyi.
All told that "other revenue" segment is one-quarter of the company's total top line, and last quarter it grew 44% YoY while the company's core online marketing business experienced a 9% slide.
So the segment is a nice kicker for Baidu right now, but long-term the play is to have a spot locked down in consumers' homes.
In the flurry of stats and names, you might not have realized that one name has been noticeably absent... a leader in consumer tech and one of the largest companies in the world... Apple (AAPL 0.85%).
Apple is largely a hardware company and it shows with its smart speaker approach -- the company's HomePod retails for several times the cost of devices from Amazon and Google.
Some of that is classic Apple premium pricing, and some of it is driven by the fact that Apple is in a position where it needs to make money on its device sales, while other companies are willing to sell smart speakers at or near cost because they plug into a larger platform strategy.
The bottom line is that lower prices make it easy to sell a ton of smart speaker units, and that's exactly why Amazon, Baidu, and Google are leading the pack.
