Please ensure Javascript is enabled for purposes of website accessibility

2 Reasons Why Big Tech Is So Invested in Voice Assistants

By MyWallSt Staff - Updated Oct 14, 2019 at 2:34PM

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

Home voice assistants have become staples of big technology companies even though the devices are rarely profitable. So why are the Silicon Valley giants investing so much in the tech?

This article was first published by MyWallSt. Do you want access to 25 years of market-beating experience in one day? Find out more about MyWallSt's exclusive InPerson November event!

In 2011, Apple released Siri, inaugurating the era of the digital assistant. Three years later, Amazon (AMZN -0.60%) brought out the Echo smart speaker featuring Alexa, and it wasn't long before Alphabet (GOOG -0.22%) (GOOGL -0.31%) jumped on board with Google Assistant and Microsoft (MSFT -0.48%) with Cortana. Today, the home voice assistant has become a fixture in roughly 120 million homes.

There's no doubt that the technology has grown very quickly from a novelty to a ubiquitous component of the modern household, yet none of the major companies involved -- Amazon, Apple, Microsoft, or Google -- has managed to finesse a revenue model for their smart speakers, even if the benefits to each company's core business seem clear enough. Although it's difficult to verify, none of the devices seem to be turning a profit yet. There's little data on the sales of specific devices, though a study conducted last year by market researcher Arizton found that $1.3 billion smart speakers were sold in 2017. It further suggested that the majority of those sales were made at a loss.

Amazon's Echo Dot smart speaker.

Image source: Unsplash.

Home voice assistants may not be bringing in much cash to their makers, but they must be bringing something in. Amazon's Alexa division, for instance, boasts a team of some 10,000 employees, by some accounts, while Microsoft continues to pump money into Cortana (it patented something called "whisper mode" back in January), despite the product being a small fish in a big pond containing HomePod, Echo, and Google Assistant.

There are two critical reasons why big tech is continuing to pour resources into smart speakers despite having to regularly stomach losses.

1. Data

For one thing, the technology acts as a perfect tool for drawing customers into each company's core business, whether that business is search (Google), e-commerce and subscriptions (Amazon), workplace solutions (Microsoft), or services (Apple). In all cases, the sheer amount of data generated by a user's daily interaction with their assistant will prove invaluable in the long run. For this reason, it's no wonder that Facebook (META -1.20%) has belatedly entered the race with its range of Portal smart displays.

2. UI shift

The second reason is the radical potential of voice-powered technology itself. In a recent report, the Harvard Business Review described the emergence of voice assistants as the "third key UI and technology platform shift of the past three decades," the other two being the World Wide Web and the smartphone. In the two previous cases (and especially the first one), users had to learn a variety of new tricks and words in order to feel like a "native" on the platform (think "click," "swipe," and "scroll"). When it comes to voice, however, this latest innovation is perfectly in line with pre-existing human behavior and can update itself as it adapts to its owner's speech patterns and accent. Behind this impressive technology lies sophisticated artificial intelligence, and in this sense, the smart-speaker battle can be seen as a front in the wider war for AI.

Of course, voice assistants are not confined to the speaker devices with which they are commonly bracketed. Siri, for example, was initially developed for the iPhone before it migrated to HomePod. It's impossible to tell what's going on in the research and development departments of Silicon Valley, but the continued investment across the board in talking computers would seem to suggest that smart speakers are only the beginning for voice technology.

MyWallSt logo

Image source: MyWallSt.

Get your shortcut to 25 years of investing experience in just one day at InPerson. Click here to find out more.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Alphabet, Amazon, Facebook, and Microsoft. Read the full disclosure policy here.

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. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, and Microsoft. The Motley Fool has the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.

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

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$119.18 (-0.31%) $0.37
Microsoft Corporation Stock Quote
Microsoft Corporation
MSFT
$289.92 (-0.48%) $-1.40
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$141.25 (-0.60%) $0.85
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$120.05 (-0.22%) $0.27
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
META
$172.76 (-1.20%) $-2.09

*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 analyst team.

Stock Advisor Returns
395%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

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.