Please ensure Javascript is enabled for purposes of website accessibility

Is Apple's New HomePod Mini Too Little, Too Late?

By Evan Niu, CFA – Oct 14, 2020 at 10:00AM

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

The Mac maker has lagged in smart speakers for years.

Investors have been hearing about Apple (AAPL -0.34%) working on a HomePod Mini for years, following the original HomePod's flop. Announced in mid-2017 and launched in early 2018 at $350, the HomePod failed to gain traction in a booming market for smart speakers. Apple was the No. 6 player in the smart-speaker market in 2019, with just a 4.7% market share, according to Strategy Analytics.

Amazon.com (AMZN -1.44%), Alphabet (GOOG -0.44%) (GOOGL -0.55%) subsidiary Google, and Baidu (BIDU 4.72%) continue to dominate the smart-speaker market. Is the HomePod Mini too little, too late?

Two children sitting at a kitchen countertop with a man cooking on a stove across from them, with a HomePod Mini foregrounded on the counter

Image source: Apple.

Smart-speaker customers might already be entrenched

Amazon is widely credited for essentially creating the smart-speaker market with the original Echo, and the e-commerce tech giant has been able to defend its position admirably over the years.

Priced at $99, HomePod Mini is comparable to the flagship Echo. But HomePod Mini is just the second addition to Apple's smart-speaker lineup, while Amazon has spent years expanding its Echo portfolio to address an increasing array of price points and use cases. The lineup ranges from the $50 Echo Dot all the way up to a high-fidelity $150 Echo Studio, complemented by a handful of smart displays, a category that was derived from smart speakers. Google's Nest is also mostly following in Amazon's footsteps.

While Apple likes to say that it doesn't care about being the first to market as long as it can be the best once it gets there, the Mac maker is also keenly aware of how powerful lock-in effects can be. As Apple lagged its smart-speaker rivals, consumers have invested heavily in competing smart-home ecosystems, buying numerous Echo and Nest gadgets to place throughout the home to control and automate various third-party smart-home products.

Some of those third-party smart-home devices might be compatible with Apple HomeKit, but not all. If a consumer is already entrenched in either Amazon's or Google's smart-home platform, then switching to Apple's could cost a considerable amount of money. Apple, Amazon, Google, and Zigbee partnered almost a year ago to create a new open-source smart-home standard that could help address some of this fragmentation, but that standard isn't set to launch until next year. As a laggard, a universal standard would help Apple the most.

Amazon led the smart-speaker market in the second quarter with a 21.6% share, followed by Google at 17.1%, according to Strategy Analytics. Baidu came in No. 3 with 16.7%, and Apple is not mentioned.

HomePod Mini won't directly support the most popular music-streaming service

Using smart-home technology and accessing music-streaming services are the top two use cases for smart speakers. One of the knocks against the original HomePod was that it only directly supported Apple Music. Apple is planning to add support for SiriusXM's Pandora and Amazon Music, but not Spotify. Spotify subscribers  -- all 138 million of them -- have little use for a HomePod Mini.

Between entrenched users and the exclusion of the most popular music-streaming service, the HomePod Mini will have limited appeal to much of the market.

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 Amazon, Apple, and Spotify Technology. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Baidu, and Spotify Technology. The Motley Fool recommends Sirius XM Radio and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned

Apple Stock Quote
Apple
AAPL
$147.81 (-0.34%) $0.50
Alphabet Stock Quote
Alphabet
GOOGL
$100.44 (-0.55%) $0.55
Amazon.com Stock Quote
Amazon.com
AMZN
$94.13 (-1.44%) $-1.37
Baidu Stock Quote
Baidu
BIDU
$113.80 (4.72%) $5.13
Alphabet Stock Quote
Alphabet
GOOG
$100.83 (-0.44%) $0.45
Spotify Technology Stock Quote
Spotify Technology
SPOT
$80.31 (1.08%) $0.86

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

Related Articles

Premium Investing Services

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