Amazon vs Apple: The Swinging of a Tech Pendulum

During the recent tech earnings calls (2017 quarter 4) - there appeared to be a common trend - an inflection point if you like, whereby the pendulum for high-end consumer technology has begun to swing.

Since Apple launched the groundbreaking, innovative, disruptive (pick any other buzzwords) iPhone back in 2007, their position as the leader in consumer hardware has only gained traction year on year ever since:

1. The Apple iPhone become the benchmark for high-end smartphones.
2. Thanks to the smartphone (and Steve Job’s foresight), the world went “mobile first” as PCs and other such legacy tech began a downward trend.
3. Apple’s iOS software has marched along in a two-horse race with Google’s Android, but the former has been in a league of its own when it comes to services revenue from the mobile ecosystem.

In recent years, we have noticed across the smartphone sphere, that “innovation” and new features have slowed and we are now left feeling somewhat underwhelmed after every smartphone launch - better cameras, screen resolution and $1,000 iPhone X's which can unlock your phone with facial recognition - Nice features? No doubt. Game-changers? Hardly.

Such releases have become the norm for most all smartphone manufacturers and they have consumers and industry analysts alike rightfully asking the question: What comes next (after the smartphone)?

Just to clarify, this is by no means saying that the smartphone will go the way of the Walkman, DVD player or Kodak Camera. Smartphone sales are still strong worldwide with particular growth in developing markets such as Africa, where people are skipping the entire PC generation and connecting to the internet for the first time via their smartphone, and with ever-improved cellular coverage and cheaper smartphones, this trend has some legs on it.

The “what comes next” question, refers to the cutting edge of consumer technology in developed markets - pretty much the arena that the iPhone and Apple have been dominating for the past ten years - and it's here where “next big thing” appears to be the marriage of voice and artificial intelligence (AI).

Although smartphones have always had an element of voice, the emergence of AI-powered voice technologies, with their new frictionless use cases, will ultimately be what replaces the smartphone at the top of the consumer tech hierarchy. In a nutshell, the revolutionary Amazon 1-click ordering process is about to be replaced by no-click voice ordering.

56 million smart speakers are expected to be shipped in 2018. These “smart voice assistants” will have the ability to search the web, play music, tell the weather, order milk, switch on the lights/thermostat and much, much more. In years to come, these voice-powered devices will become commonplace in our cars as well as our smart earphones - read my 2016 piece on "The real reason Apple is going wireless with the airpods".

It is here, however, that I refer back to the header for this post - the bit regarding pendulums and earnings calls - as both Apple and Amazon reported impressive earnings within hours of each other, there was a subtle yet common trend that was seemingly missed by most as they hid amidst the numbers and stats such as Apple selling 77 million iPhones in three months and Amazon Cloud services “side hustle” making them a whopping $5.1 billion in revenue during the same period.

The trend in question relates to AI, voice, smart homes and smart assistants. Plain and simple, one doesn't need to be a Wall Street or Silicon Valley analyst to see that Amazon and their Alexa [AI powered voice] platform, is smashing Apple’s Siri out of the ballpark. This in terms of hardware sales, but more specifically, in terms of software and the AI-powering their platform. As of December 2017, in the U.S, Amazon’s Alexa already has over 25,000 ‘skills’.

For further supporting evidence in this Amazon vs Apple battle, I should make mention of the massive advantage Amazon has in owning the world largest enterprise cloud service (AWS). This enables Alexa across endless new touchpoints developed by both Amazon themselves as well as third-party platforms. Amazon is allowing third-party developers to build on their platform and there are over 4,000 connected home devices developed by third-party players which make use of Alexa’s technology. All of this has Amazon creating a virtual circle with an impressive moat in a powerful new battlefield.

I could go off with a slew of further tech stats regarding how Alexa is more intelligent than Siri, but I’ll hold back.

It must be said, that Apple is on the brink of releasing their own smart speak called the ‘Home Pod’. However, taking into account my above points regarding Amazon’s Alexa being a far superior technology to Apple’s Siri, as well as the first-mover advantage that Alexa (and even Google’s Home assistant) have over Apple. In this new arena, I believe that the Apple’s Home Pod will be more of an impressive wireless speaker (for music), and less of a (revenue generating) smart home assistant.

What is the point of the above ramblings?

Quite simply, whether you are a consumer looking to make your home smart (and connected), or a average Joe who just wants to order milk without having to leave his couch, your next high-end tech product in years to come will probably come from the company owned by Jeff Bezos and named after a South American forest and not from the Silicon Valley giant named after a doctor’s favourite fruit.

I’ve predicted for some time that Amazon will soon be the world's largest company, while displacing Apple at the top of the pile. To be fair, this prediction has more to do with Amazon's incredible retail, AWS/cloud and Prime businesses - rather than their hardware/AI business.

However, the relevance of the latter play is that for the first time in over a decade, the leader in consumer technology appears to no longer be Apple - but rather Amazon, thanks to Alexa and it’s artificial intelligence.