Will Smart Speaker market keep growing?

Smart Speakers (SS) are all the rage today when it comes to Smart Home and/or Home Automation. Alexa, Hey Google and Siri are becoming more and more part of our everyday lexicon. About five years ago years ago when I started focusing on Smart Home/IoT market, Smart Speakers were relatively unknown and most of the OEMs and Service Providers were focused on getting existing home devices connected to the internet. Thermostats, IP cameras, TVs, OTT boxes, light bulbs, garage doors, etc, were becoming "Smart" via WiFi/BT/Zigbee/Z-wave connectivity.

Over next couple of years there were multiple efforts made by the Industry to tie all these devices together by creating alliances and even protocols at different levels to give a semblance of "Connected Smart Home". However, those efforts were not as successful as industry players would have liked. The best outcome of all these efforts was users having different apps on their Smart Phones to control different Smart devices in their Smart Home. Not seamless and not very intuitive.

In the meantime, SS started appearing and gaining strong foothold in the living rooms beginning with the US. Amazon's Echo device(s) were the first to appear on the market. They dominated the market for few years till Google decided to enter the market with Google Home. Of course, Apple is now in the market, as well as other traditional speaker OEMs. And, do not forget the Chinese "BATmen" and others for their home market. Just from Amazon and Google there are at least 6 or 7 different kinds of Smart Speakers.

With the Smart Speakers (and built in Voice Assistants), things are starting to gel together and we are now beginning to see home devices from different OEMs working together and being controlled with a single interface, i.e. Voice. This integrations and convenience has also resulted in the popularity of Smart Speakers and more and more players in the home, OEMs, service providers, home builders, etc., are getting in on this trend.

Looking at the current numbers, analyst reports suggest that by end of 2018 Smart Speaker install base will reach 100 million units world wide. Since the US is the world leader in adoption of these devices (for now) so the majority, i.e. 50% plus, of this install base will be in the US. And, of this install base, majority is based on very attractively priced Amazon Echo Dot and Google Home Mini devices.

We are in relatively early stages of SS and Voice Assistants penetrating our daily lives and the use cases will only increase. However, the VA will not necessarily be tied to SS forever. Already they have been integrated into TVs, OTT boxes, cars, etc.I'd think goal for the companies like Amazon and Google will be to have their VAs in as many devices as possible. Does that mean that we have reached the end of road for Smart Speakers as a product category? Has everyone who was going to buy a SS has already bought one? I don't think so.

Many users who have bought low cost devices like Echo Dot and Home Mini in last year or two will now be looking to either upgrade to a newer version of the same device or even move up the ladder by paying extra to get better speakers and added features like controls for other Connected devices, better acoustics and improved Industrial Design. Amazon announced latest version of these devices couple weeks ago and Google is expected to do that this week. Both companies are adding features on a regular basis thanks to latest and great hardware and Cloud integration.

Of course, there are those who don't own Smart Speakers today but will be gravitated to get one because of the benefits they offer. I wold consider myself "technology laggard" on this one, but, now I own both Amazon and Google Smart Speakers. I had my reservations about acquiring either of them, but, the way they keep adding benefits and solving problems (first world, for now) it is hard not have them in your living rooms, kitchens, cars, offices, etc. According to some analysts, we are looking at install base of 225 million Smart Speakers by 2020.

Don't forget the companies that have been making speakers for years. Bose, Harmon, Sonos, etc. are all putting out Speakers with Voice Assistants, either Amazon's or Google's or both. People who want really good Audio experience will be buying their Smart Speakers from these OEMs. BTW, listening to music is one of the top use cases on Smart Speakers. What if we go the route of gaming and commerce? Will that make these devices even more compelling? I def thinks so.

I think (very) soon Voice will be the default UI that we use to control our homes and increasingly our lives. Smart Speakers are the gateway drug to that promised land. We have very interesting 2 to 5 years coming up in this space where companies like Amazon, Google, Apple, Facebook, BATmen, etc. and traditional Speaker OEMs will be very busy putting out products to get us hooked on the reality of actual Smart Home. As a result, Smart Speaker market will keep growing for at least next few years.

October, 2018

San Francisco