In a recent tweet, Benedict Evans brings up the point that business models are important for understanding the nascent smart speaker market. This is particularly important given a Reuter’s report that both Amazon and Google likely lost money on these devices during the holiday shopping season.
This brings up the question, what business models are these smart speakers really suited for, and have Google and Amazon exhausted the possibilities? Are there other companies with different business models that might enter the smart speaker market, and be even more aggressive or successful?
Nowadays, if you want to search for perspective, it is a good idea to look to China to see what the Chinese are doing (other East Asian countries are also illuminating). According to a report by Activate, there are quite a few interesting developments. In the chart below, Activate shows that in addition to Baidu and Alibaba which can be considered as counterparts to Google and Amazon respectively, we see the Asian messaging giants – Tencent (WeChat), LINE and Kakao getting into the game. What’s interesting is that these messaging apps are not just for messaging, but are actually portals to a whole variety of services spanning ride-hailing, deliveries, music streaming, digital payments and more. This means that without plugging in third party apps like how Amazon is doing with their “Skills”, WeChat, LINE and Kakao may be able to provide a battery of useful services that could be better integrated into the voice UI. They would also be in a better position to monetise directly from a variety of services compared to Amazon which only monetises through shopping or Google which doesn’t yet have a clear monetisation strategy yet.
Therefore, it seems that the East Asian tech companies have a better business model for Smart Speakers than any of their US-based counterparts. US customers are reported to use Smart Speakers only for very basic tasks, but is it possible that East Asian users will soon adopt more complex use-cases, simply because the better matching business models will encourage the services to be much better, more varied and more integrated. Who knows? If Smart Speakers turn out to be really successful, they might turn out to be the vehicle on which Chinese companies will finally penetrate the US market (although there might be significant national security issues with having Chinese ambient microphones in US households).