The launch of HomePod this week marked yet another attempt by Apple to disrupt the consumer tech industry with a product that primes "beauty" in the shape of superior quality of experience and simplicity over smart "geeky" interactive features used by the competition. The HomePod is by far the best home audio speaker of its price range, while also the worst multipurpose smart speaker in the market. Apple has all the necessary expertise and funds to develop a much better smart speaker with Siri but intentionally decided not to do so. Here, we list a few reasons why.
The smart speaker market boomed last year with sales growing by a factor of five to nearly 30 million devices. However, Amazon and Google pushed entry-level prices below the $50 mark and brought the category into impulse buying where value perception is often lost. Ovum conducted a survey in 2Q17 in the US which showed that more than two-thirds of consumers did not find smart speakers useful. This is highly concerning and will lead to an impeding market slowdown unless new use cases for home assistants are identified. We expect smart speaker sales growth in the US to drop to 12% in 2019 and turn negative from 2020 onwards. The underlying AI technology that powers home assistant devices is simply not mature enough. It needs to perform more accurately and provide a more customized user experience.
Google and Amazon will soon stop selling their own smart speakers. There are currently nearly 30 different models of home audio speakers developed by third parties such as Sonos, Sony, Harman, and Onkyo that feature either Amazon Alexa or Google Assistant. Those compete directly with Amazon Echo and Google Home. The end game for Amazon and Google is to dominate the digital assistant market, not smart speakers. This is very different to Apple which makes money from hardware first and services second.
Accessing and sharing content and information is at the core of all new technology adoption. The devices that provide the best experience in that regard are bestsellers. Consumer-facing AI in the form of digital assistants is a new user interface through which to deliver those experiences and will certainly have a huge impact. However, Apple's pragmatism toward it should be used as an opportunity to step back from the hype that surrounds that area and rethink the core value proposition. Beauty and simplicity always wins as exemplified by Apple.
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