HomePod Uniquely Positioned to Win Smart Speaker Market

In December, Apple will ship HomePod, a smart speaker with a unique focus on music. Don’t be fooled, however, by HomePod’s music-focused marketing; Apple has a grander vision than delivering a better sounding Echo. The company is making Siri a ubiquitous, ambient presence that connects and controls all your connected devices and services – and making a leap forward in the transition to voice-first computing.

The importance of natural language interface. The way humans interact with computers is changing. Today, we use our keyboards, mice, and touchscreens to interact with computers. In the future, we’ll simply rely on our voice, gestures, or even our thoughts. In the near-term, voice is quickly becoming a preferred interface. At Google I/O in may, CEO Sundar Pichai said that 20% of mobile queries are now made via voice search. Moreover, 42% of people in a MindMeld study said they have started using voice commands in the last six months. Natural language as a computing input is not only a more natural way to interact with our devices, but it can also be remarkably more efficient. When typing or clicking, users will be very brief, leaving the computer with little information to act on. Asking a verbal question, however, allows for more involved queries with which a machine can much more easily determine intent and deliver more specific information. This is one area in which Siri excels. Siri is able to process commands with multiple steps, such as, “make a note called Slide 4 in my Presentation Notes folder that says: change transition.” Users will also be able to say, “send directions to Steve’s house to my phone,” or, “turn on the TV and play the newest episode of Westworld.”  These functionalities are not unique to Siri, but Apple’s seamlessly integrated ecosystem of devices puts them in a position to employ voice-first computing in ways their competitors can’t match.

SiriKit is important for the future of the HomePod. Siri, which will be the AI brains inside HomePod, has recently extended an olive branch to developers with the introduction of SiriKit. SiriKit allows third-party developers to add voice capabilities to their apps. Consumers will be able to do a lot more with Siri than set a timer or ask for the weather. As Apple’s vibrant community of developers works to integrate voice into third-party apps, users will be able to get real work done with verbal inputs, marking a turning point in voice-first computing. However, lining up Siri against Alexa and Google Home reveals measurable gaps in ability early on – but the Siri we have come to know on our iPhones and the upcoming Siri that lives in HomePod with third-party integrations are two very different animals.

How does HomePod stack up? The smart speaker market has undergone impressive growth and rapid adoption in recent years, growing 62% in 2016 alone. When you use one, it’s easy to see why – the verbal interface is very natural and serves as a clear glimpse into the future of our interactions with computers. Meanwhile, this market continues to be flooded with products from new entrants, and from the continuing dominance of Amazon and Google.

Amazon’s Echo, released in November of 2014, costs $179. The Echo is part of a broader family of devices that also includes the Echo Show, Dot, Tap, and Look, each with their own distinctive features and price tags. Alexa-enabled devices command over 70% of the smart speaker market. Between licensing Alexa’s software to third-party hardware manufacturers, Amazon’s aggressive sales and marketing efforts, and allowing developers to augment user experience with Alexa Skills, the Echo family has solidified itself as the de facto voice platform of today. Alexa Skills, which integrate voice capability into an expansive range of third-party applications, are Amazon’s number one advantage going forward. While Amazon remains the market leader today, the sustainability of Amazon’s dominance comes into question going forward without an existing base of integrated phones.

The Google Home, which came along a full two years after Alexa, costs $129 and has a 24% market share. Google has opened its voice platform to various third parties, but does not have the exposure of Alexa Skills, or SiriKit. Google’s natural language processing, which is reported on extensively and tested in our research, is best in class, and may propel Google to the forefront of voice-first computing in the coming years.

In the small sliver of market share that remains, numerous alternatives have entered, hoping not to be left behind as voice becomes a major computing interface. Some prominent recent and upcoming entrants include the Alibaba Tmall Genie, Lenovo Smart Assistant (powered by Alexa), Harmon Kardon Invoke (powered by Cortana), and Samsung’s Bixby Assistant. With the underlying technology in its fledgling days, early leaders and laggards are bound to appear, but the core offerings remain fundamentally similar.

Apple is well-positioned for long-term success. As the technology improves, which our research suggests can happen quickly, competitors will converge, and the long-term winner will be the product that provides its user with a heightened experience and improved efficiency. We believe Apple is uniquely positioned to do so, as Apple’s device ecosystem delivers a frictionless experience, which will only get better with the adoption of voice-first computing.

Apple’s device ecosystem delivers a frictionless experience, which will only get better with the adoption of voice-first computing.

Interestingly, Apple has included an A8 chip in its HomePod, the same chip included in an iPhone 6. The A8 chip is much more powerful than the chips competing home assistants run on, which poses the question: what else is Apple planning with the HomePod?

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