Making sense of Apple’s Home pod strategy

Fig 1: The Apple Home pod

I have always been amazed by how well Apple understands its customers. Considering apple was a bit late to the smart speaker game, I was curious to see how they would approach this market — especially considering their voice assistant Siri is lagging behind Alexa and Google.

Apple seems to be taking a very interesting approach with the Home pod; it is positioning the device as the perfect speaker for your living room — a perfect focal point for all your parties, hangouts or just your solitary evenings. Reinforced by great aesthetics and features like realtime acoustic modeling, audio beam-forming, and multi-channel echo cancellation it already has the people in the Apple ecosystem excited; Apple insider reported today that the purchase intent among Apple users is around 17%.

I wanted to dig deeper to see how people are actually using the market leader in the smart speaker category— Amazon echo. From the data, it becomes clear that most users actually use their smart speakers for the use cases in the ‘doing/ performing a task’ category (see fig 2, 3). Majority of the users frequently order their smart speakers to play music or set a timer. This is not very surprising considering smart home technologies and IoT are not a mainstream reality yet.

Figure 2: Smart speaker use cases source: AWS Lex
Figure 3: common tasks in the Doing cateogry

It makes perfect sense for Apple to approach this market via the music use case. The memories of Apple revolutionizing the music industry with iPod and iTunes are still fresh in people’s minds and Apple can leverage such users as its initial target customer segment — the head pin. This gives Apple enough time to improve the Siri ecosystem before it can approach grander use cases like home automation and internet of things and turn the Home pod in to a main stream product.

Figure 4: Bowling Alley Market development approach

Apple — unlike Amazon — can not make revenues directly from the shopping use cases. However it can make recurring revenue from the users who sign up for Apple Music. The home pod coupled with the air pods acts as a strong moat for the Apple music service. Its a no brainer that Apple would make this speaker Apple Music only. Considering its charge a premium for a perfectly integrated product business model (fig 5) it makes complete sense for Apple to price it at $349.

Figure 5: Apple and its revenue drivers

Let me conclude this post with a couple of open questions —

  • Less user data means less personalization. Will Apple’s absolutist approach to customer privacy be a limiting factor for Siri to advance?
  • How will the Echo vs Home pod battle play out? Considering Apple users are very valuable and are also likely to be Amazon prime members, will Amazon integrate with the home pod? Or will it limit the smooth shopping experience to Echo?
  • What happens to Google Home in this market? Will this market shape out to be a repeat of the iPhone vs Android battle — with Alexa powered devices being the Andorids of the voice era.