Why Audio is all you hear about

Image courtesy Visual Capitalist.

Tech companies are riding sound waves: in Q1, Spotify announced its going public, Apple launched its smart speaker, a survey claimed voice shopping is a $40 billion market, and Google and Amazon ramped up competition over who’s smart enough to win the key to your house. Here’s an update to help navigate the 2018 soundscape. (Apologies in advance for all the wordplay).

Audio is sound money

In February, Spotify announced its ready to press play on its IPO. It will begin trading in the first week of April and so far, this year, valuation has been calculated at $15.9 billion to $23.4 billion. The music streaming service has159 million users, and impressively over 50% of those are paying subscribers — a staggering ratio, compared to, for example, the average SaaS freemium conversion rate of 1–2% — which speaks volumes to consumers willingness to pay for audio.

The ratio confirms another observation: consumers are generally more willing to pay for audio than for digital content, readily paying up for services such as Audible Channels while less favorable to newspapers’ paywalls. Audio is relatively easy to monetize due to the lack of adblocks and because consumers tend to spend more time with audio content, yet programmatic audio ad-exchanges are in their infancy. While people average 2 minutes per news session online, the average for the same content in audio format is 35 minutes.

AUDIO IS TIME: Although we spend more and more hours consuming audio, there’s no necessary trade-off as voice allows for ambient media consumption (think: voice assistants lets you do work while you drive, podcasts lets you consume the news while you’re at the gym), making audio the medium of choice for a multitasking generation (click for cool simulation of how Americans spend their days).

Audio is (the) key (to the smart home)

Smart-speaker sales increased with 279% in 2017, and its estimated that 75% of all US households will have a speaker to talk to by 2020.

The devices made their way into our homes (and hearts?) with Amazon Alexa in 2014, Google following suit in 2016. Apple was (fashionably) late to the game when they introduced their sleek HomePod earlier this year. As for Facebook, its anticipated to launch its version — its first ever hardware device — in the second half of 2018, allegedly a smart speaker with a screen, similar to Amazon Echo Show. Despite the characteristics of the tech giants’ hardware converging, it’s worth remembering how different their revenue models are (take a look at the graph at the top of the article).

The domestic feud is real. In February Amazon acquired smart-lock maker Ring, and subsequently notified Google that they would no longer stock Google owned competing Nest devices.

Owning the key to your front door may enable the companies to deliver your online orders while you’re away from the house, something Walmart experimented with already last year through a cooperation with smart-lock maker August Home. Monitoring your front door is also crucial in realizing the vision of the truly smart home; your doorbell informing other smart devices of your arrival so that they too can foresee your needs.

Google, on its part, has done some interesting investments in the audio space, such as launching Resonance Audio: a tool to bring audio into the 3D/AR space, which it open-sourced mid March.

Google open sourced Resonance Audio in March: try out the Audio Factory app to hear it in action.

Google also acquired UK startup Redux a few months ago; acquiring a technology that can can turn any surface/screen into a speaker, which may be interpreted as an ability to turn any appliance into a talking gadget. Redux’s technology stack may also help make interconnectedness more seamless, allegedly enabling data transfer via audio.

Using audio to transfer data has many valuable use-cases. In simplified terms, a device translates data into sequences of sounds, which a second device decodes to convert the data back to its original form. Potentially, it can be more efficient than other offline modes of transfer such as bluetooth or QR codes — worth keeping an eye (or ear) on during Q2–4 2018.

As we’re chatting away with our devices we’re re-engineering industries. According to a report coming out early March, voice shopping is anticipated to be a $40 billion market within four years in the US alone.

Business woman Lisa Gansky once said that “a brand is a voice and a product is a souvenir.” Although speaking figuratively at the time, it has literal meaning today. Voice assistants are married to brands so that consumers expect to hear Siri’s and Alexa’s voices everytime they interact with Apple and Amazon respectively, regardless of which of the brand’s products they’re using. Since the voice outlives product iterations, voice is becoming an increasingly important aspect of branding.

Surround-sound — Audio all around

In 2004 Merriam-Webster declared “blog” the word of the year and a surge of free blog-creation services supervened. In the years that followed, everyone from baby-boomer business gurus to fierce fashionistas decided to share their wisdom online. The same is now happening with podcasting, but while it took VC’s almost ten years to get behind blog aggregators (Bloglovin got backed by Betaworks and Northzone in 2012/14) we’ve learned from history and are moving quicker with podcasts.

According to Nielsen, 50% of US homes are now podcast fans. Anchor equips the masses with the tools to produce, rather than just consume, podcasts.

In February, Anchor — an app for the masses to record and distribute their own podcasts using a smartphone — re-launched with new features. The improvements followed a $10M series A round lead by Google Ventures in September last year. There’s no hosting fees, no need for audio editing software, and with the click of a button individuals can publish their podcast to any platform including Apple Podcasts, Google Play, Amazon Alexa devices, Spotify, and beyond.

Other podcast players have been making noise in Q1 as well. British Audioboom says it plans a $185M acquisition of Triton — an interesting “reverse takeover” for Audioboom to capitalize on the smaller company’s penetration of the US market. Another European podcast success story — Acast, a platform connecting creators, ad buyers, and listeners — made a partnership with Ford to deliver in-car audio.

That said, the ultimate “instagram of voice” is yet to come. The closest we’ve seen so far might be Musical.ly, the app that lets teenagers become viral music stars, that sold to Chinese giant TouTiao for between $800M and 1B at the end of last year.

The sound of a unicorn

With so many companies making a fortune on audio, it’s about time we agree on what a unicorn sounds like. Send me a voice note if you have the answer.

The Future of Work

The latest and greatest updates about the Future of Work, from the CodeControl crew.

Clara Lindh Bergendorff

Written by

VC firstminute capital - investing early in Consumer, Future of commerce, and Media. Commentator on consumer investing for UKTN and Forbes.

The Future of Work

The latest and greatest updates about the Future of Work, from the CodeControl crew.

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