Amazon Echo Is Poised To Change Business Like The iPhone
Last week Amazon announced Echo Show, a major upgrade of its Echo “smart speaker” product line, which utilizes Amazon’s “Alexa” voice-driven digital assistant. Amazon already dominates the smart speaker category with 70% market share. Echo Show adds a camera and screen, raising the bar by bringing the voice-driven interface to video applications. Amazon’s announcement speaks of hands-free video calls, viewing shopping lists and lyrics from your music, monitoring security cameras, and many other things.
We could be on the cusp of another “iPhone moment”. The launch of the iPhone ten years ago began a fundamental transformation of the mobile device market from unwired phones to a new computing and communications platform which has now become dominant, especially with younger people. That in turn changed much of the business world and created a new set of tech giants. Something like that looks to be happening again now. Bill Gross, founder of IdeaLab, the original venture incubator, argues that Echo sales are on pace with 1st year iPhone sales, even though an Echo serves a household, while an iPhone serves an individual.
Voice-driven computing crossed a threshold a couple of years ago and became truly useful for non-specialized applications like smart speakers. I’ve been a Google Voice user for 5+ years. Google Voice will transcribe your voice mails and send them to you as emails, among other things. Five years ago, the transcription results were useful: you could generally tell who was calling and what about. But they were full of errors, some of them rather funny. Now Google Voice’s transcriptions are very understandable and often flawless. Voice to text conversion is the key technology that enables smart speakers to input voice instructions into a computer driven system that provides a service, like Echo. It is now ready for prime time.
Voice-driven computing is likely to greatly broaden the market for digital cloud-based services, which includes most of what Amazon, Google, Facebook, Snap, etc. do. Almost everyone in the first world has a capable smart phone now, but the big innovations in the mobile ecosystem occur most often among Millennials. They are not only digital natives but also mobile natives (at least the younger ones). A lot of that generation’s culture developed in the smart phone medium, and they are generally better at typing information into the phone than we older folks. However, the smart home, of which the Echo is the hub, appeals to people of all generations (see chart above). And, voice-driven devices liberate users from the on-screen keyboard. In my circle of friends, it’s not just the young geeks who proudly report buying an Echo and are eager to show it off; it’s a broad cross section.
Voice-driven computing is a powerful enabler of the Internet of Things (IoT). The technology pieces of IoT have been available for a decade or more. It has been waiting for a “killer app” to bring the market to critical mass, what spreadsheets did for PCs. Until recently, only a limited set of IoT use cases have been in any real demand. Now we see the general home-control application taking off with the rise of Echo/Alexa and similar. If this creates a critical mass of installed hardware and engaged users, then many additional IoT applications can emerge much more quickly.
Probably the biggest impact of voice-driven computing lies beyond IoT. Amazon makes it easy for Echo users to order products in the moment when they recognize a need: “Alexa, we need more diapers. Please repeat our last order. Make it next-day delivery.” The Echo enables Amazon to capture the household shopping list and have first shot at fulfilling it. We’re just at the beginning of discovering what can be done on this platform, where the smart phone was in 2008 or so.
So, for almost any entrepreneur or business owner, it’s important to consider what it means if voice-driven computing becomes the next big computing/communications platform — if we are at another “iPhone moment”. Here are some useful questions to explore:
- How will e-commerce (or all commerce) be affected by the voice-driven platform? Mobile profoundly changed commerce, giving rise to Uber, for example. Amazon’s “shop in the moment” strategy is one example of a new kind of e-commerce created by voice-driven computing. What else?
- How will communication be affected? Mobile gave rise to new communication modes based on photos, like Instagram and Snap. The screen and camera built into the Echo Show indicate that Amazon will target communication applications: it talks about making hands-free video calls and voice calls from any room in the house using Echo Dot extensions.
- How will search and advertising change? Voice-driven search is already a key component of smart speakers. Advertising is profoundly different on mobile devices where data display is based on a feed or card paradigm rather than a web page, which has room for ads around the edges. Mobile media platforms like Facebook had to work out how to insert ads into the feed. Will my smart speaker start to broadcast audio ads, like some web pages? I’d be tempted to fix that with a hammer, unless of course I’m addicted to the value I’m otherwise getting from the platform.
- Entertainment? Already Alexa plays music. With internet-connected displays, the same could be done for video. The Echo becomes the distribution channel for media, with Amazon giving its products prime placement and gathering the usage data. Netflix, take note.
This is a very early and incomplete set of questions. As voice-driven computing continues to grow, entrepreneurs need to keep a sharp eye out for the ways in which it will change their businesses, the threats it poses and, more important, and opportunities it creates. This could be another big bang in the information world, one from which we are already hearing the echoes.
First posted @ blogs.forbes.com/toddhixon on May 15, 2017.