“Alexa?”
“Hey, Siri…”
“Okay, Google…”
“Hi, Bixby…”
It wasn’t that people didn’t love their gadgets in the distant wilds of five years ago; nor did the idea of talking to a digital intelligence sound completely outside the realm of normal experience. In 2013, the world had been acquainted with Apple’s Siri for almost two years, and Google’s first crack at a smart, voice-activated assistant, “Google Now,” was released in mid-July 2012.
But the idea of voice-activated artificial intelligence (AI), capable of fulfilling more than very simple commands — and, in fact, being able to “converse” in real-time with a human, recognize a user’s voice through biometrics and develop more skills over time so it could gradually “learn” to do better — seemed literally the stuff of science fiction or superhero movies.
The idea that there would not only be that type of AI in the market, but that there would be so much of it out there that users would need to learn a variety of different “wake” commands to initiate conversation with their devices? No one was thinking that.
Well, almost no one.
With little fanfare in the summer of 2014, Amazon released the Echo, and the world met Alexa — the AI-powered smart assistant that could help a customer order online (from Amazon, naturally), provide a weather report and even tell a joke if asked.
Flash forward 3.5 years, and Alexa has come a long way, and the rest of the ecosystem strains to catch up.
As of December 2017, Alexa has 25,000 skills. At Amazon’s re:Invent conference in Las Vegas earlier this year, the company said they have roughly 25,000 developers working to perfect the Alexa ecosystem. Alexa has gone from being the interesting little gadget Amazon snuck onto the market to what many analysts and experts are estimating will be the driver of $10 billion to $11 billion worth of incremental sales for Amazon over the next three years.
“The win, by the way, for Amazon probably is not just selling devices … 40 percent of people who own these [Alexa] devices shop more with Amazon,” RBC Capital Analyst Mark Mahaney wrote in a note to clients. “You are removing friction; you’re creating more opportunities for Amazon to be there with its shopping cart. With tens of millions of users and 20,000+ skills, we see Alexa’s value prop as becoming increasingly powerful.”
Notably, it’s not just that Amazon has added lots of skills; it’s the more specific skill set expansions that have followed.
This fall, Amazon added voice biometrics, so Alexa knows who’s talking and can customize its offerings accordingly. In a rare occurrence, Amazon found itself trailing Google, which had announced voice authentication for its recently re-released home assistant (now called Google Assistant, because team Google has never really been known for its efforts in the whimsy department) about six months prior, during the spring.
But Amazon was ahead about a month later, when it announced that it would be opening up voice authentication for its third-party developer pool.
That was one of many upgrades to the Amazon Alexa developer experience in 2017. Amazon also announced that developers would be able to engage customers beyond using voice commands, having the capability to access things like lighting and audio cues. Additionally, Amazon will soon be enhancing the ability of developers to monetize those apps.
The company revealed Alexa was adding a payments capacity for third-party developers. Payments-embedded skills will fall into the categories of donations, restaurants and event ticketing at first and will expand more dramatically next year to wider uses. This will likely address complaints that the Alexa platform is hard to monetize, as ads are mostly forbidden — with the exceptions of flash briefings and streaming audio.
The firm also said a public beta for the Gadgets API that will enhance the ability for users to play games with their Echo devices. Reports indicate the beta will allow developers to create gaming experiences that interact with the Echo buttons for multi-person gameplay. Those will be in stores starting next month.
Alexa also made its first steps beyond consumer applications for voice-activated technology with the announcement of the Alexa for Business platform — with its own skills and integrations for both practical and business use cases.
And then — because that wasn’t quite enough to keep them busy in a year — Amazon set off a price war in a market they were already dominating, with 75 percent control over the voice-activated smart speaker division. The price drop apparently worked: The Echo was Amazon’s top seller during the Black Friday sales weekend. Prices stayed low throughout the holiday season, and the $30 Echo was backordered until New Year’s.
The only thing left for Amazon to do at this point in 2017 with regards to the voice-activated AI market?
Drop the mic and walk off stage.
The Competition
Amazon certainly had a winning year, but there are other players still angling hard to stop the eCommerce giant before it runs off with the market.
Well, realistically, in 2017 there was really only one other player that seriously tried to stop Amazon. Earlier this year, Apple announced its coming contribution to the race: the $350 HomePod, which was met mostly with a collective, bewildered shrug from the marketplace.
Everyone believed Apple’s claims that they were bringing superior audio quality, with its large, proprietary woofer (for deep, clean bass), its seven beam-forming tweeters (for pure high frequencies) and the spatial intelligence to detect its position in a room and adjust audio output accordingly.
They just weren’t sure why this was Apple’s focus, since the “smart” part of the pitch has heretofore been considered the more technically interesting and important part than the “speaker” side of the pitch. Apple may have the best speaker on the market, but was this the upgrade the market was looking for?
And, it seems, things may have suddenly appeared less clear to Apple as well, as Cupertino announced that, contrary to initial announcements, Apple will instead be releasing the HomePod in early 2018 at a TBD date.
Hmm…
Apple wasn’t the only big brand that decided to live to fight another day in 2018 on the smart speakers front. Samsung also decided to pause the rollout of its smart speaker until the new year. That speaker will run Bixby and will reportedly retail for about $200.
Whether consumers will want to pay $50 more for the flagship Samsung speaker as opposed to the Echo Plus remains to be seen, particularly since Bixby, Samsung’s contribution to the Speaker Wars, has so far had some trouble breaking through.
Bixby launched with a different premise than the other voice assistants on the market. Instead of being outward-looking — tailored to help users shop or search for information — Bixby’s focus was inward-looking: providing users a tool to help them more efficiently navigate their phones.
“At its core, Bixby will help remove friction. It will simplify user education with new voice interfaces and will make using your phone even more seamless and intuitive,” wrote Samsung.
It was a strong pitch, but Bixby stumbled out of the gate when its U.S. launch had to be delayed, because Bixby took more time than expected to learn English.
But Samsung and Bixby have big plans for 2018, with the rollout of what Samsung is calling Bixby 2.0. Samsung says Bixby 2.0 is a virtual assistant that will play an “intelligent” role in everything from phones to sprinkler systems, as Samsung attempts to leverage the massive collection of consumer electronics it has in the market already.
According to Eui-Suk Chung, executive vice president of R&D at Samsung Electronics, Bixby, which was launched when Samsung rolled out the Galaxy S8 and Galaxy S8+ earlier this year, is just the start for what the company’s virtual assistant will be able to do.
“Bixby 2.0 will be ubiquitous, available on any and all devices,” said Chung. “This means having the intelligence of Bixby, powered by the Cloud, act as the control hub of your device ecosystem, including mobile phones, TVs, refrigerators, home speakers or any other connected technology you can imagine. Soon, developers will be able to put their services on any and all devices and will not have to reinvent their services each time they support a new device.”
What’s more, Bixby will have enhanced natural language capabilities, more natural commands and complex processing, so it can know and understand the user and his or her family members. To control those, Samsung bought up Fluenty, a Korean artificial intelligence (AI) startup.
So, stay tuned: Samsung seems to have some tricks left up its sleeve for scale in the new year.
But the biggest player in the race to take on — or at least contain — Amazon’s relative voice speaker dominance was Google.
Google Home has been on the market since 2016, but in 2017 Google dedicated itself fully to raising the level of its game. Payments came to the Home and Google Assistant in early 2017, with an upgrade to its APIs that will allow merchants and third-party developers to enable users to pay with credit and debit cards that are saved in their Google accounts. This includes payment methods saved in Android Pay, the Play Store or stored within the Chrome web browser.
Building off that initial news, Google went on to announce that U.S. consumers with debit cards linked to their Google accounts would be able to use their voice- activated assistant to send and receive payments. For those keeping score at home, that puts Google well ahead of Amazon when it comes to integrating payments.
And Google, while it doesn’t have 25,000 skills or developers to call its own, is working hard to actively add them. 2017 saw direction from Waze going online and a gaggle of merchants joining up with the platform. It also saw Google hone its focus on leveraging its search powers to use Google’s Assistant as a resource in uncovering local commerce opportunities and service providers.
“Mobile is now the anchor of the customer journey,” noted Google’s Kishore Kanakamedala, director of product management for online-to-offline solutions. “Our research shows mobile ads generate 160 percent more incremental store visits compared to desktop and tablet. In addition, local ad efforts — such as local inventory ads — drive an 80 percent higher rate of incremental store visits.”
About those store visits (and gaggle of merchants): Google’s greatest strength and biggest power in its race with Amazon — apart from its deep pockets and incredible search capabilities — is the fact that it is not Amazon.
Google, Karen Webster noted in a recent commentary on who will rule the future of commerce, noted that for all of Google’s many powers, it needs retailers — and a lot of them — if it is going to race with Amazon’s Alexa-Echo powerhouse. Even the largest retailers need a voice platform if they want to keep their ongoing war of attrition with Amazon alive.
“Google’s tie-up with Walmart to enable voice shopping via its devices is a tacit admission that competing with Amazon online via online search and a single device called Google Home isn’t cutting it. And Walmart’s admission that it needs one,” Webster stated.
Walmart is far from the only big retailer admitting that the enemy of their enemy is their friend. This year saw a lot of retailers partnering with Google: Target, Home Depot, eBay, Costco, Publix, Bed Bath & Beyond, ACE, Kohl’s, Lowe’s, Home Depot, Moosejaw, Pier One, Plow & Hearth, PetSmart, Toys R Us, Wayfair, Payless …
We could do this for a while, but the point is that a lot of retailers are realizing that in a voice-controlled world, merchants need a presence. While they all sell different things — and in some cases are direct competitors with each other — they are all competing with Amazon.
And even though Google is down, it would be unwise to count them out. Amazon still dominates the market, and yet it saw its share of the market slip below 70 percent during Q3, as Google began aggressively pushing its new (and highly popular) Pixel phone with a Home Mini device thrown in for good measure.
Amazon’s price cut might have annoyed Google, but given that Google brings in approximately $10.2 million an hour in revenue (Google’s annual revenue in 2016 was about $90 billion divided by the 8760 hours in a year), the loss leading is unlikely to harm their bottom line.
And while Amazon controls the market as it exists today, there is still a lot of market left to capture.
Earlier this year, PYMNTS and Visa asked 2,584 U.S. consumers three questions:
What we got back were 6 million data points, which we used to build the How We Will Pay report on how consumers view the connected future — and what the world should be prepared for in terms of the shape of things to come.
We learned that the world is full of connected devices — and getting more full by the moment. As of now, the average number of connected devices (outside the usual suspects of phones, computers and laptops) has increased to 4.4 per person. Those devices include game consoles (47 percent), activity trackers (41 percent), smartwatches (15 percent), voice-controlled assistants (14 percent), connected thermostats (9 percent) and virtual reality headsets (7 percent). The study also found that the more connected devices customers have, the more purchases they are likely to make. Not only will customers shop more, they will also shop across a greater number of product categories (apparel and footwear seem to be the most favored).
And consumers are getting more comfortable shopping via these devices. The study found that in 11 out of 19 product categories, ranging from healthcare to accessories to food, 50 percent or more of the consumers studied made online purchases through a device within a week of the study.
And, most interesting, we learned that customers, for all the shopping they do, are unsatisfied with how efficient the process is today; 66 percent would consider using a connected device in the future to make their payments and commerce journeys smoother.
Everyone’s favorite use case? Around 89 percent of customers seem to look forward to the day when their car can pay at the pump for them.
Which goes a long way to explain why so many players are working so hard this year — and likely next year — to grab up market share in the coming connected world, because all of those connected devices are places where smart AI can possibly live or at least touch.
Today, there are an estimated 8.3 billion connected devices in the market, but by 2020 that number is estimated by Gartner to exceed 20 billion.
And, as important as those speakers are today, players are already looking to the car as the next big venue for connected commerce enabled by smart AI. Once again, Amazon is out ahead, with a big deal signed with Ford to bring Alexa to their cars, followed up by Garmin to place Alexa in the newly released Garmin Speak product.
But some car companies fear that allowing Alexa to hitch a ride is inviting disintermediation at just the moment the connected ecosystem is making it possible for them to reach their customers directly for the first time. Which means GM is looking to build its own — and taking a page from Google’s book by looking to sign on merchants who maybe would rather not sign on with Alexa.
The moral of the story?
There is no moral, because this story isn’t done — in fact, it’s probably just getting started.
And PYMNTS wants to be in on writing some of the next chapter. So, we’ve invited teams to help design their vision of the future of payments and commerce via voice AI with Alexa for the PYMNTS Voice Challenge with Amazon Alexa.
We’ll have the ideas in early 2018 — and the winners in March.
Until then, stay tuned; it’s only a matter of time before this starts getting really interesting.
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