Why Google Wants to Muffle Amazon's Echo
Editors' pick: Originally published May 13.
With the news that Alphabet's (GOOGL) - Get Report Google is reportedly working on its own answer to Amazon's (AMZN) - Get Report surprise hit, the Echo, the digital assistant-powered device market is one that could become one of the next big battlegrounds for the technology world's dominant companies.
Tech site Recode reported this week that Google is working on a device, dubbed "Chirp", that will resemble Google's OnHub wireless routers. Its capabilities will likely be at least hinted at during the company's I/O developer conference next week, Recode said, citing anonymous sources. The device itself won't officially be unveiled for weeks or possibly months.
Experts say the devices will grow to fill a crucial gap that keeps users online -- and using web services -- when not on a phone or computer.
"There's no reason to think that Google's similar efforts won't gain similar traction to Amazon's," said Jay Cakmak, a technology analyst with Monness, Crespi, Hardt & Co. "Digital assistants will gain greater influence in the market. It's a big deal. It's not a big deal for near-term financial contribution."
Amazon reportedly loses money on each device when considering marketing, packaging and shipping, showing that the company sees the information it can gather and the shopping it can enable as vital to Echo's business plan. The device is essentially an always-on, voice-activated speaker that can download music, order an Uber or check a credit card balance alongside more traditional speaker duties such as playing music.
Demand for the Amazon Echo has surprised Amazon, which is out of stock of the item until June 2. The Seattle-based e-commerce giant uses its Alexa voice app in its Echoes and has sold as many as 3 million of the devices, according to a recent Consumer Intelligence Research Partners report. The device sells for $179.99 on Amazon and it recently introduced two new scaled-down versions -- the Tap for $129.99 and the Dot for $89.99.
Google already offers a similar service to Alexa with its "Ok Google" search assistant on its Android phones and so integration with a device would not be difficult. But the true strength of such devices comes as they learn a user's preferences and habits, allowing more accurate results and targeted marketing in other apps or applications.
"For ad-based or commerce-based companies [such as] Google, Amazon and Facebook (FB) - Get Report , it's all about building more precise advertising profiles and the ability to serve up ads. This product segment bridges times when the users aren't near their phones," wrote Patrick Moorhead, president of Moor Insights and Strategy, in an e-mail. "For Apple (AAPL) - Get Report and Microsoft (MSFT) - Get Report , who don't make their money on ads, it's about extending the reach of services."
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Concerns about appearing to exploit user data are reportedly why Google shied away from developing a similar device to the Echo after it bought the Nest home automation company in 2014. The company was sensitive to fears that information from devices in consumers' homes could be used improperly.
Google didn't respond to a request for comment for this story.
Microsoft has introduced the Cortana personal assistant with Windows 10 but hasn't yet been rumored to be developing a device. Apple practically invented the category when it first incorporated Siri into the iPhone in 2011. However, analysts say Apple may be the weakest player in the segment since it doesn't allow outside access to its products and may not be as adept at leveraging customer information.
By contrast, outside companies have already developed what are essentially apps for Amazon's Echo that allow customers to use the device to connect with them, such as pizza delivery services, carmakers making connected autos and electronics makers who can have their devices controlled remotely. And more companies are developing them.
Similar access would be vital for the success of any competing devices, such as the Chirp.
At least one high-profile startup is already advancing digital personal assistants by coupling them with artificial intelligence. The two developers of Apple's Siri, Dag Kittlaus and Adam Cheyer, have reeled in $30 million for their Viv Labs, according to Crunchbase, and have already turned down takeover offers.
Viv's technology can allow digital assistants to perform complex tasks such as plan an entire business meeting from timing to booking flights and even ordering snacks, said high-performance computing expert Dan Olds in a phone interview.
Integrating their technology into any device would likely be revolutionary, analysts said. The Apple Watch, for example, could benefit strongly from such added capacity.
"But you'd look like a secret service agent," said Olds, a partner at technology strategy agency OrionX, said. "Maybe Apple buys Viv."
