Amazon's Echo is fast losing market share to Google as well as global players like Alibaba (BABA) - Get Report and Xiaomi, both of which released smart speaker products in the past year. According to data from Strategy Analytics, Amazon's global market share of voice-activated home speakers fell to 41% last quarter, down from 76% in Q2 of last year. Meanwhile, Alphabet is making huge strides in sales of Google Home, which grew 420% year-over-year, accounting for 28% of total market share last quarter. (If you're wondering where Apple's Homepod is in the mix, it ranks a distant fourth at 6% of market share, according to Strategy Analytics data.)
"Google and Amazon's pursuit of volume over margin is making life very difficult for vendors entering the market with products that offer similar features. However, the more premium end of the market does offer opportunity to vendors who can entice consumers with superior build and audio quality," said David Mercer, vice president at Strategy Analytics. "Early adopters of low-cost smart speakers such as the Echo Dot or Google Home Mini and who are now looking to buy a second device will be a key target demographic for such vendors."
If reports this week are any indication, Alphabet is hoping to wrest even more market share of the this holiday season. The company plans to introduce a new Google Home device equipped with a video display -- similar to Amazon's Echo Show -- in time for the holiday shopping season, according to Nikkei Asian Review. Alphabet plans to ship 3 million units for the first batch of the new Google Home model. By contrast, Amazon shipped 315,000 units of its Echo Show in 2017, according to the market research firm Canalys.
Google also pulled out all the stops at this year's CES conference, seemingly blanketing the show with marketing for Google Assistant, the voice assistant software that underpins Google Home.
A recent deal with JD.com (JD) - Get Report signals that Alphabet is aggressive about reaching as many homes as possible through the speaker market. In June, Alphabet announced a $550 million investment in JD.com, and as a part of the deal, Google Home will be offered on JD's ecommerce sites.
The home speaker market is still relatively small compared with smartphones, but research indicates that those who own them love the devices and may own more than one. In May, the research firm Canalys estimated that global smart speaker shipments rose 210% annually.
The JD deal "is a sign that [Alphabet] is deadly serious about not missing the opportunity," added Strategy Analytics' David Watkins.