Amazon.com (NASDAQ: AMZN) undoubtedly has a first-mover advantage in the smart speaker category it created. After taking the world by surprise with the launch of Amazon Echo in 2014, the growing family of Echo devices continues to enjoy a massive market share lead in the nascent category.
And Amazon doesn't look intent on giving up market share easily. The company just unveiled a new lineup of new Echo devices, helping Amazon dominate the voice-activated smart speaker market with various price points and value propositions. But even as Amazon brings a robust lineup of Echo devices to market at aggressive price points, market share loss could be on the horizon. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) all want a piece of this growing pie.
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To capture just how fiercely competition is vying for this important market, here's a quick review of each one of these companies' recent moves in the smart speaker space.
Amazon: Amazon remains the unquestioned market leader. About 13.5% of U.S. consumers have an Amazon Echo device in their home according to recent research by Cowen & Co. (via Quartz). This compares to Alphabet's 5.9% share with its Google Home device.
To strengthen its leadership position, Amazon recently launched an updated version of its Echo, a higher-quality speaker called Echo Plus, a compact smart speaker with a front-facing camera and a small screen called Echo Spot, and more.
Alphabet: Alphabet launched its first smart speaker last year before the holidays, making it the second company to bring to market a formidable smart speaker to compete with Amazon's Echo. But Alphabet just took its smart speaker offerings to the next level last week when it announced Home Mini and Home Max -- smaller and bigger versions of its Google Home, respectively.
Apple: Apple is bringing to market its first smart speaker this December, likely just in time for Christmas. Apple is hoping its HomePod will appeal to customers looking for a high-end speaker. The device is priced at $349, well above the Echo Plus' $150 price tag but below Alphabet's $399 price tag for its premium Google Home Max.
Microsoft: Even Microsoft wants in on the smart speaker race. Earlier this year, Microsoft said it is bringing its Cortana smart assistant to a speaker in partnership with Harman Kardon. The smart speaker will be called Invoke and will likely cost about $200.
Why smart speakers are the next big thing
It's not surprising that tech giants are racing to leave their mark in this nascent space.
First of all, Amazon has already proven there is a market. On Amazon's July 11 Prime Day, for instance, the most popular purchase was the Echo Dot. In addition, Amazon Echo device purchases by Prime members on Prime Day were seven times higher than on Prime Day 2016.
Second, smart speakers serve the dual role of helping tech companies improve the machine learning algorithms behind their smart assistants while also getting customers more deeply invested into their ecosystems of hardware, software, and services.
Alphabet, which put its Google Assistant at the forefront of nearly every one of its new products launched last week, eloquently captured the growing importance of artificial intelligence:
"We see tremendous potential for devices to be helpful, make your life easier, and even get better over time when they're created at the intersection of hardware, software and advanced artificial intelligence ... for this wave of computing to reach new breakthroughs, we have to build software and hardware that can bring more of the potential of AI into reality."
In tech, artificial intelligence is now just as important as hardware, software, and services -- and smart speakers are an excellent way for these tech giants to make inroads on this new, yet fundamental, pillar.
Of course, Amazon will likely continue to lead this fast-growing market. Its recent refresh to its lineup of Echo devices and its aggressive pricing show how ambitious Amazon is about the segment. But Amazon will be up against some formidable competition.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.