Technology is doing more for us than ever before. In just the last 20 years we have gone from dial-up internet to being able to order packages with our voices, and it seems Alphabet Inc. (GOOGL - Free Report) subsidiary Google and Amazon (AMZN - Free Report) are working towards bringing consumers further into the future.
Both companies are on a quest for innovation, and in the process are bringing more products into the home of the consumer. This innovation is through their creation of products meant for a connected or “smart home.”
Smart devices can use smart phone apps to control home devices like home security, lighting, and sprinklers, to name a few. Some devices can be programmed to adjust themselves as well.
Although Amazon and Google’s approaches to the smart home are a bit different, their end goals are quite similar. Let’s take a look at what these two companies have been working on, and what it could mean for consumers moving forward.
What is the Amazon Echo?
Amazon’s approach to entering the home is through their Echo devices, released in November of 2014. The Echo is a speaker controlled by speech and can play music, order pizza, and read updated news reports, amongst other things.
The built-in voice recognition system can hear users from across the room, and is plugged in at all times. The Echo operating system is named Alexa, contrary to Microsoft’s (MSFT - Free Report) Cortana and Apple’s (AAPL - Free Report) Siri.
The Echo is also capable of interacting with smart home products, such as the Philips Hue smart light bulbs and smart thermostats from Alphabet-owned Nest as well. Through voice commands, users can use the Echo to adjust lights and home temperature, to name a few.
How Does This Fit Into Amazon’s Growth Strategy?
Echo gathers its information through connection to the Amazon Web Services (AWS), a newer division of the company that has brought in new revenues. AWS has a growing list of clients such as Netflix (NFLX - Free Report) , Zynga (ZNGA - Free Report) , and even the U.S. Government.
Although official numbers have not yet been released, a report by the Consumer Intelligence Research Partners from April indicates that Amazon has sold nearly 3 million Echo units since its introduction. Nearly half of Amazon customers were aware of the product by December of 2015, up from a meager 20% in March of that same year.
By making use of AWS and providing a new angle through which to entice consumers, the Echo serves as an interesting new type of product that has the potential to increase Amazon’s sales and garner higher revenue in the process.
Since what connects us all is the beautiful world of capitalism, hopefully we know by now that a sole company in a new industry won’t have it to themselves for very long. Announced in May, Google’s soon to be released Home product is a direct response to the Echo, and is raising some eyebrows of its own.
The Home offers similar features like an assistant (although this one doesn’t have a name) that can give the same type of information that the Echo can. However, it also has a few extra features which Google hopes will make it more distinguishable.
The Home has customizable, replaceable speakers which supposedly have stronger bass than the Echo. Another huge boost is access to Google search, a treasure trove of just about any type of information a consumer could hope for.
Another feature the Home has is that it can work with other portable speakers in other rooms. A user can, for example, ask the Google Assistant to play their morning playlist, and play it in all rooms. It will then play that music in every speaker in the house. This works through their Google Cast service, which also has connections to such services as Spotify, Pandora , and thousands of other applications.
However, one feature the Home doesn’t have that the Echo has is a developer API, which the Echo uses to call an Uber or generally create compatibility with other apps and services. The Home works with Google’s Chromecast TV service, the same way the Echo works with Fire TV.
A concrete release date and price has not yet been announced, however it is expected later this year.
Google and Amazon are fighting a new war, the war of the consumer’s home. What in the eyes of businesses is a sacred space is becoming the next target, with the aforementioned products seeking to become a new and refreshing part of the consumer’s home life.
As our team discussed, these products fall into a new industry, known as the Internet of Things (IoT). Considering this market is expected to triple in size during the years to come, it is evident that the current competition between the Echo and Home has broader implications.
Although both products are pretty similar, it will be interesting to see which way consumers lean and how sales will affect both companies moving forward. The idea of a speaker serving as a personal assistant is completely uncharted territory, and as such could become the new big thing for these companies as well as the tech. industry as a whole.
This line of devices is an interesting new venture, and will surely only become more intricate as consumers figure out what it is they want from it, and companies like Amazon and Google figure out how they will deliver it.
Amazon currently sits at a Zacks Rank #2 (Buy), while Alphabet Inc. sits at a Zacks Rank #4 (Sell).
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