Yandex – Homeless.

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Alice needs a hardware home.

  • Yandex has jumped on the digital assistant bandwagon but with its history, it should be able to produce by far the best product for the Russian speaking market.
  • However, it will be unable to serve the majority of use cases without hardware to carry it into the home or the vehicle.
  • Yandex is the pre-eminent internet company is Russia with 65% market share in search and just seen off a challenge from Uber (see here) to also become the dominant provider of ride hailing.
  • Most importantly of all, Yandex has been crunching data for over 20 years, which according to RFM research (see here), is a major contributor to its RFM rating as No. 3 in AI behind Google and Baidu.
  • Consequently, a digital assistant is an obvious product to launch and is one that has a much better chance of succeeding in Russia than any of the others even if they are taught to speak Russian.
  • The assistant is called Alice and is the result of putting together a series of AI projects that the company has been working on for some time.
  • These include voice search, weather, news, maps and so on.
  • Two of the key features include:
    • First, speech recognition. Yandex claims that the assistant demonstrates near-human levels of accuracy when it comes to understanding speech.
    • This is no great feat in English anymore but in Russian, this is likely to put Yandex meaningfully in front.
    • Second, context. Alice has some short-term memory in that it remembers what the previous question was and is able to answer a follow-on question in the context of the first.
    • This is quite a difficult AI problem to solve and the only other player that I have seen do a decent job of this is Hound from SoundHound.
    • I not seen this ability in Google Assistant, Amazon Echo, Microsoft Cortana or Apple Siri.
  • Alice is available in the Yandex Search app on iOS and Android as well as in beta on Windows PC but this is not where it is most needed.
  • Usage of voice assistants predominantly occurs when the user’s hands are occupied such as in the car or in the kitchen.
  • Consequently, to address this use case Alice needs to be resident in a home speaker of some description and, potentially, in a vehicle infotainment unit.
  • Yandex has stated that there will be further products forthcoming and I am pretty certain that a speaker (probably in conjunction with a known audio brand) will be shortly forthcoming.
  • Given Yandex’s heritage in AI and its dominance in search, it looks unlikely that Amazon or Google will be able put up much of a challenge leaving the Russian speaking markets open for Yandex.
  • It will have more difficulty if it wants to expand overseas but Russian is a big enough market for Yandex to fare pretty well just by staying at home.

Google – Brain boxes

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Clever devices are useless without volume.

  • Behind the carefully orchestrated event was a series of strategies aimed at driving penetration of devices which to date have been very disappointing.
  • Google made up for slightly below par hardware by maximising its leadership in AI to provide best in class functionality as well as some unique features that no one else is likely to be able to copy for some considerable time.
  • However, the key to badly needed volumes will be execution as Google completely bungled the open goal left by Samsung after its Note 7 disaster.

Pixel 2 / 2 XL

  • Google has updated the Pixel phones and has moved to OLED displays.
  • In contrast to iPhone X, Google has opted to make use of the always on display feature that allows key information to be displayed when the screen is off with almost no impact on battery life.
  • Why Apple declined to make use of this excellent feature on the iPhone X is a complete mystery.
  • What really sets the Pixel 2 apart are the new features such as Google Lens which offers the best image recognition and the fact that Google uses AI to do with one camera while everyone else needs 2.
  • However, Google openly admitted that volumes of Pixel have been disappointing and its offer of a free Google Home Mini is clearly aimed at driving badly needed volumes of this device.
  • Pricing remains punchy at $649 for the Pixel and $849 for the XL making the comparison to better looking Samsung s8 and iPhone 8 inevitable.
  • I suspect price is going to be an issue for users considering this device.

Google Home.

  • Two new products were introduced:
    • First: Google Home Mini ($49) which takes direct aim at the best-selling Amazon device (Echo Dot) in another clear attempt to drive badly needed volume.
    • Second: Google Home Max ($399) which goes up against Sonos and Apple HomePod.
  • The broadening of the portfolio should help Google increase its penetration of the home but the smart home piece is still badly lacking.
  • Google claims that 1,000 devices from 100 manufacturers now work with Google Home but it failed to demonstrate any and instead concentrated on products from Nest.
  • Google also launched routines which is exactly the same as the Amazon Echo function of the same name and something that all smart home controllers need in my opinion.
  • The integration of Google Home with other Google devices and the functionality being added is far ahead of anything else available but the smart home bugbear continues to rankle.
  • This means that anyone serious about smart home is likely to choose Amazon simply because they know that anything made for the smart home will work while the same cannot be said for Google.
  • This needs to be fixed and will remain the reason for Google’s potential defeat at the hands of Amazon because elsewhere it is by far the best product available.

Google Accessories.

  • Two companion products were launched which deepen the cross-device functionality as well as highlight Google’s core AI strengths.
    • First: Pixel Buds ($159). These take aim at Apple’s popular AirPods (also $159) and while the design looks inferior, the functionality is excellent.
    • This includes an exciting implementation of Google Translate that works with the Pixel phone to enable usable voice translation in 40 languages.
    • It also allows easy access to the best in class Google Assistant in a similar way to AirPods.
    • The difference here being that Google Assistant is a substantially better service than Siri.
    • Second: Google Clips ($249). This looks like a regular GoPro or Yi camera but the differentiator lies in its functionality.
    • The idea with clips is to position the device during an event or gathering and leave it to gather the best photos and video clips.
    • Again, this is Google using its leadership in AI to differentiate and if this feature works well, I suspect that it will be a very good reason for users to buy this product.
    • The number one use case for GoPro and Yi cameras is family despite their sporting image and it is this use case that Google is taking aim at.
    • If it works well and gains traction, this spells more trouble for GoPro which has struggled with software and ecosystem from Day 1.

Take Home Message.

  • Google has substantially deepened its cross-device capability with the new launches as these devices should all work extremely well together.
  • I think that Google comfortably leads the industry in this capacity.
  • Furthermore, much of the functionality that Google has demonstrated should make its way onto the Android devices from other manufacturers driving which should really help penetration.
  • How well they work on the hardware of others is a concern as manufacturers tinker with Android that always seems to result in inconsistent and subpar performance of apps and services.
  • Consequently, in terms of driving deeper and richer services for its ecosystem users, this was a successful event but the real question remains what volumes will Google’s own hardware achieve?
  • These services will obviously work better on Google controlled hardware where the endemic fragmentation and lack of software updates are not an issue.
  • Execution and marketing are the two things I am looking for from Google as to date, these have been woefully lacking.

Automotive Ecosystem – Dyson C5?

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Not convinced Dyson has what it takes.

  • Vacuum cleaner maker Dyson has announced that it will be producing an electric vehicle that has more hallmarks of the Sinclair C5 than the Model S.
  • Dyson intends to produce a fully electric vehicle by 2020 which will feature:
    • First: Solid state batteries. This is one of the holy grails for battery technology as lithium batteries can be extremely dangerous when exposed to physical trauma, overcharging or excess heat.
    • This has been a focus of Dyson for some time but whether it has cracked this thorny problem remains to be seen.
    • Second: Electric motors. Given Dyson’s history with household products, there would seem to be a natural progression into electric vehicles.
    • Third: Premium price. Dyson is sticking to what it knows in positioning its vehicle at the high end but in this segment, it will face fearsome competition.
  • I think that there are two critical attributes that will be required to succeed in a world of electric vehicles and Dyson has neither:
    • Automotive experience. As Apple has found (see here), making cars is extremely difficult and requires a lot of upfront investment.
    • Dyson plans to invest $2.6bn in developing its vehicle which is not that much compared to everyone else investing in this space.
    • Consequently, it has a lot to learn and not much money to invest which I think will leave it wanting.
    • Digital data. RFM research (see here) has concluded that understanding the importance of data generation in vehicle is likely to be critical for the success of the OEMs in the long-run.
    • Players such as Google, Apple, HERE and TomTom are pushing hard in this space with OEMs such as Tesla and BMW already working hard to improve their differentiation using sensor data.
    • Dyson’s current product line up does not have any data collection nor does the company have any real experience with regard to using data to make its customer experience better.
    • I see Dyson as firmly in the ship and forget category rather than the ship and remember that I think is essential going forward.
  • Furthermore, most of the money in the automotive industry at the moment is made through the financing of vehicles and here Dyson also has no experience.
  • Consequently, I think that Dyson is pinning its hopes on differentiating via its battery.
  • Range anxiety and charging are two of the biggest limitations of electric vehicles today and if Dyson can offer differentiation by fixing either of these two problems it may have a chance.
  • That being said, I think that the secret to solving these problems most quickly lies in making lithium batteries safer rather than using another substrate entirely.
  • According to Amionx 50-80% of the weight of an electric car battery is made up of packaging to protect the battery against the kind of trauma that will cause a battery fire.
  • If the battery can be made resistant to physical trauma, overcharging and heat then the weight of the package can be substantially reduced.
  • This would enable a much higher capacity battery to be used for the same weight giving a big increase in range.
  • My research leads me to believe that this solution is going to come before solid state batteries meaning that range will not be something with which Dyson will be able to differentiate.
  • Consequently, I am struggling to see how Dyson will compete effectively in this market as it lacks almost all of the core competences that I think are required.
  • Furthermore, it will be up against the biggest automakers which are already shipping in big volumes as well as the biggest ecosystems who have tens of billions of dollars to invest.
  • It has been 32 years since arguably the biggest disaster in British innovation (Sinclair C5) but perhaps we are due for an upgrade.

Amazon vs. Everyone – Battle for the home pt. V

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Amazon goes better, smaller cheaper.

  • Amazon has raised the bar in the digital assistants battle right before Google’s hardware event on 4th October with an update to the Amazon Echo home speaker and a big upgrade to the user experience.
  • Amazon has launched two new speakers to replace the Amazon Echo, one of which is has extra hardware to optimise the smart home experience.
  • On top of this Amazon has created an over the top experience that allows the user to tie together a range of Alexa skills that it hopes will make Alexa much more intuitive to use.
  • Two new Echos have been released to replace the original.
    • First: The new echo is smaller, has better sound quality,comes in 6 colours and will cost $99 which is half of what the original did at launch.
    • It has a new microphone array that should improve audio performance in terms of noise cancellation and wake word making the overall experience less error prone.
    • Importantly, this is now cheaper than Google Home and looks set to continue what has become a race to the bottom in smart speakers.
    • Second: Amazon Echo Plus has all of the above but also includes a built in home-hub that enables the automatic discovery and set-up of devices that support Zigbee.
    • The device costs $150 but also includes a Phillips Hue smart light bulb to get the user started.
    • This will enhance the smart home functionality but it in no way covers all available devices.
    • Third: Amazon has launched Alexa Routines that allows the user to tie together a series of actions into one command.
    • The user will now be able to say “Alexa, I am going to bed” and the lights will be turned off, doors locked, TV turned off and so on all in one go.
    • It will also be possible to schedule these sorts of actions.
    • This will not work with all of Alexa-enabled devices and skills but I think it represents a further step forward.
  • With this update, I think that Amazon has achieved two goals:
    • First: It has put itself ahead of Google in the hardware race with an improved device that is now meaningfully cheaper than Google’s offering.
    • Whatever pricing Google was considering for Google Home 2 may now be quickly re-thought.
    • Second: The horrible user experience using Alexa’s skills may now take a big step forward.
    • A lot depends on how good this experience is and how well it works but if it is good, it will bring Alexa into line with what I consider to be smart home best practice (see here).
  • Amazon has had by far the most aggressive roll-out of hardware that supports a digital assistant of any of the major ecosystems.
  • There are now a total 8 different types of home device that all carry the Alexa digital assistant with a large number of third party devices in the works.
  • This is critical because a large majority of the usage of digital assistants occurs when user’s hands are busy meaning that the smartphone is almost always useless in most use cases.
  • This gives and advantage to those that provide a physical device present in the home that use an audio wake word.
  • Google has this with the home but there is only one device whereas Amazon now has 8 all which are much better at controlling the smart home than Google is.
  • This puts Google on the back foot right ahead of its launch despite the fact that it has a much better product when considering the performance of the assistant and its ability to correctly respond to enquiries.
  • Google’s response on 4th October will be key to its outlook in the smart home and based on its performance to date, I am not optimistic.
  • I continue to think that Google is at risk of suffering a VHS vs. Betamax-like defeat in the smart home.
  • I don’t like either Amazon or Google on valuation grounds preferring instead Tencent, Baidu and Microsoft.

Google vs. Amazon – Battle for the home pt. IV.

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Amazon increases its aggressive land grab. 

  • Not content to sit on 70% market share, Amazon is aggressively compensating for the lack of Alexa on smartphones by effectively giving the devices away and pushing e-commerce as hard as it can.
  • A land grab strategy makes complete sense because the more Amazon can drive Alexa usage, the more data it will generate and the better it can become.
  • Usage is the key to making all digital assistants better and this is the one area where Amazon has huge ground to make up compared to Google.
  • Amazon has launched yet another Alexa device which costs $20 but this is immediately credited back to the user when it is registered with an Amazon account making it effectively free.
  • The latest addition to the family is called the Amazon Dash Wand which can be used to scan bar codes or Alexa to order products from Amazon.
  • Alexa is present on the device and while this is clearly aimed at driving e-commerce, there is no reason why it can’t be used to answer inquiries or control the smart home.
  • The one thing it won’t do is play music or radio but when the whole device costs $20, it is obvious that the audio experience would not be worth the effort.
  • At the same time, Amazon is also offering $50 off the Amazon Tap reducing the price of the portable speaker to $79.99.
  • The two weaknesses of Amazon in the digital assistant space are that it is inferior to Google and that Google Assistant is present by default on every Android smartphone that ships.
  • This means that if Google can convince users to use their smartphones to access the digital assistant, then Amazon will be at a big disadvantage.
  • However, at the moment over 60% of all digital assistant usage occurs when the user’s hands are busy with another task which obviates smartphone usage as the device almost always has to be removed from a pocket to be activated.
  • This, combined with the fact that Google is still really struggling in the smart home (see here), is why Amazon still has the upper hand which it is showing no sign of losing.
  • This move is clearly aimed at seeding as much of the market as possible before Google can get its act together.
  • If a large number of households have Alexa which is working nicely with the other smart devices they have at home, it will be increasingly difficult for Google to win them back even with a superior product.
  • This is particularly relevant given that the market is still lowly penetrated in USA and is almost non-existent overseas.
  • Given Google’s very slow progress, I am increasingly of the opinion that we are witnessing a repeat of the VHS vs. Betamax battle.
  • I continue not to like either Alphabet or Amazon (even if it wins the smart home) on valuation grounds, preferring instead Tencent, Baidu and Microsoft.

Apple – SiriKit?

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There are very good reasons to launch SiriKit.

  • Apple has made some changes to executive responsibility for Siri that I see as a sign that things are not going very well and that changes are required.
  • Given Siri’s weakness, I don’t see much downside for Apple in allowing third parties to implement the digital assistant in their hardware presumably using an SDK called SiriKit.
  • Responsibility for Siri has moved from services (Eddy Cue) to software (Craig Federighi) which I think is pointing to much deeper integration of Siri into the Apple ecosystem.
  • The way this kind of development works is that the services are developed on top of the finished product of the software department.
  • With Siri as part of the software department it can be much more deeply integrated as the software is created and refined which should allow its functionality to be meaningfully enhanced.
  • However, what is unlikely to change is that fact that Siri is just not that smart and is easily outperformed by Google Assistant and even Amazon Alexa on occasion.
  • This is due to the fact that Siri has not been in existence for very long and that its global learning capability is hobbled by Apple’s implementation of differential privacy (see here).
  • The net result is that I think Siri is falling behind in the AI race and moving Siri to software will not really solve the problem.
  • To really improve, Siri needs to be used and this is where I think the problems really begin.
  • Usage of Digital Assistants primarily occurs when users’ hands are busy which currently means in the car and in the kitchen.
  • Apple’s position in both of these areas is quite weak and a $500 Home Pod that is nearly 4x more expensive than Google Home and 10x more expensive than the cheapest Amazon Alexa device is unlikely to help penetration.
  • Apple’s strategy to date has been to drive differentiation and desire through software that can then be monetised by selling hardware at premium prices.
  • This is why it keeps all of its software to itself but I think Siri can be an exception:
    • First: I do not think that Siri is differentiating for Apple because it is a substandard service.
    • Consequently, if it was removed from Apple products or allowed to appear on the products of third parties, I don’t think it would affect Apple’s ability to price its hardware at a premium.
    • Second: Siri is driven by AI and the AI community is far more open and collaborative than Apple has been historically.
    • For example, DeepMind published its method for creating AlphaGo which in my opinion was then immediately copied by Tencent to create its own AI Go player.
    • Apple has opened up a little bit and has begun sharing and publishing some of its methodologies for Siri (see here) which I suspect will increase over time.
  • As a result, I see only upside for Apple in making Siri available for third parties to put on their devices.
  • I think that Siri on third party hardware is very unlikely to damage Apple’s hardware business and at the same time could result in many more devices in the places where digital assistants are most used.
  • The net result would also be more data collection and learning that would help make Siri better.
  • This would represent a big departure from the way Apple has been doing businesses and there is a possibility that Apple has become too big and too set in its ways (like Nokia was) to make a departure of this magnitude.
  • Consequently, I think the probability of Apple launching SiriKit is pretty remote which is will to allow Google and Amazon to continue dividing the market between them.
  • My top picks remain Tencent, Microsoft and Baidu.

Home vs. Echo – Battle of the Home pt. III.

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Google has everything to do.

  • Google is great at getting third parties to build hardware that uses its software, but needs to work on developers of smart home devices if it wants to trounce Amazon.
  • Following the general availability of the Google Assistant SDK that allows anyone to embed Google Assistant into almost anything, Google has also announced a series of third party devices which will be launched at IFA next month.
  • These include the Anker Zolo Mojo, the Panasonic GA10 and the TicHome Mini all of which will go on sale during Q4 17.
  • Amazon has followed suit but as of yet, there appears to be less traction with hardware makers.
  • Alexa is likely to power the next generation of Sonos speakers and may make an appearance in some VW cars but it looks like Google has more momentum when it comes to hardware.
  • This is likely to ensure a race to the bottom in terms of voice enabled smart speakers from which I think Google will be the only likely winner (just like Android).
  • It badly needs to close the gap on Amazon which has around 70% of the home speaker market and having a much wider selection of attractively priced products will be of great help.
  • What will further help Google is the fact that Google Assistant is a vastly superior product compared to Amazon Alexa.
  • This is because the AI that sits behind Google Assistant is the best available, meaning that Alexa answers fewer questions correctly and gets stuck much more often.
  • However, where Google comes completely unstuck is in the smart home.
  • Amazon has aggressively pursued developers and showered them with love and support meaning that almost every developer of anything that has a Bluetooth or WiFi radio can be controlled with Alexa.
  • The same cannot be said for Google Assistant which I think has been caused by Google’s surprising lack of support for developers of this type (see here).
  • I think that part of the reason for this is that Google Assistant has been brought to life by one part of Google (hardware) but was created and managed by another.
  • Google is addressing this by encouraging developers to write directly to the assistant meaning that any device be it a smartphone, speaker or thermostat can run the smart home but progress to date has been slow.
  • Amazon Alexa has over 15,000 skills which don’t work very well but importantly, there are there and do work with a little effort.
  • Google Assistant is hopeless by comparison and it is here that it is at real risk of suffering a Betamax-like defeat.
  • I think that Google needs to bring all of these devices together such that “OK Google, I am going to bed” results in the whole house shutting down rather than a long series of carefully constructed instructions to each device individually to go into night mode.
  • For many of Alexa’s skills, it is simply easier and quicker to perform the operation manually than to ask Alexa to do it.
  • Unfortunately, so far there is no sign of smart integration from Google meaning that the advantage remains with Amazon.
  • The market remains very lowly penetrated meaning that everything is still to play for but this won’t last forever.
  • Valuation keeps me from liking Alphabet and Amazon leaving Microsoft, Tencent and Baidu as my top choices.

 

Google vs. HERE – Perfect parking

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HERE has more potential but needs to execute.

  • Google is upping the ante in the race to provide value-added services on top of digital maps, but with the right execution, HERE should be able to provide a much better service.
  • In January Google launched its parking difficulty icon on Android Maps which give the user an idea of how difficult it will be to park at the user’s destination.
  • This was initially launched in 25 US cities but this has been: 1) extended to another 25 locations (Canada, Europe and Brazil), and 2) expanded to offer parking suggestions in the area.
  • This service is based on historical parking data as well as data gathered from smartphones using Google services within a certain location to ascertain how busy that location is.
  • This is similar to the popular times and visit duration data that Google provides for businesses and will give the user an idea of how long he should expect to spend looking for a place to park.
  • While this will be a useful addition to Google Maps, I think that HERE should be able to offer a service that is vastly superior.
  • This is for two reasons:
    • First, data quality: While Google’s service is based on estimates and AI, HERE’s service should be based on much more specific data.
    • This is because HERE has access to automotive sensor data while Google does not.
    • For example, when HERE’s location platform detects an ignition start, it can be almost certain that the space occupied by that vehicle is about to be vacated.
    • It will also know from ignition switch-off which spaces are occupied and which are not.
    • This gives it a highly accurate, real time picture of the parking environment meaning that it’s HERE ON-Street Parking service should be much more accurate than Google.
    • Second, positioning. Vehicle positioning is often much more accurate than that offered by mobile phones as the antennas are larger and are almost always open to the sky.
    • This means that HERE should have a more accurate real-time picture of exactly where the devices connected to its platform are.
    • Combining this with the highly granular data it gets directly from the vehicle, should allow HERE to provide its users with a more accurate and relevant parking service than Google Maps.
  • This is exactly the kind of differentiation that HERE needs to win the attention of users but there are caveats.
  • Google is present on almost every smartphone in the market (except China) meaning that although its data set is much less accurate, it has a much fuller picture of the environment.
  • HERE by comparison is at a very early stage in getting devices connected to its location platform meaning that its lacks the visibility of the environment to make its service work really well.
  • This allows Google to offer a workable service today, while HERE is still at the stage of building out its network of data collecting devices.
  • Furthermore, should Google manage to get access to the sensor data generated by vehicles (Android Auto offers no access), then HERE’s key advantage will be lost.
  • However, most automakers have recognised that Google represents a meaningful long-term threat and are keen to keep their sensor data to themselves.
  • Google has done a deal with Volvo and Audi but whether it has managed to gain access to sensor data is still unclear.
  • The net result is that HERE has an opportunity to roll-out a much better service and win over users, but it needs to quickly achieve scale or risk being swamped by Google should it gain access to sensor data.

Facebook – Empty head

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Another smart speaker that badly needs a brain.

  • It looks like Facebook is joining the ever more crowded smart speaker bandwagon, but without a decent brain inside the box, it may as well be a paperweight.
  • One possibility is for the device to use Cortana as it comes from one of the few companies that doe not compete directly with Facebook: Microsoft.
  • The device looks like it will be using a 15-inch screen from LG and will be manufactured by Pegatron but beyond that there are very few details.
  • I suspect that Facebook may be trying to take a slightly different tack here.
  • This is because:
    • First: the smart speaker market is already very crowded,
    • Second: Facebook has no brain of its own to install in the box,
    • Third: Facebook is more focused on community than smart home.
  • Facebook’s main objective in life is to bring its users closer together using its apps and to give them a sense of community.
  • While this all sounds great for users, the reality is that they will end up spending more time inside Facebook’s fledging ecosystem, generating more traffic and thereby increasing Facebook’s ability to make money from them.
  • Hence, I suspect that this device may be aimed more at making it easier for Facebook friends to spend time with each other by voice, video, messages or even images.
  • However, to earn a place on the increasingly crowded countertop of consumers, it is going to need voice functionality of some description.
  • I think that Facebook M, which is Facebook’s own digital assistant is hopelessly inadequate to fulfil this role, meaning that Facebook will have to get one from somewhere else.
  • Top of my list for this is Cortana which, while not the sharpest tool in the box, it is the only one whose owner is not competing directly with Facebook.
  • In fact, I have seen Microsoft and Facebook creeping closer together (see here) over the last few years and this is a collaboration that could make some sense.
  • With a bit of tinkering on Microsoft’s part, Cortana could be taught how to deal with the majority of the tasks that users ask smart speakers to perform.
  • This work is probably already going as Microsoft may already be working on a smart speaker of its own.
  • Combining this with the screen and Bing would give the device a reasonable shot at doing a decent job of answering queries.
  • This is just another example of how badly Facebook needs to bring its AI up to a level at which it can compete on a level playing field with Google.
  • This would also help Facebook deal with the objectionable content problem that it has on its platform as its current answer to this is to throw more humans at the problem.
  • For me, this has to be Facebook’s number one strategic priority and the progress displayed at F8 on image and video recognition was somewhat encouraging (see here).
  • I am still quite cautious with regards to Facebook’s outlook for this year as I don’t think that either its video offering or its gaming offering are mature enough to bring the company back to high growth in 2017.
  • This combined with requirement to really improve its AI to compete with the other digital ecosystems leads me to still prefer Baidu, Tencent and Microsoft.

Baidu – Talking machines.

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The way in China is wide open for Baidu.

  • Baidu’s strategy around its AI platform and its Duer OS has become clearer and with the support of a large number of chip vendors, it is in pole position to be a major player in smart connected devices in China.
  • DuerOS is not a traditional OS like Android or iOS but instead is a much more focused sub-system that is capable of bringing intelligent voice control and intelligence to any device in which it is implemented.
  • DuerOS’s direct comparisons are the software that runs on Amazon’s family of Echo products, Google Home or JD.com’s DingDong.
  • While Duer still speaks no English at all, I think it is currently by far the leading contender in this category for China for two reasons:
    • First: ecosystem. Baidu has already lined up an impressive list of component and device manufacturers who will be implementing DuerOS in their products.
    • Realtek, Intel, Nvidia, MediaTek, RDA, Conexant and ARM have signed up to support the system, which combined with a series of device makers, should create a pretty healthy ecosystem.
    • There are already around 30 products in the pipeline encompassing pretty much the entire range of domestic electronic devices and appliances.
    • Second: Artificial Intelligence. RFM research (see here) has indicated that Baidu’s AI is second only Google and certainly far better than anything else currently on offer in China.
    • This is a product of years of work as well as having developed by far the leading search function in China.
    • The net result is that DuerOS, like Google Assistant, should be able to provide users with the best experience when it comes to understanding and dealing with voice based requests.
  • Putting these two together put Baidu in pole position when it comes to creating an ecosystem within which a whole series of devices can talk and understand both the user and each other as well as work together.
  • This represents a big threat for Xiaomi which has laso built quite a large ecosystem of smart devices but they really lack the intelligence that DuerOS can offer.
  • The upside for Baidu is that by powering all of these voice-enabled gadgets, it will be able to gather data about its users that it will be able to make its search all the more relevant.
  • One of the big differences between China and Western markets is that no one seems to care very much about privacy (see here) meaning that this strategy could work very well.
  • I don’t expect Baidu powered machines to suddenly start spewing out voice-based advertising but learning what its users like and what their needs are will help it make its search results more accurate and hence more valuable to advertisers.
  • Baidu is still the search leader in China but its recent problems with fake advertising are only just behind it and this could provide a good pillar for long term growth.
  • I think that its real rivals, Alibaba, Xiaomi and Tencent, are miles behind when it comes to AI and voice-based services, leaving the Chinese market wide open for Baidu.
  • This combined with its leadership position in AI and search are the main reasons why I still like Baidu together with Tencent and Microsoft.