Amazon vs. Google – Homefront pt. II.

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Amazon is pre-emptively moving to keep Google out.

  • Amazon is pulling out all of the stops to ensure that it is Alexa, rather than Google Assistant, that ends up becoming the nerve centre for controlling the smart home.
  • In its latest move, Amazon is offering credits for AWS that are likely to ensure that connecting one’s smart home device to Alexa remains free in almost every circumstance.
  • As the scope of Alexa improves and users can do more with Alexa, it is likely that creators of smart home devices will require more space on AWS that will require them to start paying Amazon.
  • Most device developers are small start-ups with very limited funds meaning that this will be a big incentive to do more with Alexa.
  • At the moment, the free tier gives developers 1m AWS Lamda requests and 750 hours of EC2 compute time per month.
  • Beyond that, developers end up incurring a monthly charge which is something that Amazon is wisely keen to avoid.
  • With this new program, Amazon is offering a one-time credit of $100 as well as $100 per month towards any charges that they incur as a result of usage of their devices.
  • This is likely to ensure that almost all developers of smart home devices will not have to pay anything to Amazon until they are generating so much usage that they are making plenty of money themselves.
  • I think that this is a very shrewd move as it encourages more developers to sign up to make their devices work with Alexa and also encourages them to make the skills deeper and more intuitive.
  • Currently, most skills are very basic and as a result they suffer from usability problems which in most cases makes it easier to turn the device on manually rather than using Alexa.
  • This looks like a pre-emptive move to keep Google at bay as I see Google making rapid moves to improve its Google Home developer program after being all but wiped out at CES 2017.
  • Even though Amazon has close to 10m devices installed in the houses of users compared to Google at 0.5m – 1m, the Google Home experience is so superior to Alexa that I still see a risk of Amazon losing this race (see here).
  • This is why I see Amazon doing everything that it can to show developers love and support which is something that to date, Google has badly neglected.
  • The result is that very few of the smart home device developers are making sure that their devices works with Google Home giving many users more reason go with Amazon’s Echo devices rather than Google.
  • Amazon is also very fortunate that the market’s view of Alexa is so positive as a side by side test of the Amazon Echo against Google Home shows how inferior Amazon is compared to Google.
  • This is why it is still Google’s battle to lose but Amazon is clearly doing everything that it can to ensure that it is Alexa rather than Google that dominates the potentially extremely lucrative market for intelligent home automation.
  • From an investment perspective, neither of these two companies are desperately appealing leaving me preferring Baidu, Microsoft and Tencent with Apple for long-term income based investors.

 

Smart Home – Back to front.

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Apple is losing badly despite offering the best user experience.

  • Apple has redesigned its HomeKit website (see here) in order to generate interest around its smart home offering but despite having the best experience, it remains a very distant third in developed markets.
  • HomeKit enables smart home devices to be controlled with Siri as well as the Apple’s own Home app that appeared with iOS10.
  • I think that Apple has three main problems with its offering for smart home:
    • First: Hardware. device makers need to install a piece of Apple hardware to enable them to work with HomeKit.
    • This adds a level of complexity and cost for device makers who in many instances are small companies with only a few employees and very limited resources.
    • Consequently, most have ignored HomeKit completely and simply written their own app for iOS devices that talks to the device directly over WiFi or Bluetooth.
    • Second: Data. Just like Digital Life services, HomeKit brings together multiple devices and enables them to work together.
    • The device makers get access to the data that their devices generate, but it is only Apple that gets to see the whole picture.
    • RFM research has found on multiple occasions that understanding the bigger picture is far more useful and offers a much greater monetisation opportunity than looking at data sets individually.
    • I think that this is why device makers who understand this concept generally decline to make their devices work with HomeKit or HealthKit.
    • Third: Device. Apple has no device within which Siri can reside within the home.
    • Usage of both Alexa and Google Home show that over 60% of all usage is generated when the user’s hands are busy with another task.
    • This makes the use case of Siri on a device that needs to be removed from the pocket not as easy or as intuitive as Alexa or Google Home.
    • Furthermore, both Alexa and Google Home can hear the user from a distance which also improves the use case within the home.
    • Hence I think it quite likely that Apple will launch a home speaker device of its own or enable third parties to embed Siri in their products.
  • The irony of the current situation is that Apple has by far the best smart home user experience.
  • This is because Apple has understood the importance of integrating these devices together into single commands and use cases like going to bed, leaving the house or arriving home.
  • This makes it easy to turn off all the lights, lock up, turn down the heating and so on with a single button press which is something that neither of the other two have come close to offering.
  • Furthermore, I suspect that HomeKit will end up being far more secure than the other two but at this point in time, no one seems to care.
  • Amazon has both first mover advantage and has done the best job of showing developers love and support.
  • The net result is that there now over 10,000 skills available for Alexa which continues to grow rapidly despite the awful user experience offered by most of these skills.
  • Consequently, I still think that this is Google’s race to lose as its product is by far the best, and its decimation by Amazon at CES seems to have shocked it into getting its developer activities up to scratch.
  • Of the three, I would continue to prefer Apple but overall I still like Baidu, Microsoft and Tencent.