After less than a decade of existence, the smart speaker market is already mature. But unless smart speakers are launched with services or features that bridge industries, they risk becoming the next digital photo frame.
Ever since the first smart speaker hit the market in 2014, these devices have promised experiences that could never be achieved with a smartphone alone. Voice was the new user interface. And for the next six years, that would be mostly true as smart speakers aimed to supplant, or at least complement, the use of smartphones, PCs and laptops inside the home. Smart speakers turned out to be fun and engaging content providers that talked to people, played games and music, and as the smart home developed, controlled devices like lights. smart. But smart speakers now need to evolve.
The evolution of voice towards services
Consumers, for the most part, still use smart speakers for the features listed above. But while natural language processing (NLP) has improved over the years, we are still a long way from emotional and contextual conversations with our home AI.
So to fill the void, brands like Amazon and Google are looking to move beyond living room tricks and provide paid services attached to smart speakers, such as sleep tracking, security and personal care. elderly. And now that smart speakers are in nearly three out of five US homes, it’s a good time to change strategy. Instead of selling boxes, it’s time to sell services.
Moreover, the overall smart speaker market has peaked. Globally, 56 smart speakers were introduced to the market in 2019, but only 33 in 2021. Another sign is that brands that integrate voice assistants into their smart speakers – like Sonos, Bose, JBL and Harman – haven’t introduced new products with built-in voice assistants in nearly three years.
It can be difficult to introduce paid content and services for smart speakers. Other subscription services, like Netflix, are experiencing an exodus. In its latest earnings report, Netflix said it lost 200,000 subscribers in the first three months of the year and is expected to lose up to 2 million subscribers in the second quarter. CNN+, meanwhile, never even got off the ground. It’s also easy for beleaguered consumers to cancel a streaming service or any other form of discretionary spending. And the average American household currently has seven streaming subscriptions!
The security services, on the other hand, have been notoriously resilient. Over the past few decades, the number of American households with paid professional alarm monitoring has remained at a steady 25-30%, despite the rise of DIY systems that are mostly free. Amazon has already taken advantage of this, from 2020, with Alexa Guard. And once smart speaker brands became able to identify sounds, like breaking glass or smoke detector sirens, Amazon in September 2020 started charging $4.99 per month for Guard Plus. , which offers notifications.
For senior care, Amazon replaced the free Alexa Care Hub in December 2021 with a new paid subscription service called Alexa Together. This premium service costs $19.99 per month and includes access to a professional emergency help line and fall detection with proactive emergency assistance.
Wellness services delivered through smart speakers are also on the horizon. Google announced sleep tracking via its Soli chip in its latest Nest Hub, in early 2021. While Google says it aims to focus on sleep duration as well as sleep consistency and quality using a combination of radar and microphones, in 2023 the company is expected to roll out sleep detection in Fitbit Premium, which costs $10 per month.
Will consumers spend on services?
Paid services are the holy grail of smart speakers, but will they succeed? Once consumers start paying for services delivered through a smart speaker, these devices will become content carriers. Which will be different from initial consumer expectations of smart speakers as fun providers of free content detached from paid apps.
What a viable business model looks like and how to get paid advertising and services on smart speakers remains unclear, but as more speakers are replaced by smart displays, the opportunities for marks become more obvious. For example, on-screen advertising could be interpreted by consumers as less invasive compared to ads at the end of a Google or Amazon response, and developers could create on-screen shopping experiences, such as Instagram does. Netflix and other streamers are already adding service tiers with advertising to serve struggling households.
At first, smart speaker services will continue to be based on security and peace of mind, but will quickly morph into health monitoring and senior services. Smart speakers will also be part of an omnichannel approach to care provided by hospitals and doctors. Chatbots and texting communications are already popular, but smart speakers could introduce a new level of service. Certainly, there is a macro trend in healthcare to provide services outside of the traditional clinical environment, which creates a strong tailwind for home devices like smart speakers and other IoT devices. In the longer term, as AI assistants aggregate more data, their creators could then offer insurance, financial technology, transcription, artistic creation (NLG) and other highly personalized services based on large amounts of data shared between ecosystems.
Among the remaining questions are: Will consumers allow – and trust – smart speakers to become more than fun, free content providers? If so, will the services offered be scalable and sustainable over the long term? And will consumers see the benefits? Finally, as competition for a portion of a consumer’s subscription budget increases, will there be enough left for the smart speaker market?
If the answer to any of these questions is no, then I think smart speakers are at risk of becoming the new digital photo frames, which are low-touch devices with a single lens. Digital photo frames do not connect consumers to other ecosystem services or provide data to machine learning algorithms. They also don’t lead to lucrative opportunities with other industries like healthcare, automotive, hospitality, and education.
Blake Kozak is a smart home analyst at Omdia.