Google vs. Amazon – Battle for the smart home pt. VIII

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Google booted from the nest.

• The tit for tat war between Amazon and Google (which I thought had been largely resolved (see here)), has been brought back to life with the almost certainty that Google’s smart home products will no longer be sold on Amazon.
• This has re-emerged as Amazon has decided not to sell any of the new products that Nest launched in Q4 2017.
• The older products are still listed on the site but are expected to disappear once existing inventory runs out.
• This is the latest salvo in a tit for tat war that has seen Google pull support for YouTube from Amazon Alexa devices that have a screen (particularly the Echo Show).
• This has nothing to do with Alexa support, as Nest users have long been able to control their devices with Amazon Alexa and makers of other smart home products that compete directly with Amazon’s in-house smart home offerings are still available.
• This is almost certainly about the fact that Google’s digital assistant is the arch rival of Amazon’s Alexa and, in my opinion, is now in a position to squeeze Amazon out of the smart home.
• This is because:
  • First, developers. At CES in 2017, Google was completely absent with almost every developer of a smart home device neither offering nor planning to offer support for Google Assistant.
  • 12 months have made a huge difference and at CES 2018, almost every smart home device maker was either offering or planning to imminently offer Google Assistant support.
  • This has long been one of Alexa’s key advantages over Google as when it comes to intelligence of the agent, Amazon is far behind Google.
  • Second, traffic: The secret to improving the intelligence of a digital agent is traffic and the latest data is showing that 91% of US smart assistant users access the agent with a smart phone and only 17% via a smart speaker.
  • Even taking out the large amount of traffic that Siri, is generating in the US, this still leaves Google with a big traffic advantage over Amazon given that Alexa is not meaningfully present on smartphones.
  • Hence, I think it likely that the Google Assistant will improve more quickly than Alexa meaning that its relative advantage in terms of quality will continue to increase.
• This is why I now think that Google has the advantage over Amazon in the smart home leading to its eventual ouster.
• The one area where I think Google has no chance is in shopping but Amazon Prime households are affluent enough to have two assistants.
• Furthermore, because Amazon gives away the Echo Dash Wand, there is no reason why Prime households cannot use Alexa for shopping and Google for everything else.
• Amazon’s digital consumer ecosystem is not nearly strong enough for users to rely on it entirely meaning that attempts by Amazon to lock users into its ecosystem are likely to backfire spectacularly.
• I expect that this tit for tat war will continue while the smart home market develops.
• As the purveyor of the most desired services and with developers now on board, this is Google’s race to lose.