Amazon.com (AMZN) has a potential megahit on its hands with the Echo smart-home device and its Alexa companion — a voice activated, digital home assistant — the combination of which could attain $10 billion in revenue by 2020, an analyst report said Friday.
RBC Capital Markets analyst Mark Mahaney said a survey of Amazon customers showed stronger awareness of the Amazon Echo than expected. Google Home, which Alphabet (GOOGL) introduced in November and competes with Echo, is also gaining strong traction. Google Home is powered by Google Assistant.
Amazon and Alphabet are in a race for dominance in one of the hottest categories in consumer electronics. Both devices are voice-activated speaker systems connected to the internet that can answer a multitude of questions, play music on request, read books, tell jokes, provide weather and traffic information, and much more.
Microsoft (MSFT) also is expected to enter the market, based on its Cortana platform. That’s also true of Apple (AAPL), based on Siri.
Microsoft in December gave a sneak peek at a new device that looks similar to Echo. The device has a label from speaker-maker Harman (HAR), but is voice-controlled through Cortana, Microsoft’s artificial intelligence platform. Microsoft said the device will ship this year.
Amazon has a big early lead with Echo, priced at just under $180. It was introduced in June 2015.
Echo is voiced by Amazon’s Alexa, which responds to questions and requests and lives in the Amazon cloud. It can also be used for buying products. Amazon also has a low-end version of Echo, called Dot, also voiced by Alexa, which sells for $50, and a midrange device called Tap.
Google Home, which sells for under $130, didn’t arrive until November but is quickly catching on. Mahaney said both products are “dramatically gaining awareness, adoption and usage in the U.S.”
IBD’S TAKE: Amazon, Apple, Alphabet and Microsoft are strengthening their connection to customers with mobile and in-home devices infused with advanced speech recognition and artificial intelligence. The devices could evolve into the next major disruption in computing and put the smart home on a fast track.
The devices have the potential of being the central hub of a smart-home ecosystem. As to which device is better, that’s open to opinion. Some analysts think Google Home will be the winner, based on its strength in artificial intelligence, while others think Amazon has a good shot at remaining the market leader with its Alexa line of products.
Mahaney, drawing from survey results, thinks Amazon could pull in $5 billion in revenue from Echo device sales and an additional $5 billion in revenue from sales through the devices by 2020.
By then, Mahaney thinks Amazon will sell 60 million Echo devices. Current estimates are that Amazon has sold about 6 million Echo and Dot devices. Mahaney said survey results indicate that Alphabet may have an installed base about one-third the size of Alexa’s.
“We are seeing strong traction for Google Home. That said, Google still has a lot of catching up to do,” Mahaney wrote.
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