Amazon Alexa

It was only six months ago that the Consumer Technology Association reported smart speaker penetration of 22% in U.S. homes. Inside Radio said then, “Amazingly, that figure represents triple the number of Amazon Echo and Google Home units sold year over year.”

As they say, you ain’t seen nothin’ yet. A new report from RBC Capital Markets says that as of the end of 2018, 41% of U.S. consumers now own a voice-activated speaker. According to their data—similar to CTA’s—that is up from 21.5% in 2017. The near doubling of the adoption rate for smart speakers in the U.S. was driven by growth in both Alexa and Google Home devices, while Apple’s HomePod played a minimal role. But for the device overall, as Tech Crunch writes, “The smart speaker market reached critical mass in 2018.”

Amazon Echo continues to lead the way, by a large margin. RBC reports that U.S. penetration of Alexa-enabled devices reached 31% this year, compared to the 41% overall penetration. It forecasts that Alexa will generate $18 billion to $19 billion in total revenue by 2021. That represents about 5% of Amazon’s total revenue, thanks to a combination of device sales, incremental voice shopping sales and other platform revenues, Tech Crunch writes. In the U.S., there are now more than 100 million Alexa-enabled devices installed, a “key milestone for Alexa to become a critical mass platform,” the RBC report says.

Alexa’s third-party app ecosystem also grew in 2018, with 150% year-over-year growth in skills, reaching more than 60,000 total Alexa skills by year-end. That’s up from 40,000 skills in May; 25,000 in Q3 2017; and a scant 5,000 two years ago.

Offering its take on the report, Retail Dive said, “The key to Amazon's ongoing dominance of this market is that it offers the widest variety of smart speaker devices and the broadest ecosystem of apps and partners.”

Competitor Google Home did gain traction in 2018, with U.S. penetration for its devices at 23%, up from 8% in 2017. Each so-equipped household owns around 1.7 devices, which leads a Google Home install base of around 43 million in the U.S., the forecast offered. Google Home generated $3.4 billion in revenue this year, and will grow that to $8.2 billion by 2021.

This is the first year the RBC analysts asked about Apple’s HomePod in the consumer survey. They report that its U.S. smart speaker market presence remains miniscule: Amazon has a 66% share to Google’s 29%, while HomePod has 5%. As Retail Dive points out, HomePod has been criticized for its overall design, lack of capabilities, proprietary apps or “skills” and initial $350 price tag.

Still developing, as Retail Dive notes, is the ecommerce potential over smart speakers. “The current state of affairs in the smart speaker market appears to set Amazon up well to win the evolving voice commerce battle, although to date not many smart speaker owners are actively shopping and purchasing through their devices,” it reports. “Smart speakers represent an explosive new market opportunity for the technology companies that are selling these devices, but even as more are showing up in consumer homes, they do not yet represent much of a sales channel for retailers.”