Smart speaker sales are surging in America — Amazon may be the big winner

Brian Sozzi

And you thought smart speakers were yesterday’s news. Think again.

With consumers on the prowl for easier ways to shop, manage their daily lives and pull up music and news (such as Yahoo Finance) on demand, the smart speaker industry is poised for its next major chapter of growth, according to new research from investment bank Credit Suisse.

Global smart speaker units shipped will surge 67% this year to 164 million, Credit Suisse says. That’s up markedly from 36 million units shipped in 2017 as consumers become more comfortable with using the devices and leaders Amazon (AMZN), Google (GOOG, GOOGL) and Sonos (SONO) refresh their smart speaker lineup to spur sales.

Overall, the global smart speaker market is expected to reach $23.3 billion by 2025 according to Allied Market Research. In 2017, that number was a mere $4.4 billion.

It almost goes without saying the introduction of more advanced smart speakers is unlocking new consumer behaviors and sales opportunities for the primary manufacturers.

“Today, consumers are primarily using speakers for music listening, though other applications include general information searches and weather, news and sports updates,” writes Credit Suisse analyst Brian Russo. “Surveys indicate that after purchasing a speaker, users are listening to more music, are searching for music in different ways than on smartphones (e.g., “play happy music”), are listening more often with other people (living room and kitchen are primary locations for speakers, 53% of users say they listen with others most of the time), and are adopting music subscription services (1-in-5 consumers subscribed to a service for the first time after buying a speaker).”

The ultimate winner

Russo believes Amazon with its nifty Alexa-powered smart speakers is the ultimate winner from these behavioral shifts.

Amazon holds a commanding 65% of the U.S. smart speaker market, Russo notes, well ahead of Google and Apple at 20% and 5%, respectively. The fact Amazon has its hardware in millions of homes (which is a sale, of course) means consumers are constantly interacting with the tech giant’s digital ecosystem. And with that engagement comes opportunities for Amazon to cash in on everything from music downloads to grocery orders.

FILE - In this Sept. 27, 2017, file photo, a new Amazon Echo is displayed during a program announcing several new Amazon products by the company, in Seattle. Big Mouth Billy Bass is programmed to respond to Alexa voice commands through a compatible Amazon Echo device. That means the singing and talking fish will lip synch to Alexa’s responses and will dance to songs from Amazon music. When it’s first plugged in, it will respond “Woo-hoo, that feels good!” (AP Photo/Elaine Thompson, File)
An Amazon Echo is displayed during a program announcing several new Amazon products by the company, in Seattle. (AP Photo/Elaine Thompson, File)

Unfortunately for music streaming service Spotify (SPOT), Amazon’s dominance in smart speakers isn’t necessarily welcomed news.

“We find investors overly dismissive of Amazon as a competitor in our view (Apple is often the primary focus of competition fears),” says Russo. “Given consensus expectations that Spotify will add 132 million paid subscribers over the next five years, including 27 million in North America and 40 million in Europe where growth should come disproportionately from older demographics (age 35+), and that Amazon is well positioned to target this same cohort of potential adopters through the proliferation of its smart speakers, we believe this supports our view that the consensus outlook for Spotify developed world net subscriber additions is aggressive.”

The same could be said about Sirius (SIRI), which owns music streaming service Pandora.

“For Pandora, the implications of growing smart speaker penetration and potential market share shift toward Amazon Music appear consistent with our expectations continued monthly active users declines,” Russo thinks.

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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