Company / division: Amazon
Here’s the second story today about a tech company expanding in the video business. Whereas Apple’s video investments have almost all been happening behind closed doors, with very little public indication of where its strategy is heading, Amazon has been taking a different approach: drip-feeding piecemeal announcements that are slowly adding up to an interesting subscription video business. On top of the Netflix-like service bundled into Prime, it now has relationships with a number of standalone content providers like HBO, Starz, Showtime, and Cinemax, and this anime channel is its first Amazon-branded channel. This whole approach has now been branded AmazonChannels, and it’s actually a pretty smart strategy for building up to a more fully-fledged pay TV-type service. Anime happens to be one of those categories that has a small but passionate audience, and AT&T’s Otter Media has also invested in this space for similar reasons.
Is Amazon late to the mobile voice assistant game? – iMore (Jan 11, 2017)
This is satire and opinion, but it’s very relevant to two prevailing narratives – that Apple is behind in AI and that Amazon is ahead in voice. Rene’s piece here does a good job of framing the discussion, and the two essays on this site which I just linked to take a similar stance: Amazon is very good at what it does with Echo, but it does a very limited number of things, and for today still does them mostly in the home. Siri has two orders of magnitude more users, but also gives users a variety of other ways to interact with their device. Any analysis that doesn’t take into account those factors when comparing the two is insufficient.
Amazon to Launch Credit Card for Prime Members – WSJ (Jan 11, 2017)
This is yet another example of Amazon pursuing its flywheel strategy of reducing friction and providing incentives for people to spend more time and money on Amazon. The 5% cash back feature for Amazon purchases will be compelling for many people, since it’s basically free money for things many of them would already buy there, but since it’s a higher percentage than for purchases made elsewhere, it may also shift some buying to Amazon. This is a smart move and I’m curious to see how many people sign up for this (something we will of course have to rely on third parties to tell us).
Apple has invested enormously in its green initiatives under Lisa P Jackson, arguably one of the biggest and most visible changes under Tim Cook, who seems determined to use Apple’s power for good beyond the influence of its products alone, to a much greater extent than Steve Jobs was. For Apple to come out on top of the major tech companies is still quite an achievement, though Google and Facebook also did well. It’s not clear that most consumers care all that much about any of this, but there’s an argument to be made that these companies are seen as leaders in the field, and Greenpeace’s endorsement puts pressure on others to fall in line, which has broader environmental benefits.
It must be tempting to make every speaker-related story about Amazon and Echo at the moment, but I think the thrust of this story is off. I just met with Sonos last week at CES, and they’re doing very well – arguably just hitting their stride, with their first brand advertising campaign after many years of word of mouth marketing alone. They recently secured Apple Store distribution and have an interesting partnership with AirBnb. I do think they’ll want to take their current Alexa integration beyond Echo-based control by incorporating microphones into the line, but I don’t see an existential threat here just yet.
This is the second of two Alexa car announcements made at this year’s CES, along with Ford’s, and together they’re part of Amazon’s push to get Alexa out of the home. There’s no date yet for this one, so it’ll be a while still before we start to see this, and of course unless you’re buying a new Ford or VW in the near future, you won’t benefit, but this is part of the longer-term push.
This piece highlights what I still see as the biggest challenge for Alexa – for the most part, it’s not available outside the home, and where it is the experience is sub-par relative to the Echo. That’s really important because I think a lot of people are mistaking Echo’s superior performance as evidence of better voice recognition or natural language processing rather than a function of its form factor. Put it in a smartphone or watch, and it will likely perform just as poorly as other assistants in those devices.
This report from Baird’s retail analysts cites its own survey on several points around selection and Prime. It estimates that there are 55-60 million Prime households in the US, out of around 125m total households. Some of the biggest expansion categories in selection are apparel, office/industrial, and home/kitchen, where Amazon has historically been weaker. There are tons of other data points in the linked report, which is well worth a read.
I’ve been saying for months now that where Alexa really needs to make progress is in phones, because unless an assistant is with you all the time, it’s not truly useful. Well, here’s the first phone with Alexa, and it’s an Android one, as you’d expect, though the announcement here feels a little half baked. The news leaked due to a prematurely unfurled banner at CES, and even now it’s out there some of the details are unclear. But this is a blow to Google and yet another CES win for Amazon.
Walmart has been hard hit by Amazon’s success and dominance of e-commerce, but has lately been taking more proactive steps to fill gaps in its own e-commerce portfolio, using its Jet acquisition to make further buys. Given the sheer number of small- to medium-sized e-commerce plays out there, Walmart can easily snap up these focused providers and roll them up into its broader e-commerce offering, accelerating its efforts to become more competitive with Amazon.
This is an important new domain for Amazon and Alexa, one of the first that gets it out of the house with its voice assistant. Of course, it’s also one of the slowest-moving technology products, with massively long upgrade cycles and very long development cycles too.
Vivint Smart Home Delivers on the Promise of Artificial Intelligence for the Home – Press Release (Jan 4, 2017)
Vivint is one of the companies that’s closest to my vision for what needs to happen in the smart home, a space that’s currently characterized by lots of disconnected islands and a retail DIY model that’s fine for early adopters but lousy for mainstream users. I wrote about Vivint’s vision a few months back after I was briefed on it, and they’ve now announced the actual product off the back of it. This, and not Amazon’s Echo/Alexa, is what a truly smart home assistant looks like.
Fulfillment by Amazon Delivered More than 2 Billion Items for Sellers Worldwide in 2016 – Amazon (Jan 4, 2017)
This is one of those Amazon press releases with very few real numbers and lots of relative ones, but those numbers are still impressive. Fulfillment by Amazon (FBA) is about half of third party seller units on Amazon, which in turn are about half of total unit shipments, so Amazon likely sold around 8 billion total units in 2016. Growth rates for FBA and seller units are higher than overall growth rates, because both are growing as a percentage of total sales, but this still suggests very high growth for Amazon overall in Q4. We’ll know more in a few weeks, of course, when Amazon reports earnings.
Taken together with the news that Amazon is one of the potential bidders for American Apparel, this is yet more evidence that it’s very serious about the clothing space. Activewear is one of those categories where some people definitely care about brands and are willing to pay for them, but others just want functional clothing at a decent price, and Amazon could do very well among the latter segment. The rise of activewear at stores like Gap and sister company Old Navy over the last several years is a great illustration of this opportunity, and Amazon is smart to try to tap into it.
Google Assistant is coming to Android TV – The Verge (Jan 4, 2017)
One of the weirdest things about the Google Assistant from the day it launched was that it wasn’t immediately part of Android, but was exclusive to Pixel and Home for at least some period of time (how long exactly has been something of a mystery). We are, now, starting to see signs of the Assistant making its way to some third party devices, notably those cited in this article, but still “in the coming months”. Meanwhile, Alexa is in almost every new voice device announced at CES, highlighting the folly of Google’s strategy to prefer its own devices rather than going straight to an open platform.
Flipkart salaries: Documents reveal high pay of employees at bleeding Indian startup — Quartz (Jan 4, 2017)
In case you’re not familiar with it, Flipkart is the big homegrown competitor to Amazon in India, where the two companies are going head to head in an aggressive fashion, paying (according to this article) high salaries, but more broadly losing lots of money in the process. Amazon, of course, has deep pockets filled by its businesses elsewhere and more recently by AWS, whereas the Indian business makes up most of Flipkart, so if this becomes a game of chicken, Amazon may well come out on top.
We’ve arrived remarkably quickly at the specialization phase of voice assistant technology – this usually only arrives once the generic version of a technology has gone mainstream. This device looks clever – though the article is frustratingly silent on when or where it might be available – but the broader point is that we’re going to see lots of companies playing in this space, leveraging Microsoft, Amazon and other platforms and technologies combined with their own expertise. Voice is hot, and that means a rapid entry into the market of dozens of new competitors, many of whom won’t survive there long.
Amazon’s Fire TV devices have sold pretty well, but as with Alexa the company is clearly willing to license its technology to appear in third party devices too, in this case TVs sold under three brands owned by a single Chinese company, Tongfang. These aren’t the biggest brands in the market, but this is a starting point, and could lead to more meaningful partnerships in future. However, with Roku also doing well (and perhaps perceived as less of a threat for some of these companies), it’s a competitive space. Amazon, though, can also offer prime placement (no pun intended) on Amazon.com, something Roku can’t.
Amazon has done enormously well with the Echo over the past couple of years, but its biggest challenge remains letting it leave the house. It looks like CES is going to be a showcase of many third party integrations, some of which will make sense and many of which won’t. This is a big success for Amazon, but the big question is still whether it can get Alexa into the most personal and portable of devices: the smartphone. Until that happens, Alexa will be competing with assistants like Siri and Google Assistant which are truly ubiquitous.
This is an interesting new angle from Amazon as it tries to compete with homegrown competitor Flipkart in India. It’s a good example of Amazon’s flexibility in responding to local conditions in markets outside the US – unlike some other big tech companies, it’s not rigid about a particular business model, and instead experiments as necessary to find the right products and strategies to make each market work. It’s still an uphill battle, however, in many of these markets, notably China, while it does seem to be making progress in India.