Amazon and Google launch smart speaker battle to lose money selling


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NetEase Smart News, January 5 — During the holiday shopping season, Amazon and Google have significantly discounted their home smart speakers, offering deals that could cost them money per unit. This aggressive pricing strategy poses a challenge for Apple, which is preparing to launch its own smart speaker, the HomePod.

Both Amazon Echo Dot and Google Home Mini saw price drops from $50 to $29 during the U.S. holiday season. The mid-range versions of these devices are more than double the price of the mini models. Analysts believe that the sales of these lower-end models have led to significant losses for both companies.

According to ABI Research, the components of an Echo Dot are valued at around $31, while the Google Home Mini’s parts are worth about $26. These figures don’t include overhead costs like shipping and management, suggesting that both companies may be selling these devices at a loss.

Adam Wright, a senior research analyst at IDC, noted that Apple has been struggling in the smart speaker market. He estimates that global smart speaker sales reached about 35 million units before the holiday season. “We’ve seen explosive growth in smart speakers over the past six months,” he said.

Apple initially tried to launch the $349 HomePod in 2017 but delayed it until early 2018. The company aims to make the device profitable and also promote its Apple Music subscription service, which costs $9.99 per month. Siri, Apple's voice assistant, is expected to play a key role in recommending new music.

In contrast, Amazon and Google are using low prices to attract consumers and introduce them to their digital assistants, Alexa and Google Assistant. Their goal is to lock in users and generate long-term profits through future purchases and data collection.

Although the HomePod offers better sound quality than the Amazon Echo Dot or Google Home Mini, some consumers might prefer cheaper options, thinking they don't need more expensive smart speakers. Even during the holiday season, mid-range models from Amazon and Google dropped to $79.

Paul Erickson, a senior analyst at IHS Markit, stated, “This pricing is good for consumers, but bad news for Apple.” Some buyers may see a $30 smart speaker as affordable enough to use without needing to upgrade to a pricier device like the HomePod.

Amazon did not comment on Echo products, but last week, it revealed that the Echo Dot was the most popular product among Prime members when using Alexa. Google declined to release specific sales figures for the Home Mini, but a spokesperson, Nicol Addison, expressed satisfaction with the product’s performance during the holidays. Google offered the Home Mini to new Pixel 2 smartphone buyers at a discounted price of $29 through Walmart, Target, and Best Buy.

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