Amazon and Google fight crucial combat over voice recognition

The retail giant has a threatening result over its contender with the Echo and Alexa, as questions remain over how the search engine can turn voice technology into revenue

Amazon and Google always thrive in the fourth quarter as people get out their wallets for Christmas. Both companies or in Googles case, its mother group, Alphabet are therefore expected to announce booming revenues in their fourth-quarter results over the next fortnight, with Alphabet going first on Thursday and Amazon the following week. But analysts are already looking beyond the simple question of how many cardboard boxes Amazon filled and how many searches Google answered. Theyre wondering which company will win the battle to control your home.

That battle is being fought by two carafe-sized cylinders from the respective companies. One is Amazons Echo, with its voice-operated personal assistant, Alexa; the other is Google Home, which responds to the phrase OK Google. Both are internet-connected, home-based devices which can be command to do things: give the weather forecast; play music; read out news headlines; update shopping lists; and control smart devices in the home such as light bulbs or power points. In theory, if a device can be linked to it, the Echo can control or monitor it, and keep you advised. And simply by saying Alexa, add sugar to the shopping list, users can keep up to date on home supplies and even purchase them directly.

Amazon is in the lead, having launched the Echo in November 2014, two years before Google Home came out. Though Amazon has not and does not release sales figures for any individual item, investment bank Morgan Stanley is forecast that 11 m Echos had been sold by the end of November 2016; other estimations indicate a further 7m have been sold since. About 700,000 were estimated to have been sold in the UK and Germany, the only countries outside the US where it is available.

The Morgan Stanley estimation would put an Echo in more than 8% of US households. This is a significant figure, especially compared with the best estimates for Google Home, which put its sales at less than a million since its launching in October 2016.

Why should Google care about Amazon? Because voice is seen as the next big field for computer interaction, and the home is a far better environment for voice detection than the great outdoors. Research company Gartner reckons that by 2018, 30% of all interactions with devices will be voice-based, because people can speak up to four times faster than they can kind, and the technology behind voice interaction is improving all the time.

The risk to Google is that at the moment, almost everyone starting a general search at home begins at Googles home page on a PC or telephone. That leads to a results page topped by text adverts which help generate about 90% of Googles revenue, and likely more of its gains. But if people begin searching or ordering goods via an Echo, bypassing Google, that ad revenue will fall.

And Google has cause to be uncomfortable. The switching from desktop to mobile saw the average number of searches per person autumn as people moved to dedicated apps; Google responded by adding more ads to both desktop and search pages, juicing revenues. A switching that cut out the desktop in favour of voice-oriented search, or no search at all, would threaten its lucrative revenue stream.

Amazon is copying one feature of Googles success in smartphones: it is offering methods to connect and control smart devices via the Echo for free, instead as Googles Android software was offered as a free platform for smartphones. There are signs it is paying off: Wynn hotels in Las Vegas announced in December that it would be adding Echos to all 5,000 rooms, for functions such as playing music and controlling curtains and blinds. That gained some notice, as much as anything because the life cycle of such hotels implies they will be there for a decade or so.

Amazons Echo: providing a handy link to the firms shopping services. Photograph: Mikael Buck/ Rex

Similarly, at Januarys Consumer Electronics Show( CES ), also in Las Vegas, commentators were struck by how many devices incorporated Alexa. And Amazon is even stealing into Googles territory: some telephones sold in the US from Chinas Huawei, which uses Android, is to include Alexa rather than Googles Assistant programme.

Googles natural reaction is to have its own voice-driven home system, in Home. But that poses a difficulty, illustrated by the problems it claims to solve. At the devices launching, one presenter from the company explained how it could speak the answer to questions such as how do you get wine stains out of a rug? Most people would pose that topic on a PC or mobile, and research results page would offer a series of paid-for ads. On Home, you simply get the answer without ads.

What analysts wonder is: how can Home bridge that revenue gap? So far, Google hasnt explained. Even if it can fend off the Echo, it may not be able to defend its core business.

By contrast, the Echos benefit to Amazon is much clearer: it can make online shopping( at Amazon) a breeze, play music from Amazons paid-for subscription service, and generally act as a passive block on your employing rival shopping sites instead as Google cemented its predominance by being the default search engine on multiple browsers in the mid-2 000 s.

Richard Windsor of Edison Investment Research suggests that time is running out for Google: It has to act quickly, as Amazon is on the brink of becoming the industry criterion for controlling smart home devices.

At CES, everyone was integrating with Echo, with Google Home and Apple HomeKit barely present.

Indeed, where are Apple and Microsoft, which also have their own voice-driven assistants in the form of Siri and Cortana? Although both can be used in the home Siri on the iPhone or iPad, and to play content on the Apple TV set-top box, and Cortana on the Xbox games console neither seems to be intent on the home assistant market.

Phil Schiller, Apples vice-president of marketing, seemed to suggest recently that Apple wouldnt follow Amazon and Google into offering a voice-only device: Having my iPhone with me as the thing I speak to is better than something stuck in my kitchen or on a wall somewhere. He also emphasised the importance of a visual showing: We still like to take images and we need to look at them, and a disembodied voice is not going to show me what the picture is.

Even so, there are persistent rumours that Apple has prototyped an Echo-like device in secret but is undecided on whether to release it. The company hasnt commented. It could be ready to unveil something or may never do so. Microsoft, meanwhile, is in more homes than the Echo via the Xbox, but isnt trying to make itself a listening device linked to a shop.

So, will we all be burbling away to thin air in a few years, asks how long our commute will take while our smartphones sit unused in the kitchen? Perhaps though Ken Sena, a senior analyst at investment bank Evercore ISI, suggests that home-based voice assistants will never be used as widely as smartphones. According to Sena, they are not such a must-have.

Yet, the latter are a hot Christmas present and voice interaction is still in its early days, perhaps comparable to the smartphone marketplace in 2005, when BlackBerry, Palm and Microsoft predominated. Or, it could be like the smartphone marketplace now, effectively dominated by Google and Apple. But which?

Alexa, can you see into the future?

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