Share price drops for both Amazon and Google after quarterlies

Despite reporting quarterly numbers most companies would kill for Amazon and Alphabet share prices dropped by 8.6% and 5% respectively due to investor disappointment.

More than anything else it shows the high demands of investors but also the confidence which is being placed in the internet giants. With Amazon reporting a revenue increase of 29% to $56.6 billion for the quarter, while Google parent company Alphabet reported $33.7 billion, up 21%, the expectations are certainly high.

Starting with Amazon, the revenue increase of 29% paled in comparison to the more than 10X lift in net income to $2.9 billion. While this would be a regular cash bonanza for most companies around the world, sales guidance between $66.5 billion and $72.5 billion for final quarter were lower than what the market wanted to hear. The more coy guidance for Amazon’s busiest quarter resulted in the 8.6% drop, after confidence during the day sent stock up 7%.

In Google’s HQ the story was slightly different. Revenues of $33.7 billion, up 21%, and net income of $9.1 billion, compared to $6.7 billion in 2017. Shares were down 5%, following a 4.4% rise across the day, after sales figures did not hit the expected heights. The last three months have been a tough period for investors to swallow with various scandals dropping share price by 8.8% over the last three months.

Of course, it wasn’t all bad news. The cloud unit for both businesses is continuing to rack up revenues with AWS up 45% to $6.7 billion across the quarter and Google’s other revenues segment, which features cloud up 29% to $4.6 billion. Encouragingly for both, Gartner estimates the worldwide public cloud services market is projected to grow 17% percent in 2019 to total $206.2 billion, up from $175.8 billion in 2018. IaaS is set to get the largest boost, forecast to grow 27.6% in 2019 to reach $39.5 billion. With so many businesses around the world citing a cloud-first approach, it’s amazing to think only 10% of workloads have been moved into the cloud.

The relatively new venture into the world of smart speakers and virtual assistants is proving to be a continued success story as well. For Amazon, the number of Alexa-compatible smart home devices has quintupled to more than 20,000 devices from 3,500, while the team have also started to launch new products such as a smart home security solution (Alexa Guard), and Alexa is expanding what it can give updates on as well, such sports with predictions, live streams, cooking instructions and maths homework. For Google. the Assistant has expanded to 20 languages and 76 countries, while the devices with screens will help YouTube business, which is attempting to blend in more direct response adverts as well as branding to its proposition.

There will of course be short-term wins for the pair in this space, but this is a long-term bet. Once the idea has been adopted by the mass market, the opportunities to make money through third-party relationships will be quite remarkable. Search revenues can be moved into the voice domain (effectively anywhere) and look how profitable search has been for Google. This is only one way to make money, but both Amazon and Google are putting themselves in a remarkably strong position for the future.

Both businesses might have suffered in the last 24 hours but they are still in incredibly dominant positions. The cloud units still have incredible growth potential, while the smart speaker ecosystem is starting to become a reality. For Google, the is delivering amazing profitability but sales growth does seem to be slowing slightly. Amazon is delivering on the North American market but the business is not as effective on the international scene, posting a loss of $385 million.

There are issues, but these are nothing compared to the billions being raked in and the growth potential in new, lucrative markets.

Alibaba Cloud opened two data centres in London

The e-commerce giant Alibaba is challenging Amazon and Microsoft in cloud service by adding London to its global data centre map.

If anything can indicate that the world is still confident in the UK as a business hub, amidst all the confusions over deal or no deal of Brexit, new investment from Alibaba can certainly do. The cloud service division of the e-commerce giant, Alibaba Cloud, announced on Monday that it is opening two data centres in London.

“Our decision on the location is driven by the rapidly growing customer demand in the U.K. The United Kingdom is one of the fastest growing European markets for Alibaba Cloud,” said an Alibaba spokesperson. “We are also working with many global and local partners to make sure we are offering best-in-class technologies, services and consulting to customers.”

Among the services the data centres will provide include a so-called “elastic computing”, which is a dynamic system to manage traffic spikes in the network, as well as deliver application services and big data analytics. Alibaba Cloud’s UK clients come from sectors like retail, finance, media, education, research, and logistics, and include public companies like the software maker SDL and the B2B media and event company Ascential.

Cloud service has become a key battlefield for the webscale companies and are clearly delivering results for the market leaders. Over 60% of Amazon’s operating income was from AWS, its cloud service division, in the first half of 2018, while Azure has been the most stellar performer among all Microsoft products.

Meanwhile cloud services have also attracted unwelcome following. According to a report by PwC, “Red Apollo”, a hacking group based in China, launched a series of sustained cyber-attacks last year, specifically targeting cloud service providers. The logic goes that, if they could break the defence of a major cloud service, they would be able to spread spying tools and malware to all the companies on these outsourcing services.

London joins Frankfurt to form Alibaba Cloud’s network in Europe. By the time the new data centres are up and running the company will have 52 data centres sites in 19 regions for its cloud service.

Amazon, Supermicro and Apple call BS on Chinese spying sting – someone is lying

Amazon, Supermicro and Apple have released statements denying they have ever found any malicious microchips on their hardware calling into questions the validity of Chinese espionage claims.

Yesterday Bloomberg pulled back the curtain on an apparent three year-old US government into one of the most intrusive and intricate espionage campaigns, fuelled by the Chinese government. Should the claims be proven true, it would certainly add weight to the political paranoia which has been whipping the anti-China rhetoric into a frenzy, though the major players have denied all knowledge of the malicious microchips and the resulting investigation.

“As we shared with Bloomberg BusinessWeek multiple times over the last couple months, this is untrue,” said Steve Schmidt, Chief Information Security Officer at Amazon. “At no time, past or present, have we ever found any issues relating to modified hardware or malicious chips in SuperMicro motherboards in any Elemental or Amazon systems. Nor have we engaged in an investigation with the government.”

“Supermicro has never found any malicious chips, nor been informed by any customer that such chips have been found,” Supermicro said in a statement. “The manufacture of motherboards in China is not unique to Supermicro and is a standard industry practice. Nearly all systems providers use the same contract manufacturers.”

“Over the course of the past year, Bloomberg has contacted us multiple times with claims, sometimes vague and sometimes elaborate, of an alleged security incident at Apple,” an Apple statement reads. “Each time, we have conducted rigorous internal investigations based on their inquiries and each time we have found absolutely no evidence to support any of them. We have repeatedly and consistently offered factual responses, on the record, refuting virtually every aspect of Bloomberg’s story relating to Apple.”

While the entire saga is now a bit hazy, one thing is clear, someone is lying and misleading the general public.

Would China compromise ‘Workshop of the World’ position?

It is not difficult to believe the Chinese government would conduct such campaigns. It is generally accepted the Chinese government monitors the activities and communications of its own citizens, therefore it is not a huge stretch of the imagination to believe it would do so for foreign countries. But, would the Chinese government put its valuable position as the ‘Workshop of the World’?

With roughly 75% of smartphones and 90% of PCs manufactured in the country, any accusations of espionage would certainly force companies to reassess their supply chain. What company would buy hardware if they knew the potential for data breaches? It would be commercial suicide. China surely knows this, but it depends on what it places more importance on; securing intelligence from foreign governments and multinational corporations, or maintaining stability for a very lucrative industry for the country.

This is not to say they wouldn’t, but it would have to accept it would be sacrificing an important and profitable role in the global supply chain, one which it has worked hard to dominate.

Amazon, Supermicro and Apple clearly have a lot to lose

Another denial here is nothing which should come as a surprise. Should there have been a confirmation, the trio would haemorrhage customers.

Amazon AWS’ government business is a big earner, but how many would trust the services if there was a threat of espionage. The same could be said of corporate clients who are incredibly protective of trade secrets. Supermicro manufactures motherboards for more than 900 customers around the world, clearly this would be incredibly damaging to its reputation. For Apple, and Amazon as well, the PR damage for the consumer business could be a disaster. Consumers would be very wary, which combined with the high-prices Apple tends to charge, could possibly turn the public to other brands.

Each company has a lot to lose by admitting it has been compromised. There was of course going to be a denial, especially considering this investigation has not been confirmed by the government. If it does turn out to be true, the trio can simply state they were under non-disclosure agreements and a denial was necessary for national security, even if it was a lie.

A convenient revelation for the US government

Just as President Trump is going on the offensive against the Chinese government with tariffs and company bans, the story emerges. To say it is convenient timing is somewhat of an understatement.

Just last month, Trump upped the ante on the Chinese trade war by introducing tariffs on another $200 billion of imports. This adds to the initial $50 billion which was announced earlier in the year. With the price of imports increasing, and the option of domestic manufacture more expensive, the price of certain consumer goods will soon begin to rise. Trump will soon need to justify to US citizens why it is important to swallow these price increases, and an espionage scandal would certainly fit the bill.

Another interesting aspect is on the 5G side of things. With Huawei banned from any meaningful deployment or contracts, the risk is reduced competition which could potential lead to increased prices and slower deployment. Ghost stories about the naughty Chinese will only get the government so far, Trump will soon need a concrete reason for banning Huawei and ZTE from the fray. The malicious microchips provide justification here as well.

Not everyone can be right

Right now the validity of the claims is hazy. There are of course strong arguments for all, some suggesting they are telling the truth and some as evidence of lies, but right now, who knows.

With the intelligence community and the White House remaining quiet, rumours will continue to swirl. Until this confirmation or denial for the investigation is unveiled, the conspiracy theorists will be typing away. Of course, a confirmation or denial will not stop the conspiracy theorists, but it will at least provide some clarity for the rest of us.

Maybe the Chinese espionage rhetoric is more than political hot air

Evidence has reportedly been found of China spying on more than 30 US companies, suggesting the anti-China rhetoric might be more than political posturing.

To date, little hard evidence has been displayed in the public domain regarding Chinese espionage, but that might be about to change. According to Bloomberg, a three-year old investigation has uncovered tiny microchips nestling on the motherboards of servers used not only in private corporations, but Department of Defense data centres, the CIA’s drone operations, and the onboard networks of Navy warships. These chips can be traced down the supply chain to a Chinese subcontractor used by SuperMicro.

While espionage has focused on locating and exploiting vulnerabilities in software in recent years, compromising hardware can be more effective. It is more difficult to do, but due to the life-cycle of these products, it can be longer until the issue is uncovered. Compromising hardware can be done in two ways; firstly, devices can be manipulated when on-transit between the supplier and the customer, or the nefarious activities can be conducted at the beginning of the manufacturing process. This is an example of the latter.

The microchips were first discovered after Amazon sought to acquire a company called Elemental. Elemental makes software for compressing massive video files and formatting them for different devices, but also provides expensive servers for customers installed on their sites to handle the video compression. These servers were assembled by SuperMicro, which in turn outsourced some processes to the Chinese subcontractor. These microchips allowed the controller to create stealth doorway into any network that had servers hooked up to it.

To conduct this sort of espionage is incredibly difficult. Not only does the microchip need to be small enough to avoid detection, and powerful enough to perform the desired actions, implanting the device would require an intimate knowledge of the products design. Considering how much of the worlds telecommunications manufacturing is done in China, the country is in an incredibly unique position to master the complex and intricate task. Sources states the microchips were inserted by operatives from a unit of the People’s Liberation Army, the armed forces of the People’s Republic of China and Communist Party of China.

Amazon has stated it had no knowledge of such a saga, though Bloomberg notes this is contradicted by its own sources. While the scale of such espionage activities are unknown for the moment, it is believed more than 30 companies could have been victims, including Apple which had planned to purchase servers from SuperMicro as part of the companies data centre expansion plans.

For the US government, this might just prove to be the justification it needs to chase Chinese companies off the shores. It has been battling to rid the country of Huawei and ZTE, though as little evidence has been released to the general public, a sceptic might suggest this was little more than anti-communist propaganda.

Unfortunately, this might simply compound the pressure which is being applied to China, instead of creating a resilient security framework. A whitepaper from the Rural Broadband Alliance entitled Domain5 suggests a supply chain can be compromised at any point and concentrating on one country might not be the best solution. Operatives are capable of infiltrating a manufacturing plant, in theory, irrelevant as to where it is, therefore concentrating too intently on one country might weaken the security protocols elsewhere.

This should not undermine what is perhaps the most damning evidence of Chinese espionage in recent years however. Various intelligence committees and sub-committees have pointed the finger of dodginess at China for years, though this is the most compelling evidence which we have seen.

Alexa is starting to turn into a genuinely helpful assistant

Amazon has unveiled a host of new features and skills for its Alexa virtual assistant, edging the living room closer to the intelligent dream we’ve all been promised.

While you cannot argue with the gimmicky entertainment brought by virtual assistants, you have to wonder whether it is anything more than five minutes of entertainment or making our lives easier in the very smallest (and often irrelevant) of ways. The new features and skills released by Amazon are starting to add some clarity to the smart home as we all imagine it from watching too many re-runs of Back to the Future 2.

“The Alexa service is always getting smarter, whether you’re using the Echo you bought three years ago or an Echo Show you buy tomorrow,” said said Tom Taylor, Senior VP of Amazon Alexa. “We have thousands of engineers and scientists inventing on behalf of customers, and today we’re excited to introduce even more features to help make customers’ lives simpler, safer, and more convenient.

“Soon customers will be able to manage their email, easily secure their home, watch the shows they love on Echo Show, and make their daily routines more productive – all just by asking Alexa.”

Right now virtual assistants are very limited in the way they work. This is partly due to customers not utilising the capabilities to full potential, though the breadth of features and skills does need to be fleshed out. It might be cruel to point the finger at Amazon, it is still early days after all, but with the big promises made in advertisements, the virtual assistants are a bit drab. That said, some of the new features do look pretty good. The difference is underlying interaction with other applications and features.

Take the new location based reminders. It’s a simple idea, but linking reminders up with GPS adds value. How many times have you walked home from the tube station, only to realise you forgot to buy peas when you are half-way through cooking your dinner. Now you can ask Alexa to remind you to pick up peas, post a letter, drop off the dry cleaning or buying a last minute birthday present, when you’re passing by the relevant establishment.

The routines is another area which been improved as well. This is an interesting feature which can be adapted to each individual. The morning playlist might depend on the day for instance, or lights are triggered depending on motion and your routine. Both of these examples take the virtual assistant away from the simple command-action scenario and factor in other variables which are not dependent on proactive actions from the user. It is actually starting to become smart.

Later in the year you’ll start to see some even more interesting features with Alexa actually making sensible suggestions depending on your actions and commands. For example, if you activate the bedtime routine by saying ‘Good night Alexa’, the white noise playlist will kick in, and Alexa might ask you whether you want it to switch off the living room light you left on. Features like this will make the virtual assistant much more than a gimmick.

The next step will be deeper integration with other applications such as Outlook calendars. When Alexa prompts you to change your alarm the night before because it has spotted an early morning meeting, it’ll start to be a genuine assistant. One step further would be linking to weather and travel update services so it can proactively change the alarm in the middle of the night if it decides your commute will take longer than it usually should.

The promise of virtual assistants has been very glorious, and so far it hasn’t met the expectations. But updates like this are making Alexa an genuinely helpful and interesting proposition.

Twitch is blocked by China’s Great Firewall

The Amazon-owned game streaming platform Twitch confirmed on Friday that it became inaccessible from China, the latest of a string of popular services banned from the world’s largest internet market.

That China has banned another internet site can hardly hit the headlines nowadays. On the contrary, often it is the clandestine or not so clandestine efforts from those blocked to re-enter China that are making the news. As a matter of fact, among the top 10 most visited websites based on the traffic data from the analytics company Alexa Internet (not the personal assistant from Amazon, but an Amazon subsidiary nonetheless), four are entirely blocked (Google, YouTube, Facebook, Twitter), one is partially blocked (Wikipedia), one is accessible (Yahoo), the rest are China-based.

The reason that the twist on Twitch has caught media attention is that it has suddenly gained popularity in the last month, not the least because e-sports were included in the recent Asian Games in Jakarta, a regional multi-sport event with the number of competing athletes next only to the Olympics. Following the Games, Twitch’s iOS app climbed to the 3rd position in Apple’s App Store in China, before it was quietly taken down, presumably another measure to comply with local regulations.

E-sports have been attracting stronger following in recent years, and special events have taken place in different parts of the world, where spectators would travel to follow the stars they have followed on platforms like Twitch. However the Asian Games was the first time e-sports were sharing the stage with other “real” sports.

China’s attitude towards e-sports, and the games industry in general is mixed. It is the world’s largest video game market, host to the world’s largest publisher (Tencent), and has a total number of video game players larger than the total population of the United States. But it also banned game consoles sales for a number of years, and its official media has also repeatedly underscored the “harm” video games can do to young people’s mental development. Despite the extensive coverage of the Asian Games, where China dominated the medal table, the state-owned China Central Television (innocuously abbreviated as “CCTV”) did not cover the e-sports section at all, leading to the sports channel’s chief producer alluding to this gap in his latest column (in Chinese).

“I can’t say I am surprised by the crack down on Twitch,” said Nitesh Patel, director of Wireless Media Strategies of the research firm Strategy Analytics. Live video streaming, including game steaming, has taken China by storm in recent years. Large amounts of money and time have been spent on following streaming stars. “The authorities are concerned about gaming addiction and, as a consequence, players like Tencent have implemented features to limit the time children spend playing addictive titles like Honor of Kings. The recent reported spike in use in Twitch may have caused some concern among authorities and they have moved to pull the plug before momentum continued,” added Patel.

Likely to benefit from the ban will be local game streaming platforms, for instance Douyu, Huya, Panda TV, similar to WeChat benefiting from the ban on WhatsApp, Badu on the ban of Google in the past.

The Children Act: US lawmakers asking to know how YouTube collects data on children

US Congressmen have demanded Google CEO answers questions on how YouTube tracks the data of minors.

Anyone who has been a parent to toddlers or pre-schoolers in the last dozen years must have felt, like it or not, YouTube has been a wonderful thing. It does not only provide occasional surrogate parenting but also delivers much genuine pleasure to the kids, from entertainment to education, with sheer silly laughter in between.

Meanwhile we have also recognised that YouTube can be a pain as much as a pleasure. The pre-roll and interstitial ads on such content are all clearly pushed at kids, in particular game and toy shopping; recommendations are based on what has been played therefore encouraging binge watching; not to mention the disturbing Peppa Pig or Micky Mouse spoof parodies that keep creeping through, a clear sign that, while you are watching YouTube, “YouTube is watching you”.

But neither the pleasure nor the pain should have been there in the first place, because, though not many of us have paid attention, “YouTube is not for children”, as the video service officially puts it. In its terms of service YouTube does require users to be 13 years and above. But, unlike Facebook, which would lock the user out unless he has an account, anyone can watch YouTube without the need of an account. An account is only needed when someone intends to upload a clip or make a comment. Even in situation like this, children can pretend to be above the age limit by inputting a faked date of birth, or simply by using someone else’s account. And YouTube has known that all along, it even teaches users how to make “family-friend videos”. Admit it or not, YouTube is for children.

Following complaints from 23 child and privacy advocacy groups to the Federal Trade Commission (FTC), two congressmen, David Cicilline (D) of Rhode Island, and Jeff Fortenberry (R) of Nebraska, sent a letter to Google’s CEO Sundar Pichai on September 17, demanding information on YouTube’s practices related to collection and usage of data of underaged users. The lawmakers invoked the Children’s Online Privacy Protection Act 1998 (COPPA), which forbids the collection, use or disclosure of children’s online data without explicit parental consent, and contrasted it with Google’s terms of service which give Google (and its subsidiaries) the permission to collect user data including geolocation, device ID, and phone number. The congressmen asked Google to address by October 17 eight questions, which are essentially related to:

  • What quantity and type of data YouTube has collected on children;
  • How YouTube determines if the user is a child, what safeguard measures are in place to prevent children from using the service;
  • How children’s content is tagged, and how this is used for targeted advertising;
  • How YouTube is positioning YouTube Kids, and why content for children is still retained on the main YouTube site after being ported to the Kids version

Google would not be the first one to fall foul of COPPA. In a recent high-profile case, FTC, which has the mandate to implement the law, fined the mobile advertising network inMobi close to $1 million for tracking users’, including children’s location information without consent.

This certainly is a headache that Google can do without. It has just been humiliated by the revelation that users’ location data was still being tracked after the feature had been turned off, not to mention the never-ending lawsuits in Europe and the US over its alleged anti-trust practices. It also, once again, highlights the privacy minefield the internet giants find themselves in.  Facebook is still being haunted by the Cambridge Analytica scandal, while Amazon’s staff were selling consumer data outright.

Nine years before COPPA came into force, an all-encompassing Children Act was passed in the UK in 1989. In one of its opening lines the Act states “the child’s welfare shall be the court’s paramount consideration.” This line was later quoted by the author Ian McEwan in his novel, titled simply “The Children Act” (which was recently made into a film of the same title). In that spirit we laud the congressmen for taking the action again YouTube’s profiteering behaviours. To borrow from McEwan, sometimes children should be protected from their pleasure and from themselves.

Amazon China staff were reportedly selling-on user data

Amazon is conducting an internal investigation into allegations that its staff in China received bribes from merchants for user data.

According to a report by the Wall Street Journal, staff of the online retailing giant’s China operation received between $80 and more than $2,000 to part internal user and sales data to brokers, who would then re-sell them to merchants who do business on Amazon platform. According to the WSJ report, it was not only Amazon’s internal sales metrics and users’ email addresses that were sold, also on offer was additional services. The staff would help the buyers to delete negative reviews and to re-open banned Amazon accounts.

It is said the malpractice was particularly rampant in Amazon’s office in Shenzhen, the city bordering Hong Kong. It is not the first time China’s online retailers suffered from data security comprise. Back in 2016 over 20 million of Alibaba’s users had their data hacked. Nor is this the first time that Amazon has found itself in the centre of data leaking controversies, but earlier cases were related to its cloud service AWS. So it is astonishing that in the present case, data was not breached by hacking but through blatant criminal transactions. It is not clear how many users have had their data sold.

Amazon released a statement saying “We have zero tolerance for abuse of our systems and if we find bad actors who have engaged in this behaviour, we will take swift action against them, including terminating their selling accounts, deleting reviews, withholding funds, and taking legal action.”

Amazon set up its business in China in 2004 after acquiring a competing online bookshop Joyo with $75 million. It was rebranded Amazon China in 2011.

Amazon Pay acquires app aggregator platform Tapzo

Amazon has acquired Indian app company Tapzo in a deal to bolster its digital payments offering.

According to the Economic Times, the deal will be valued between $40-45 million, while co-founders Ankur Singla and Vishal Pal Chaudhary will be brought onto the Amazon team to continue development of the offering. While the acquisition is yet to be confirmed by either party, sources state Amazon is after a shortcut to get in on the mobile money bonanza.

“It would have taken Amazon Pay up to two years to build an entire stack of service offerings to enable efficient use-cases for its payment platform,” one source familiar with the deal stated. “So this acquisition helps them save time and also enables them to spread their cashback offers across a host of services immediately.”

Tapzo is an aggregator platform that allows users to access over 35 apps including Amazon, Flipkart, Ola and Uber through a single screen, but also allows for mobile payments, to pay bills, order cabs and food and book flights and hotels. The most popular service for users to date has been bill payments and recharges, with about 15,000 transactions per month across the two services.

Integrating the Tapzo capabilities into the Amazon Pay business will offer the team plenty of ammunition as the battle for domination in the Indian payments market warms up. While there are several local firms are controlling market share for the moment, PhonePe and Paytm for example, the continued digital revolution in India is attracting the interest on the international scene.

Aside from Amazon, Google has also been carving itself a new revenue stream in India. Its Tez offering has recently been rebranded to Google Pay, and will start offering new services such as pre-approved loans.

Amazon loosens tight grip on smart speaker market

New estimates from Strategy Analytics have Amazon maintaining its lead in the smart speaker market, but it’s starting to erode as more mainstream brands hit the market.

Being first to market has its advantages, but these leads are rarely maintained. Getting a jump on the early adopters of course offers a massive advantage, but more often than not the money is made in mainstream market penetration. Unfortunately for those who attempt to use the first-to-market strategy as a means to break the status quo, Joe and Jane Bloggs on the street usually revert to brands they are comfortable with.

“Amazon and Google accounted for a 69% share of global smart speaker shipments in Q2 2018 down from over 90% in Q2 2017,” said David Watkins of Strategy Analytics. “The drop is not only a reflection of growing competition in the smart speaker market but also Amazon and Google’s inability to break into the fast growing Chinese market that is dominated by local powerhouse brands such as Alibaba, JD.com and Baidu.”

Looking at the estimates, Strategy Analytics believes Amazon’s global smart speaker share of shipments fell to 41% in Q2 2018 from 44% in Q1 and 76% in Q2 2017. Google has increased its share to 28% in Q2 2018, up from 16% during the same period last year, while technology giants Apple and Samsung are intensifying competition, as are more traditional audio brands such as Sonos and Bose.

Amazon and Google are still the dominant players as it stands, though companies like Apple and Samsung, both of whom made their names in the hardware space, will test out brand loyalty with their own products. That said, consumers in the mainstream market, the majority who have more basic understanding of the technology industry, will like lean towards brands such as Sonos and Bose. These are common names in the audio market already and brands people have been buying for years; reputation and credibility means a lot for consumer purchases.

With the two market disruptors starting to flag out front, we suspect market share will gradually become more even, with Amazon and Google eventually falling back further. But do they actually care?

We’ve said this before, but these are two companies which do not have an outstanding pedigree in the hardware markets. It has not been a cash-cow for the pair, who have both focused on software and services. We believe this will be the long-term focus of both Amazon and Google.

Launching low-cost devices onto the market and capturing the attention of the highly-vocal tech enthusiasts was an excellent move. It normalised the products and demonstrated to the traditional manufacturers there is money to be made in smart speakers. Now the rest of the industry are playing catch-up, some might suggest it is mission accomplished. The pair can go back to focusing on the aspects which they are more comfortable with.

Both Amazon and Google make cash through the desires of consumers to have more of their lives online. They operate in the virtual world, making money off the ecosystem and creating free services which are attractive to the consumer. In Google’s cash it is the search engine, as well as video platforms and mapping products. For Amazon, it’s the dominant eCommerce platform, and more recently it has been venturing into subscriptions. For both the idea is simple; create an idea which is user friendly, before making money off the connection between consumers and third-parties.

The same business model is possible in the smart speaker world. Whether it is referrals for a takeaway or ordering weekly groceries, Amazon and Google can make money off the digital experience, not simply selling devices to consumers.

The issue to start with that the devices weren’t present in homes around the world, but that hurdle seems to have been conquered. With the products gathering momentum, the mission of normalising day-to-day uses of the virtual assistants can begin. This is where Amazon and Google will make billions in recurring revenues.

Should privacy be treated as a right to protect stringently, or a commodity for users to trade for benefits?

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