Google launches a bunch of hardware

Internet giant Google has launched the latest version of its own smartphone, together with a bunch of other stuff, as it continues to expand its hardware offering.

The tagline for the Pixel 4 smartphone is that it’s the most helpful version yet. On the surface this is a reference to Google Assistant, which has been beefed up with even more AI power to ensure it knows what you want before you do, thus sparing you the pain and indignity of having to do things like choose, decide, think, etc.

On those rare occasions when the phone feels the need to consult its owner about their best interests, it’s further assisted by improved speech recognition, which is now largely processed locally. This feature also enables a new voice recorder app that will be able to transcribe in real time – very handy for lazy journalists.

Other than that the Pixel 4 seems to come with all the expected bells and whistles; an improved camera, better chips, etc. You can possibly find out a bit more in the first of the videos below, we’re not sure if the motion sensor will be more help or hinderance. It will ship globally on October 24, costing $799 for the regular one and $899 for one that’s a bit bigger.

On top of that Google also launched some new BlueTooth ear buds, a smart speaker called the Next Mini, a wifi router incorporating the Next Mini called Next Wifi and a new laptop called the Pixelbook Go. Goole has been generous with its YouTube videos for this launch so we’ll let them do the rest of the talking.

 

The battle for smart speaker market domination goes global

The latest smart speaker market data from Canalys shows significant gains from Chinese vendors and an international shift from the US giants.

The whole sector is on a bit of a tear, with unit shipments jumping 55% year-on-year, showing there is considerable appetite among the general population for totally surrendering the details of their lives to internet behemoths. Perhaps desensitized by their own government’s Orwellian levels of intrusiveness, the Chinese seem especially keen to embrace voluntary surveillance.

As a consequence shipments of the smart speakers made by Baidu, the Chinese equivalent of Google, exploded to 4.5 million in Q2 2019 from a standing start a year ago. China, with its population of 1.4 billion technophiles, can do that for you, but Baidu must be doing something even Alibaba and Xiaomi aren’t because it has overtaken both of them, as well as Google itself, to grab second place among global vendors.

canalys smart speaker q2 19 table

“Aggressive marketing and go-to-market campaigns built strong momentum for Baidu in China,” said Canalys Research Analyst Cynthia Chen. “The vendor stood out as a key driver of smart displays, to achieve 45% smart display product mix in its Q2 shipments. Local network operator’s interests on the device category soared recently. This bodes well for Baidu as it faces little competition in the smart display category, allowing the company to dominate in the operator channel.”

So it looks like standalone smart displays are lumped in with the speakers and that’s what Baidu is doing well. There’s little sign that the company will be honest enough to rebrand its smart displays from ‘Xiaodu’ to ‘Lao da ge’ but you never know. Rather worryingly for Google, the other reason it lost second spot is that its own shipments declined year-on-year.

“Amazon and Google are focused on growing their business outside the US,” said Canalys Senior Analyst Jason Low. “Google’s transition to the Nest branding while pivoting to smart displays proved to be a challenge, especially as it has begun rolling out its Nest Hub smart display globally. Google urgently requires a revamped non-display smart speaker portfolio to rekindle consumer interest, as well as a robust marketing strategy to build its Nest branding outside of the US.”

You can see evidence of this international pivot in the chart below, with at least half of Amazon and Google’s shipments now coming from outside the US, compared to more like a third a year ago. “Despite feeling upbeat about the market outlook, vendors are wary about the price sensitivity towards the relatively new category of smart displays,” said Low.

canalys smart speaker q2 19 chart

BBC set to take on Google and Amazon in the digital assistant game

The BBC has announced it will challenge Google and Amazon in the digital assistant market, with its own version built to understand regional dialects.

Although it is still early days with many questions still to be answered, the working name for the digital assistant will be ‘Beeb’. What, we hear you say (and would you double dare to ask ‘what’ again?), but the state-funded entertainment service will attempt to prove its software engineering smarts match-up to that of Silicon Valley’s finest.

“Around one in five adults have a smart speaker in their home – and millions more have voice-activated devices in their pockets – so there is growing demand from people to access programmes and services with their voice,” a BBC spokesperson said.

“But people are concerned about how these devices use their data. Much like we did with BBC iPlayer, we want to make sure everyone can benefit from this new technology, and bring people exciting new content, programmes and services – in a trusted, easy-to-use way.  This marks another step in ensuring public service values can be protected in a voice-enabled future.”

The selling point of the voice assistant is an interesting one. While those on the other side of the pond might want to monetize data collected through digital assistants, the BBC has promised an experience “free of commercial interests”. That might sound attractive to those who do not trust the internet giants with their personal data, but first and foremost, the BBC has to create an offering which is as good, if not better.

The voice user interface is becoming increasingly popular with consumers around the world, though it is another way in which the trust with the consumer can be broken. Few might consider their voice a potential risk, though with banks and other sensitive services using voice for identification and authentication, it will certainly become one (assuming it isn’t already of course).

With the BBC brand viewed by many favourably around the world, this could be an interesting element. The press statement is already laying the concept of trust on thickly, and we suspect this will be an important tool for the communications team in the future. Especially considering Silicon Valley constantly seems to be shooting itself in the face.

Another interest element is the regional dialects of the UK. While we all might sound the same to those from outside the isles, the difference in regional accents is very apparent to a Brit. In offices around the UK, BBC employees will be asked to record a couple of minutes of audio footage to help the team train the digital assistant in the variances of the UK.

The world is changing, and changing very quickly, therefore there is a risk the BBC could be left in the analogue age. Linear TV is dying, and while there might be generations who are sticking with the traditional means of entertainment, it won’t be long before the gathering around the TV is a nostalgic memory.

The BBC iPlayer has proven to be very successful, and this is another way in which the BBC is proving its relevance in the digital economy. What remains to be seen is whether ‘Beeb’ can compete against the smarts and head-start Silicon Valley has.

Google is now leading the European smart home segment

The smart home is increasingly becoming normalised in the eyes of the consumer, and Google is leading the way in Europe.

According to IDC’s Quarterly Smart Home Device Tracker, the smart home segment is growing healthily though there doesn’t seem to be any one manufacturer dominating the space. Google is holding down the largest market share, thanks to its smart speaker products, though there are gains for a quite a variety of products.

“Google had a stellar quarter and was the clear winner in the first quarter, reaching an important milestone in Europe,” said Antonio Arantes of IDC. “Google continues to expand to new countries and support new native languages at a faster pace than Amazon. This is also contributing to strengthening its position in voice assistant platforms.

“Google Assistant was present in 49.2% of all smart speakers sold in Europe in the first quarter of 2019. Meanwhile, Amazon faced supply issues, with the Amazon Echo Dot being out of stock in some countries for several weeks, leaving space for Google Home products to grow.”

The indirect win for Google is perhaps the most important aspect of this momentum. One-off sales to consumers are all well and good, but another interface with consumers offers recurring revenues through third-party relationships and advertising opportunities. This is more in-line with the traditional business model for Google.

This is far from the end of the story however; smart speakers should still be considered a niche segment though growth is impressive. The smart home market is forecast to reach 107.8 million units in 2019, up 21% year-on-year, before hitting 183.9 million a year in 2023.

Looking at the winners across the smart home segment as a whole, it’s the traditional consumer electronics heavyweights who are winning (aside from the smart speaker segment):

Brand Shipments (in 000’s) Market share
Google 3575 16.8%
Samsung 2853 13.4%
Amazon 2810 13.2%
LG Electronics 2129 10%
Sony 1231 5.8%
Others 8670 40.8%

Looking at the segment growth, home entertainment products are the largest area collecting 55.4%, while smart speakers sit in second place with 21.4%. Lighting, home security and thermostats collectively accounted for 20.8% of the smart home market, with IDC predicting 27.11% CAGR between 2019 and 2023. By 2023, these products could account for an additional 9.5% market share.

The smart speaker revolution isn’t quite here yet

A survey on voice assistant use in the US reveals the majority of consumers hardly ever use smart voice assistants and even when they do it’s on a smartphone.

The survey was conducted by digital commerce strategy firm Sumo Heavy. It chatted to around a thousand US punters to find out what their voice assistant habits are. The first thing it found was that 46% have never used  voice assistant and that 19% do so rarely, which probably means they did it once out of curiosity and concluded they didn’t fancy it.

sumo slide 1

So that means less than a third of US consumers use voice assistants with any regularity. Considering this sort of technology hit the mainstream when Siri was pre-integrated into the iPhone 4S back in 2011, it would be a stretch to say voice assistant adoption has exploded in the intervening 8 years.

The same could be said for smart speakers, which had their mainstream launch in 2014 with the launch of the first Amazon Echo. We have been led to believe they achieved near ubiquity in the subsequent 4-5 years but this survey begs to differ. By far the most common way of accessing voice assistants is smartphones, with smart speakers accounting for less than a fifth.

sumo slide 2

Unsurprisingly those people that do own smart speakers (Amazon is the clear market leader) use the voice assistant fairly frequently, with over half doing so at least once per week. Iphone users seem more into voice assistants than Android ones. Only 42% of regular voice assistant users ever buy stuff that way, but if they do it’s likely to domestic products or things like movie tickets.

Turns out real people sometimes hear what you say to smart speakers

The revelation that Amazon employs people to listen to voice recordings captured from its Echo devices has apparently surprised some people.

The scoop comes courtesy of Bloomberg and seems to have caught the public imagination, as it has been featured prominently by mainstream publications such as the Guardian and BBC News. Apparently Amazon employs thousands of people globally to help improve the voice recognition and general helpfulness of its smart speakers. That means they have to listen to real exchanges sometimes.

That’s it. Nothing more to see here folks. One extra bit of spice was added by the detail that sometimes workers use internal chatrooms to share funny audio files such as people singing in the shower. On a more serious note some of them reckon they’ve heard crimes being committed but were told it’s not their job to interfere.

Amazon sent Bloomberg a fairly generic response amounting to a justification of the necessity of human involvement in the AI and voice recognition process but stressing that nothing’s more important to it than privacy.

Bloomberg’s main issue seems to be that Amazon doesn’t make it explicit enough that another person may be able to listen into your private stuff through an Echo device. Surely anyone who knowingly installs and turns on a devices that is explicitly designed to listen to your voice at all times must be at least dimly aware that there may be someone else on the other end of the line, but even if they’re not it’s not obvious how explicit Amazon needs to be.

An underlying fact of life in the artificial intelligence era is that the development of AI relies on the input of as much ‘real life’ stuff as possible/ Only be experiencing loads of real interactions and scenarios can a machine learn to mimic them and participate in them. In case there is any remaining doubt, if you introduce a device into your house that is designed to listen at all times, that’s exactly what it will do.

Google wins first round in the battle for the living room

Smart speakers were only about developing a new dynamic in the relationship between the OTTs and the consumer, and Walmart’s new ‘Voice Order’ feature is a taste of things to come.

The new initiative from Walmart is perfect for the Google smart speaker ecosystem, as it plays to the strengths of the internet giant. By simply saying ‘Hey Google, talk to Walmart’ consumers will be able to use their voice to build shopping lists with the grocery mammoth, using any device which has the Google Assistant installed on it.

“With the new voice ordering capabilities we’re building across platforms with partners like Google, we’re helping customers simply say the word to have Walmart help them shop … literally,” said Tom Ward, SVP of Digital Operations at Walmart US.

Of course, the application will not be perfect to start with, but as with anything intelligence related it can be trained and personalised to each individual. At the beginning, users will have to specify what products to put into the cart, but soon enough the virtual assistant will remember these purchases. Saying ‘milk’ won’t put any brand or product into the cart, but the one you bought last time.

This is the futuristic world Silicon Valley had in mind when it started rolling smart speakers out to the world, and we imagine it won’t be too long before the innovation starts catching on.

Although some might suggest Google and Amazon have ambitions to disrupt the audio industry with the launch of their own smart speakers, this was most likely a ploy to drive user acceptance and demonstrate to the mainstream brands there is consumer appetite. If you actually look at the products which Google and Amazon have been championing, they would not compete with the calibre which could be manufactured by the likes of Bose or Bang & Olufsen, but it did start to get consumers using smart speakers.

Google and Amazon are the top-sellers of smart speakers across the world, with Amazon claiming to have now sold more than 100 million products, but the traditional audio giants are starting to release their own products. Sonos is releasing models, so is Samsung. But the traditional audio brands do not have the software smarts to create their own virtual assistants, this is where the likes of Google and Amazon come in.

Sooner or later, smart speakers will be the norm, with the internet giants battling for access to the consumer. A walled garden business model can be created, with the virtual assistant monetizing relationships between the consumer and a third-party. This creates a new dynamic between the consumer and Silicon Valley, offering more opportunities for the internet giants to sell to third-parties, and it looks like Google has won round one in the fight for control of the living room.

Walmart has said other assistants will be available to place orders before too long, but Google was selected as the first partner. This could mean one of two things. Firstly, Google nailed the partnership, commercial elements and technical issues to all for such a feature to be introduced. Then again, it could have paid for the right to be first.

Perhaps it should come as little surprise Google has won the first round here. While Amazon fortunes emerged from hosting an online marketplace and creating a dominant public cloud platform, this sort of feature is true to Google heritage. The Google dominance was created through software, intelligent algorithms and monetizing third-party relationships online. This is nothing more than an extension of this expertise onto a new user interface.

Whichever the case, it is largely irrelevant. Google is now ahead of Amazon when it comes to monetizing the voice user interface. This is a big step forward for the digital economy, and while it might be early days, it does give an indication of the futuristic world we are hurtling towards. With more ‘intelligent’ devices emerging, Google and Amazon could be set to become a lot more powerful and influential.

Google investors slightly spooked by free-spending execs

Revenues might well be booming again at Google, but it seems shareholders are slightly concerned by increased costs, which is one of the fastest growing columns in the spreadsheet.

Looking at the final quarter, revenues stood at $39.3 billion, up 22% year-on-year, though traffic acquisition costs (TAC), what Google pays to make sure it is the dominant search engine across all platforms, operating systems and devices, were up by over $1 billion. Cost-per-click on Google properties were also down. A glimmering ray of sunshine was higher-than-expected seasonal growth for premium YouTube products and services.

Total revenues for 12 months ending December 31 stood at $136.8 billion, up 23% over 2017, while net income was back up to the levels which one would expect at Google, raking in $30.7 billion. The company is not growing as quickly as it used to, while expenses are starting to stack up. Investors clearly aren’t the happiest of bunnies as share price declined 3.1% in overnight trading.

“Operating expenses were $13.2 billion, up 27% year-over-year,” said Alphabet CFO Ruth Porat. “The biggest increase was in R&D expenses, with the larger driver being headcount growth, followed by the accrual of compensation expenses to reflect increases in the valuation of equity in certain Other Bets.

“Growth in Sales and marketing expenses reflect increases in sales and marketing headcount primarily for Cloud and Ads followed by advertising investments mainly in Search and the Assistant.”

Headcount by the end of the last period was up by more than 18,000 employees to 98,771. While CEO Sundar Pichai was keen to point out the business is continuing to invest in improving its core search product, diversification efforts into areas such as the smart speaker market, cloud and artificial intelligence are hitting home. Perhaps investors have forgotten what it’s like to search for the next big idea.

For years, Google plundering the bank accounts with little profit to offer. These days are a long-distant memory, but it is the same for every business which is targeting astronomical growth. You have to perfect the product and then scale. A dip in share price perhaps indicates shareholders have forgotten this concept, but Google is doing the right thing for everyone involved.

Some businesses search for differentiation and diversification when they have to, some do it because they have ambition to remain on top. Those who are searching because they have to are most likely reporting static or declining numbers each month and did not have the vision to see the good days would not last forever. Google is pumping cash into the next idea so when growth in its core business starts to flatten, something else can pick up the slack and pull the business towards more astronomical growth.

This is what is so remarkable about the ‘other bets’ column on the spreadsheets. It might have costs growth every single year, as does the wider R&D column, but having graduated the cloud computing business and most recently Loon, there are businesses which will start to contribute more than they are detracting. This is a company which never sits still, and this is why it is one of the most admired organizations from an entrepreneurial perspective. Shareholders might do well remembering this every now and then.

Looking at joy around the world for the final quarter, US revenues were $18.7 billion, up 21% year-over-year, while EMEA brought in $12.4 billion, up 20% and APAC accounted for $6.1 billion, up 29%. Revenues in LATAM were $2.2 billion, up 16% year-over-year. APAC and LATAM were subject to negative FX fluctuations, particularly in Australia, Brazil and Argentina.

In the specific business units, Google Sites revenues were $27 billion in the quarter, up 22%, with mobile collecting the lion’s share, though YouTube and Desktop contributing growth also. Cloud, Hardware and Play drove the growth in the ‘other’ revenues for Google, collecting $6.5 billion, up 31% year-over-year for the final quarter.

Although these diversification efforts are growing positively, there are also some risks to bear in mind. Firstly, the cloud computing business is losing pace with Microsoft and AWS. Google is making investments to attempt to buy its way through the chasm, but it will be tough going as both these businesses make positive steps forward also.

Secondly, some properties and developers are choosing to circumnavigate the Google Play Store, instead taking their titles direct to the consumer. This is only a minor segment of the pie for the moment and there will be a very small proportion of the total who actually have the footprint to do this (Fortnite for example), though it is a trend the team will want to keep an eye on. Perhaps the 30% commission Google charges developers will be reconsidered to stem dissenting ideas.

Finally, the data sharing economy which will sit behind the smart speaker and smart home ecosystem is facing a possible threat. Google will not make the desired billions from hardware sales, but it will from the operating systems and virtual assistant powering the devices. Collecting referral fees and connecting buyers with sellers is what Google does very well, though this business model might be under threat from new data protection and privacy regulations.

The final one is not just a challenge to the potential billions hidden between the cushions in the smart home’s virtual sofa, but the entire internet economy. GDPR complaints are currently being considered and potential consequences to how personal data is collected, processed and stored are already being considered. The Google lawyers will have to be on tip-top form to minimise the disruption to the business, and wider data sharing economy.

Costs might be up and while there are dark clouds on the horizon, Pichai and his executives are moving in the right direction. The lawyers can lesson the potential impact of regulation, but the exploration encouraged by the management team in the ‘other bets’ segment is what will fuel Google in the future. Costs should be controlled, but spending should also be encouraged.

Deloitte predicts 50k 5G smartphone in the UK by 2019-end

While the vast majority will have to wait some time before experiencing the euphoria of an extra ‘G’ Deloitte is predicting there will 50,000 early adopters in the UK.

After several years of slugging, the glorious 5G world is upon us. First in the US and South Korea, though pockets are starting to emerge everywhere else as well. San Marino is live while it won’t be long before countries like China and Japan start hitting the green button.

“The introduction of 5G handsets expected this year will look a lot like 2010, when 4G phones first entered the market,” said Dan Adams, Head of Telecommunications at Deloitte.

“There will be a lot of noise in the first year from vendors vying to be first to market, and relatively little action from consumers. We’re not talking about an overnight switch to faster connectivity with lower latency, we will see 5G used by consumers in hotspot locations in the next two to three years, with mass adoption by 2025.”

The first devices are likely to be with us in Q2, though this year’s Mobile World Congress will almost certainly be a shouting contest between the main smartphone manufacturers. It’s already rumoured Samsung will be launching a foldable-phone (albeit not 5G) prior to the event, while LG and Motorola are also in the running to produce a 5G compatible phone.

In total, Deloitte predicts roughly 20 handset brands will launch 5G-ready handsets across 2019, with shipments totalling one million. This is still a tiny fraction of the 1.5 billion smartphones which will be sold through the year, though 50,000 of them could be heading to the UK.

Looking at the networks, there might not be much to choose from across the UK. EE has confirmed it will launch 5G across 16 cities in 2019, though these will only be in the busiest locations. Vodafone will also launch this year, though it is being coy as to when. Three is telling the same story, while O2 has confirmed its customers will have to wait until 2020. One thing is clear, these will be incredibly limited deployments and it will be years until coverage reaches what the demanding user would consider adequate.

Whether this justifies the hype, or the extortionate amount handset manufacturers will inevitably charge the glory-seekers for the new devices, we’ll leave you to decide, but it will take years for the devices to be considered mainstream. Deloitte expects worldwide 5G smartphone sales to represent 1% of the total smartphone sales by the end of 2020, with 2-3 million Brits getting their hands on the devices. As Adams points out above, 2025 is when the team expect 5G devices to hit mass adoption.

Another interesting growth area the Deloitte team is keeping an eye on is the smart speakers segment.

“Smart speaker adoption has seen phenomenal growth in recent years,” said Paul Lee, Global Head of Research for TMT at Deloitte

“With improvements continuing to be made, demand for smart speakers could be in the many billions of units, possibly even higher than for smartphones. In the future, smart speakers have the potential to be installed in every room in a house, hotel, office, school and even beside every hospital bed.”

Smart speakers are the flashy product which will attract a lot of the consumer market, but the power of the virtual assistants is what could take the segment to the next level. We’ve long anticipated the breakthrough of artificial intelligence in the workplace, but perhaps the slightly sluggish resistance has been down to the delivery model of the applications.

Should smart speakers be adopted in hotel rooms, hospitals and offices in the way which Deloitte anticipates, the world is opened up for industry specific applications of virtual assistants. One area which might help this adoption is the price point.

While smart speakers were initially an expensive appliance for the home, the normalisation of the product in the eyes of the consumer has peaked the interest of traditional consumer electronics manufacturers. With more manufacturers, including those with the ability to produce goods at greater scale, entering the fray competition will increase, bringing prices down, while advertising will also grow, fuelling interest in the bellies of the consumer.

Deloitte anticipates the marker for internet-connected speakers with integrated digital assistants will be increase to £5.6 billion in 2019, selling 164 million units at an average selling price of £34. This would represent a 63% growth rate, making smart speakers the fastest-growing connected device category worldwide, leading to an installation base of more than 250 million units by the end of the year.

This is a price point which would make enterprise adoption of the devices more interesting, and as time moves on, it will get cheaper. The increased introduction of industry-specific virtual assistant and AI applications will certainly help this segment also.

After years of promises and false-dawns, 2019 might prove to be a blockbuster year after all. There’s still a lot which could go wrong, but here’s to hoping.

Orange squares up to OTTs in battle for smart home

With it abundantly clear connectivity alone is not enough to meet the profitability ambitions of the telcos, Orange has made a fresh push to wrestle control of the smart home away from those greedy internet players.

As expected, the Orange and Deutsche Telekom partnership has flourished into a diversification venture. For Orange, the team will be launching the Djingo Speaker, while DT will be launching its own version branded the Magenta Speaker. These are fundamentally the same product, operated by the same AI, tailored for the individual markets.

New products should hardly come as a surprise, but this is the tip of the spear aimed directly at the useful ecosystem created by Amazon and Google in the smart home.

Originally the router might have appeared to be the logical focal point of the fabled smart home ecosystem, though inactivity from the telcos and aggressive deployment from the OTTs has seen this shift to the smart speaker. Orange’s Live Box will seemingly be the home of the connected services portfolio, though with the smart speaker the team now have an interface which is increasingly becoming normalised with the consumer.

The big question is whether Orange is able to demonstrate the value of itself as a provide to the customer, above and beyond what the OTTs can offer. And they are playing an interesting angle.

“The business model is based on the subscription charge,” said Stephane Ricard, Orange CEO. “We won’t squeeze your data to make money.”

With the world quickly turning against the data-sharing economy, thanks to governments gradually exposing the complicated nature of the data machine, this might be a useful statement to make. Orange will charge a subscription for the added value services, not use personal information as a commodity in the manner the OTTs are.

This is where Orange might find its first challenge. Less than one in four French citizens have a connected device today, aside from a smartphone, while only 10% make use of a digital assistant. The initial connected life services offered by Orange, linking up everything from connectivity to banking and entertainment, will be free, though monetization depends on luring customers to the more premium services, such as security.

This is one of the services which will be placed on top of the connected ecosystem created by Orange in the smart home. Working in partnership with Groupama, the Protected Home is a security solution which can be remotely managed by the user. There will be future joint ventures and solutions launched on top of the smart home ecosystem, but Orange needs to convince the user it is worth it in the first instance.

With low penetration of connected devices and virtual assistants, the French clearly aren’t that enthused by consumer IOT right now. Perhaps the Orange brand, a trusted and credible company in France, can change this image. Though whether it can compete toe-to-toe with the likes of Google and Amazon in developer power, remains to be seen. We doubt it, though perhaps the world does not need an overly complex virtual assistant right now.

Users don’t need a virtual assistant to restock fridges, or arrange meetings, they just a link to control the smart home. This is an area which the user is still getting used to, therefore perhaps its inability to create an overly-complex and super-intelligent virtual assistant will work in its favour?

Orange’s ambition is to be a multi-service vendor with connectivity acting as the bridge between various different services. The banking venture is now a year old, making steady progress, and the team will hope the same success can be replicated in the smart home segment.