Echo Is a Potential Gold Mine for Amazon
Amazon has lion’s share of smart speaker market
Amazon (AMZN) needs to give its Echo voice-controlled speaker greater exposure to tackle escalating competition. Furthermore, the product and its related technology have a huge potential to transform Amazon’s financial fortune.
Amazon doesn’t disclose Echo sales figures, but it is believed that it has sold more than 10 million Echo devices since Echo was launched toward the end of 2014. According to eMarketer, Amazon claims more than 70.0% of the US (SPY) market for voice-controlled speakers, placing it is miles ahead of closest rival Alphabet (GOOGL), whose market share is cited at 23.8%.
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Amazon isn’t safe as market leader
While Amazon’s wide leadership in the smart speaker market is a reason to celebrate, it is also a cause for concern. New players entering the market are gunning for Amazon’s market share. Apple (AAPL) recently unveiled its Echo competitor, HomePod, which will launch later this year. Microsoft (MSFT) is also eyeing the voice-controlled speaker market.
A $10 billion revenue opportunity
However, if Amazon can maintain its smart speaker market share, it’s in for a bountiful harvest. Echo is underpinned by Amazon’s digital assistant, Alexa. It is because of Alexa that Echo is able to take voice instructions and act on commands. According to RBC Capital Markets, Amazon could generate over $10 billion (QQQ) (XLK) in new revenue by 2020 through Alexa-based products and services.
RBC predicts that Alexa devices such as Echo could net $5.0 billion in revenue for Amazon by 2020, with Alexa-based voice shopping on Amazon.com bringing in another $5 billion. Alexa may have the potential to drive Amazon’s cloud sales, because developers will use the platform to create Alexa skills. Amazon’s cloud sales, reported under the Amazon Web Services (or AWS) segment, rose 43.0% to $3.7 billion in 1Q17, as shown in the chart above.