Does Alexa spell trouble for Google?
Some analysts worry that the rise of voice-controlled assistants like Amazon's Alexa will cut into Google's ad revenue. But we're still likely to look at plenty of screens – and ads – in coming years.
—Amazon’s Alexa was the star of this month’s Consumer Electronics Show (CES) in Las Vegas. Attendees cooed as the digital assistant, controlled not with a touchscreen or keyboard but by a speaker/microphone combination called Echo, operated kitchen appliances and changed TV channels. But as voice-controlled home assistants like these become reality, some see trouble for one of Amazon’s main competitors.
Google has introduced its own at-home digital assistant, called Google Home. But because the company earns the vast majority of its revenue from online ads, some view the rise of screen-less devices as a major threat to the company’s future viability. If assistants like Alexa catch on, “consumers will be spending less time in front of screens and looking at Google's search ads,” Business Insider's Matt Weinberger wrote as this year's CES came to an end. “No matter how good Google's search ads are, it doesn't matter if people aren't seeing them.”
But Google chief executive Sundar Pichai may disagree. In a conference call with investors on Thursday, he told analysts he was "comfortable," Business Insider reports, and predicted that "users will have many different ways by which they interact" with tomorrow’s devices, rather than relying on voice-based commands.
A broader look at the tech sector suggests he could be right. Services like Alexa may change the way internet users play music, stock their kitchens, and run their dishwashers. But they hardly signal the end of the visual internet, meaning that Google can expect its ads to reach plenty of eyeballs in coming years.
Allied Market Research expects the worldwide “intelligent virtual assistant market” – including Alexa, Siri, and other assistants that do not use voice commands – to be worth $3.6 billion by 2020. That’s a nontrivial sum, but for the moment, much more money is being invested in and earned from services that require screens.
Last year, even as it developed Alexa, Amazon reportedly spent up to $4 billion on its video content, and expects to increase that amount in 2017. Meanwhile, Facebook reported sales of almost $18 billion in 2015. These kinds of services – watching videos, sharing photos, and reading news articles – aren't yet threatened by a machine that can order groceries and tell a dishwasher to turn on.
Google is also poised to prosper in mobile advertising. On smaller screens, Google's ads take up a larger portion of the screen, boosting the chance a user will click on them, as The New York Times noted on Thursday, when the company announced its fourth-quarter results: clicks on Google ads increased by 36 percent, as the Times reported, “but what advertisers paid for each click decreased 15 percent.”
To CES attendees in Las Vegas, the smartphone market may seem saturated. But in the developing world, smartphones remain a hot new tech item. According to the Pew Research Center, only 37 percent of adults in emerging economies report owning one.
That share stands to grow in coming years. The November 2016 Ericsson Mobility Report predicts the worldwide number of mobile broadband subscriptions to rise from 4.3 billion in 2016 to 8 billion by 2022, presenting an opportunity not only for electronics makers, but for advertisers.