Smart Home Leaders Competitive Landscape - Google, Amazon, and Philips
Google (Nest), Amazon (Alexa/Echo), and Philips all have very different strategies when it comes to competing in the smart home category. Google (Nest) focuses on creating a holistic ecosystem of their devices that intuitively work together, and is tied together by Google Assistant. Amazon (Alexa/Echo) creates devices but is primarily focused on getting consumers into the Amazon ecosystem, whether that's from their own devices or via "Alexa Inside" collaborations with other brands. Philips is exclusively focused on their hardware, with only Hue being a truly smart (vs. just a digital) home device, and they work with third party providers like Apple to ensure their devices can become part of others' ecosystems.
- Google's Nest products are aimed at creating a holistic ecosystem at home, where a consumer interacts only with Google and their products. Their products span the gamut from home assistance (via voice assistants), streaming devices, connectivity (WiFi devices), safety and security (like smoke alarms, doorbells, and locks), cameras, thermostats, and accessories.
- Google has a competitive advantage when it comes to answering questions, given Google's origins as a search engine. It also has a leg-up for Android mobile phone users, who are already familiar with Google Assistant, and will find the transition to the smart home device use more intuitive. While it's possible to make Alexa work with Android devices, it requires additional setup and will not be as intuitive for many users.
- Nest also has a perceived advantage in creating visual smart speakers, as they have helpful options like Chromecast and YouTube built-in while Echo does not.
- Google's marketing strategy is to consciously build a "walled garden" ecosystem, where each piece (from Google Mail to their search engine to their home devices) build on one another. Their goal is for seamless and holistic integration.
- Google Nest controls an estimated 24% of the US smart home market, and made an estimated $7.5B globally in 2019.
- Amazon offers a range of proprietary products from smart speakers and smart displays, to audio companions, to streaming devices. However, they have a much wider range of product partnerships that come with "Alexa built in."
- Alexa's competitive advantage is the sheer breadth and scale of its partnerships. They have the most choice for smart integration, the smartest routines and third-party skills, and the biggest hardware assortment. They also have Alexa Guard, which is free and can notify contacts of suspicious activity (like the sound of breaking glass, an alarm, or alerts from a Ring doorbell).
- Amazon's marketing strategy is to make their device (or Alexa, via third-party devices) ubiquitous. They can then make revenue from having customers lured into the Amazon universe and spending in other ways.
- Amazon currently controls 70% of the US smart speaker market and made an estimated revenue of $21.91B globally in 2019.
- Philips is best known for its Hue bulbs, which can be controlled remotely to change brightness, color, or be set on a timer. These lights can be connected to the separate Philips Hue Bridge, which allows users further customization and Siri controls using Apple's Homebridge technology.
- Philips' competitive advantage is its established history as first movers on smart bulbs. These bulbs are also easily installed and work with most third-party software like IFTTT. Its marketing strategy is to focus on discrete hardware devices that play well with third-party suppliers, like Apple. As of yet they have not launched any smart home assistants.
We computed Amazon's smart home device revenue for 2019 by analyzing global revenue vs. Amazon's market share. Specifically, we found out that the US is 30.4% of the global home market. Since Amazon makes up 70% of the US market, we can derive its total revenue globally given the global revenue for smart home devices in 2019- which was $103B. We first get the total percentage that Amazon Echo owns vs. the global total by figuring out what 70% (Amazon's US share) is of 30.4% (the US share of global sales.) This is 21.28%, meaning Amazon makes up 21.28% of all revenue globally. Then we simply find 21.28% of $103B, which is $21.91B.
We can do the same thing for Google Home, which makes up 24% of the US base. We can use the same calculation as we did with Amazon, multiplying Google Home's 24% share by the US share of global sales (30.4%). This is 7.3%. We find 7.3% of $103B which is $7.5B.
Unfortunately, we cannot find similar data for Philips. The team checked its earnings report, reviewed industry websites such as Owler and Crunchbase, and reviewed news and industry publications, but there was insufficient information to estimate its revenue. This is because Philips folds Hue revenue into their LED lighting category. However, we found that Philips Lighting (now Signify) made 1,812 million euros in 2018 for total LED products.