Google and Amazon likely lost money on their smart speaker sales over the holiday period which saw aggressive discounts being attached to both the Home and Echo-series devices, Reuters reported Wednesday, citing analysts of IHS Markit and IDC. While estimates differ, industry watchers appear to agree that both tech giants lost several dollars per sale, with the biggest losses being attributed to the entry-level segment of the market, i.e. offerings like Google's Home Mini and Amazon's Echo Dot smart speakers which usually retail for $50 but were down to $29 for the better part of December.
The development is interpreted as a conscious move to penetrate the emerging Internet of Things market in the United States as both companies are now pushing to promote their offerings while consumers still see smart speakers as a novelty and are more likely to purchase such gadgets on an impulse, especially when encountering steep discounts. Neither Google nor Amazon is presently monetizing its smart speakers in a particularly effective manner, with both still being focused on growing their artificial intelligence ecosystems. That state of affairs may change in the near future, with recent reports suggesting Amazon is already talking new voice-enabled advertising partnerships with a wide variety of consumer companies and will begin injecting a significantly larger volume of ads into Alexa's shopping searches over the course of this year. While it's still unclear whether Google will immediately follow suit, the company's experience in the digital advertising segment may allow it to ramp up its Google Assistant-based advertising efforts even more quickly than Amazon is able to monetize its Alexa-powered products.
Both Amazon and Google's smart speaker strategies are essentially the diametric opposites of Apple's approach to the segment, with the Cupertino-based firm still insisting on healthy profit margins for all of its hardware products, including the upcoming HomePod. The differences in business models are also indicative of long-term plans as Amazon and Google are signaling they'll be primarily monetizing their IoT devices with ads and big data. The U.S. adoption rates of smart speakers are widely projected to spike over the course of this year, with Google and Amazon being the likeliest candidates for swiftly transitioning to the monetization phase of their IoT plans as they'll be looking to recoup the losses incurred on getting their devices into people's homes.