Amazon fed investors a smorgasbord of impressive performance statistics in its quarterly earnings announcement April 25 – such as a 43-percent increase in year-over-year revenues and the generation of $1.4 billion in operating income for Q1 2018.
But by the tine Amazon announced its Q1 earnings, the company had already disclosed an even more intriguing statistic via CEO Jeff Bezos’s April 18 letter to shareowners: 100 million. That’s the number of Amazon Prime members, a figure Amazon had never before shared. Amazon Prime is bigger than Costco. Amazon Amazon Prime also represents the future of Amazon and possibly the on-demand economy
Prime Is Amazon’s Future
For a fee (which is increasing to $119 annually), Amazon Prime members enjoy a number of advantages unavailable to non-Prime customers, such as free two-day delivery on orders and access to exclusive entertainment content via Prime Video.
With Amazon Prime, Amazon is redefining convenience as a premium service by creating an on-demand lifestyle. Just as Starbucks convinced people to pay more for fast coffee, Amazon wants us to pay more to get access to an even more exclusive tier of on-demand services. Continue reading →
Amazon just extended its influence on how everyday people live.
Today Amazon announced the launch of Alexa Blueprints, which makes it possible for anyone to create their own Alexa skills and responses with the popular voice assistant – and no coding is required.
In doing so, Amazon has found a way to build on its lead in the smart speaker category, where Amazon is crushing its competitors with a 70-percent market share through its Echo product powered by Alexa. But Alexa is more than the heart of the Echo. Alexa is helping to change the way people live through voice-based experiences.
These applications of Alexa do something important: make people more comfortable with the voice interface. As Bezos told Billboard, “Alexa is primarily about identifying tasks in the household that would be improved by voice.”
But Amazon needs Alexa to perform more skills for the assistant to become the common fabric of our lives. According to Amazon, Alexa performs 25,000 skills including checking your bank account balance and cooking thanks to interfaces with third parties. And with Blueprints, Amazon puts the tools of production into the hands of the owners. By empowering end users to create personalized Alexa skills and responses without needing how to code, Amazon has created a compelling way to accelerate the uptake of Alexa. Now anyone can create their own content and customize the product to do what we want. The Amazon website offers a number of suggestions such as helping the babysitter find things in your home, mastering subjects with your own voice-based flash cards, and creating stories.
Making tools more accessible is a common approach employed by technology companies such as Apple and Google. Apple, of course, made smartphone adoption explode by opening up the iPhone to third-party app developers. More recently, Apple released ARKit for developers to launch augmented reality products. Google has taken an even more democratic approach over the years by releasing tools that you don’t need to be a developer to use, such as Google Analytics. Google is now ambitiously trying to make virtual reality more popular by launching tools to create VR experiences.
Apple and Google face bigger challenges making AR and VR more mainstream although Apple less so because AR is easier and less costly to adopt. On the other hand, voice-based experiences are becoming more intelligent and accessible. Plus, it’s far less expensive for people to use voice assistants especially as they become more embedded in products we own already.
With Blueprints, Amazon is widening its lead in the marketplace for voice assistants by changing how we live. Amazon is now Amazon Everywhere.
The great disruptor is just another player in the entertainment space. Amazon Studios, its TV and movie arm, is still looking for a blockbuster like Game of Thrones to compete in an elite league defined by HBO, Hulu, and Netflix. Amazon Music is a follower behind Spotify and Apple Music.
But recently Amazon has made some moves in a bid to transform itself from a follower into a leader. Let’s take a closer look. Continue reading →
In the United States, only 9.6 million people use virtual reality (VR) at least once a month, and by 2019, VR will penetrate 5.2 percent of the population, according to eMarketer. And yet, the VR industry has already become a complex ecosystem. As the VR Fund’s VR Industry Landscape illustrates, the ecosystem encompasses a multitude of companies spanning applications/content, tools/platforms, and infrastructure:
When I recently did a Google search for VR, my top 20 search results revealed diverse uses of VR spanning architecture, entertainment, healthcare, pornography, retail, sports, and travel/hospitality. Why has VR spawned such a complex ecosystem touching many industries when so few consumers actually use it? A few reasons stand out:
Recently Amazon and Facebook announced new products that will extend their reach into the corporate world:
Amazon’s Alexa for Business, unveiled November 30, is a platform for a business’s employees to use the Amazon Alexa voice assistant (in Amazon Echo speakers) to manage everyday tasks such as scheduling conference calls and managing calendars. Amazon believes that with Echo smart speakers embedded in corporate conference rooms and offices to manage the mundane things, people will be freed up to focus on more productive work.
Facebook’s Oculus for Business, announced October 11, is a bundled set of Oculus products designed to help businesses apply virtual reality (VR) to do everything from train employees to design cars. In fact, although VR has experienced slow adoption among consumers, the corporate world is a different story, where VR is penetrating industries including entertainment, financial services, healthcare, manufacturing, and retail. Facebook believes that by making it easy to purchase hardware, accessories, and associated services needed to employ VR in the workforce, more companies will adopt Oculus over competing products.
These announcements are more than landmark moments for Amazon and Facebook. Alexa for Business and Oculus for Business are also manifestations of something else: the ambitions of Jeff Bezos and Mark Zuckerberg to be market makers with artificial intelligence-based voice assistants and virtual reality.
Why did Amazon buy Whole Foods? To beat Walmart in the war for the on-demand grocery shopper.
As announced June 16, Amazon and Whole Foods have agreed that Amazon will acquire Whole Foods Market for $42 per share in an all-cash transaction valued at approximately $13.7 billion. Whole Foods will operate under its own name. The acquisition will give Amazon ownership of 460 stores in the United States, Canada, and the United Kingdom as well as Whole Food’s built-in ecosystems of customers and suppliers.
Amazon’s expansion into brick-and-mortar grocery industry is well known (as is the company’s general encroachment into offline retail.) To date, Amazon’s strategy has been to build and pilot its own stores. So why would Amazon buy a chain of grocery stores rather than develop its own? I believe Walmart is forcing Amazon to accelerate its expansion.
Amazon has been piloting its own models for using physical stores to provide on-demand grocery services, examples being the launch of Amazon Go and Amazon Fresh Pickup. Amazon Go is supposed to provide a completely frictionless buying experience via physical self-service grocery stores where anyone with an Amazon account, a supported smartphone, and the Amazon Go app can simply take what they want from the store and leave with no check-out required. With AmazonFresh Pickup, customers can order groceries online and have their orders ready for pick-up at designated AmazonFresh Pickup physical locations — in as little as 15 minutes.
Walmart has been making moves of its own, some of which are aimed directly at the grocery-buying experience. In 2015 the company launched Walmart Pay, which shoppers use on their mobile devices to purchase goods in-store. In 2016, Walmart’s began piloting Pickup and Fuel concept stores, where customers order online and then drive to Walmart to have their groceries loaded into their cars by employees. These developments have occurred in context of Walmart developing a stronger way to battle Amazon by developing its own ecommerce business and to gain more efficiency through its offline infrastructure. For instance, in 2016, Walmart purchased hot ecommerce company Jet.com. In 2017, Walmart announced it has been testing a service whereby Walmart employees deliver packages to customers on their way home, which raises the possibility that employees could also deliver groceries.
Both Amazon and Walmart are in a strong position to win the war for the future of Continue reading →
In unveiling the HomePod June 5 at its Worldwide Developers Conference (WWDC), Apple announced that the voice-activated speaker will be a music-first experience that combines both the quality of high-fidelity Sonos speaker and the intelligent interface of the Amazon Echo – with a focus on providing users access to the Apple Music catalog. As Apple noted in a press release,
Designed to work with an Apple Music subscription for access to over 40 million songs, HomePod provides deep knowledge of personal music preferences and tastes and helps users discover new music.
At WWDC, Apple Chief Executive Tim Cook said the speaker has “amazing sound and incredible intelligence that will reinvent home music.”
Why the focus on a high-fidelity experience with an emphasis on music? One reason is that Apple wants to be the leading music streaming provider – badly. After disrupting the music industry through iTunes and the iPod, Apple found itself looking behind the times when consumer tastes shifted from downloading songs on iTunes to streaming them on apps such as Spotify. And looking outdated is strange ground for Apple. Apple’s desire to play catch up with streaming was a big reason why the company paid $3 billion for Beats in 2014. Months after buying Beats, Apple launched its own service, Apple Music, in 2015.
The good news for Apple is that within two years, Apple Music has become the Number Two streaming service as measured by paid subscribers. And these are heady times for streaming services such as Apple Music and Spotify. In 2016, for the first time ever, streaming music platforms generated the majority of the U.S. music industry’s revenues. As the RIAA noted, the biggest contributor to growth was a doubling of revenues from paid streaming services. But for Apple, there is also some bad news:
Amazon has been rapidly encroaching upon music streaming. It offers a limited service to Amazon Prime customers (Amazon Prime Music) and recently launched a subscription service, Amazon Music Unlimited.
Spotify and Amazon are significant competitors with their own strengths and weaknesses:
Spotify enjoys the strong brand affiliation with music, its customer base, and outstanding personalized playlists, but the company is losing money.
Amazon enjoys an advantage with its deep pockets and the popularity of Echo speaker, which provide a natural platform for streaming music. But Amazon Music Unlimited is an upstart (and Amazon Prime Music is a feature of Amazon Prime, not a pure streaming service, per se).
And in addition, Echo is also a platform for playing music through voice commands (“Play the new Lorde song”), something Spotify does not offer. In 2017, according to eMarketer, 35.6 million Americans will use a voice-activated assistant device at least once a month, and 71 percent of them will use Echo. (Google Home has the second highest marketshare behind Echo, at 24 percent, but Google does not release user figures for its Google Play streaming service.)
No wonder Amazon offers Amazon Music Unlimited at its lowest price to owners of Amazon Echo speakers: Echo is a Trojan Horse for Amazon’s music streaming product.
But Swiss Army knives, while being useful, are not great at everything. The Echo is not engineered specifically to listen to music. HomePod is. At WWDC, Apple Senior Vice President of Global Marketing Phil Schiller said that HomePod will provide the high quality of a Sonos speakers and the smart interface of the Echo.
“These aren’t smart speakers, Schiller said of Sonos. “They don’t sound so great when you listen to music,” he said of the Echo. But HomePod will sound great and act as a home musicologist, he said.
He indicated that the HomePod will make it possible for consumers to call up music using complex voice searches and then listen to music through a product that provides state-of-the-art sound including spatial awareness, which adjusts the audio depending on where you are sitting in the room.
But the ace in the hole is the integration with Apple Music. As Apple announced,
By saying, “Hey Siri, I like this song,” HomePod and Apple Music become the perfect musicologist, learning preferences from hundreds of genres and moods, across tens of thousands of playlists, and these music tastes are shared across devices. Siri can also handle advanced searches within the music library, so users can ask questions like “Hey Siri, who’s the drummer in this?” or create a shared Up Next queue with everyone in the home. HomePod, Apple Music and Siri deliver the best music experience in the home that streams ad-free directly to HomePod.
HomePod will also provide the same functionality as Echo, providing functions ranging from turning on the lights in your home to providing sports and weather information.
Subscribing to Apple Music because it’s so easy to listen to music with voice commands on HomePod. (I wouldn’t be surprised if Apple offers an incentive for bundling Apple Music paid subscriptions and HomePod.)
It’s an interesting bet. Consumers have been indifferent to sound quality on mobile devices, not caring enough about sound quality to buy high-end mobile streaming products such as Pono. Meanwhile in the home environment, the growth and popularity of Sonos speakers for years showed that people would pay for premium sound – but then Amazon’s encroachment on Sonos suggest that consumers were willing to sacrifice the fidelity of Sonos for the convenience of Echo. And now Apple believes consumers will do the same with HomePod.
Apple won’t put a dent in Echo’s 71-percent market share anytime soon, but Apple doesn’t need to. Apple is not offering a utility that competes on price as Echo does. Apple is selling a high-end experience first and utility second. Apple Music is central to that experience. Will HomePod be a catalyst for Apple Music to eat into Spotify’s lead?
Jeff Bezos is the Abraham Lincoln of the business world: he doesn’t let critics stop him from making history.
The success of the Amazon Echo encapsulates his resiliency perfectly. eMarketer recently reported that Echo owns more than 70 percent of the market for voice-assisted devices, whose usage grew nearly 130 percent in 2016. During 2017, 35.6 million Americans will use voice-activated assistants at least once a month, which means 25 million of them will use Echo. And during the 2016 holiday season, Amazon sold nine times as many Echo devices as it did the year before. But the ascendance of Echo was hardly assured when Amazon launched the product in November 2014.
In fact, Amazon’s Echo caused a good deal of criticism, ranging from concerns about violations of personal privacy to skepticism over its value to do anything useful for its owners.
Echo Faces a Rocky Start
The Echo surfaced at a time when Bezos was fielding taking heat for the failure of the Amazon Fire phone, which Amazon had released earlier in 2014. And although the Echo made some positive impressions coming out of the gate, the product didn’t exactly overwhelm the media influencers. The voice-activated speaker inspired bemused reactions from publications that were not quite sure what to make of it, including The Verge, which described Echo as “a crazy speaker that talks to you.” An analyst at Wedbush Securities told Bloomberg, “I think it’s just a two-way speaker, but why isn’t there an app that lets me do the same thing without having to spend $99 on hardware? I think this is a solution that is seeking a problem.” And Consumer Reports criticized the Echo for being too rudimentary.
The music industry finally has some reason to celebrate, thanks to artificial intelligence.
The Recording Industry Association of America (RIAA) recently announced that music revenues in 2016 grew 11.4 percent to $7.7 billion — the highest year-over-year growth rate since 1998. Although the industry is only half the size it was in 1999, double-digit growth is encouraging after years of either declines or flat results. Why the growth? According to the RIAA, the answer is simple: streaming is taking hold. And streaming services — especially Spotify — are lapping the field with AI.
As the RIAA noted, the biggest contributor to growth was a doubling of revenues from paid streaming services such as Apple Music, Spotify, and Pandora. In fact, for the first time ever, streaming music platforms generated the majority of the U.S. music industry’s revenues.
Younger streaming platforms such as Tidal are still too new to contribute significantly to the $3.9 billion that streaming services generated in 2016. Rather, the established streaming leaders, especially Spotify, are hitting their strides by offering better products fueled by AI.
Pandora and the Power of Personalization
Streaming services such as Pandora and Spotify have always created customers by personalizing their vast inventories of music. If you stream music, you already know how well Pandora and Spotify create engagement by offering you customized listening choices based on your personal tastes. I still remember how exciting it was when I first started using Pandora years ago and created my own Pandora radio stations based on names of artists or songs that appealed to me. If I wanted to create a station based on my love of Massive Attack, I could do so. If I wanted to create a station of music inspired by the Cure song “All Cats Are Grey,” I could do so. And Pandora refined my stations even further when I gave a thumbs up or thumbs down to songs that Pandora suggested to me based on my listening tastes.
On March 28, Amazon fired a shot in its war with Walmart to define the future of the $600 billion grocery industry. The world’s biggest online retailer announced the beta launch of AmazonFresh Pickup, an on-demand grocery service. With AmazonFresh Pickup, customers can order groceries online and have their orders ready for pick-up at designated AmazonFresh Pickup physical locations — in as little as 15 minutes.
The service is a clear response to Walmart’s limited rollout of Pickup and Fuel concept stores, where customers order online and then drive to Walmart to have their groceries loaded into their cars by employees.
Both businesses are racing to win loyalty from the on-demand consumer.
The rise of the on-demand consumer is one of the compelling trends defining the 21st Century economy. As Google has reported, we’re living in the era of the micro-moment, when consumers, armed with mobile devices and apps, can research and purchase goods and services on their own time and terms. On-demand businesses such as Uber have acted as important catalysts. Uber, for all its flaws, demonstrated the power of responding to mobile consumers with an easy-to-use app that provides a service on demand, and the company has had a profound impact across many industries. Businesses ranging from Panera Bread to 7-Eleven have responded to the on-demand consumer with services such as online ordering and drone delivery.
The grocery industry is well suited to an on-demand model. People need to restock groceries often, and obviously perishable goods have a limited shelf life. But as writer Mark Rogowksy notes in Forbes, the on-demand grocery model has been fraught with its share of failure, one of the reasons being that grocery delivery is not as “on-demand” as it sounds. In fact, it’s a lot easier for mobile consumers to order and pick up groceries on the go rather than wait around in their homes for delivery. Hence, Walmart has been experimenting with the Pickup and Fuel stores. Walmart launched the stores in late 2016 amid speculation that the giant retailer had found a way to battle the ongoing Amazon threat.
At about the same time Walmart began experimenting with Pickup and Fuel, Amazon made headlines with the beta launch of Amazon Go, which consists of physical self-service grocery stores where anyone with an Amazon account, a supported smartphone, and the Amazon Go app can simply take what they want from the store and leave with no check-out required. The flagship Amazon Go store is open exclusively to Amazon employees, and so far the frictionless shopping model has encountered glitches as the in-store technology struggles to keep pace with consumer foot traffic when the Amazon Go store gets busy. Amazon has delayed the launch of a public-ready Amazon Go. But as Amazon has demonstrated with its latest announcement, Amazon has many more cards to play.
Both Amazon and Walmart are in a strong position to lead the on-demand grocery business. They both have brand muscle and deep pockets. Amazon is crushing Walmart (and everyone else) in online retailing, and Amazon is successfully moving into our homes and cars with on-demand devices and technologies such as the Dash button and Alexa voice assistant, which make Amazon a more ubiquitous and convenient presence in our lives, as Google strives to be. Walmart, though, possesses many advantages, including scale and a powerful physical ecosystem that includes not only its stores but network of partners, over whom Walmart wields considerable power.
Walmart also has an uncanny knack to experiment and learn. For example, in 2015 the company launched Walmart Pay to make it possible for shoppers to use their mobile devices to check out and purchase goods, and in 2016, Walmart expanded Walmart Pay across 4,600 stores. Walmart has quickly added services to Walmart Pay that cater to the needs of on-demand consumers, such as the ability for shoppers to refill prescriptions and skip pharmacy lines. Here is a company that understands the intersection of the mobile and physical worlds.
In coming months, Amazon and Walmart will continue to claw their way for leadership. And who will win? The on-demand consumer. With each innovation, Amazon and Walmart are reshaping the grocery industry around the needs of mobile consumers — which is good news for shoppers and the businesses that possess the means to service them on shoppers’ own terms.
Image source: Matthew Kane (https://unsplash.com/@matthewkane)