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Amazon and Google both want to run your home, but for totally different reasons

Amazon and Google both want to run your home, but for totally different reasons Featured

Clocks, microwaves, sub-woofers oh my: In its quest to dominate the smart home, Amazon revealed 15 new Alexa-enabled products this week, including revamped versions of its Echo speakers.

The blockbuster event drew comparisons to Apple's relatively lackluster launch the week before, and has set the stage for Google's own big hardware event on October 9.

Don't expect Google to follow Amazon, though: it's expected to release the latest editions of its Pixel smartphones, and possibly some laptops and its own smart speaker with a screen, but not much else.

 

That's because while both companies want to get their AI assistants into every aspect of your life, their reasons and strategies for doing so are very different.

Amazon builds, Google partners

Google is more likely to spread its AI through partnerships than building products itself.

Amazon has had significant success in hardware stemming back to 2007, when it first introduced the Kindle e-reader. It's emboldened to experiment.

Canalys analyst Ben Stanton describes Amazon's strategy as a "scattergun approach, aggressively launching as many different products as possible, and waiting to see what sticks."

Google, on the other hand, has never had a smash hit, and has been much more conservative (Google Glass aside). It bought Motorola's phone business in 2011, but then sold it a mere three years later.

Not only does Google release fewer products, but it has traditionally chosen to work with third-parties instead of making its hardware, partnering with LG and Huawei to make its phones and laptops, for example.

Nest does make its own hardware, but it, like Motorola, was an acquisition. It was an independent Alphabet company for a while, but rolled back into Google this summer after a turbulent few years.

Amazon sells you stuff, Google sells you

Amazon cares about pushing products while Google cares about pushing advertising.

"Amazon wants to sell stuff to me — whether its content, services, or products — 24-hours-a-day," says Gartner analyst Werner Goertz. It wants to be a platform that "takes a cut of all economic activity."

By selling low-cost smart home devices of all types, Amazon feeds its services and retail business, whether through getting more people to sign up for a Prime subscription or using its home services unit for installations. Being the backbone of your home will help as it expands to sell you everything you might possibly need: groceries, pharmaceuticals, and more.

Sure, Amazon is an an up-and-comer in online advertising, expected to book more than $4 billion this year, and has started experimenting with sponsored Alexa ads, but it's still early days.

Google, on the other hand, booked more than $54 billion in advertising revenue in the first half of 2018 alone.

As more people start interacting via voice instead of screens, Google's advertising engine needs to be ready to adapt. Having its platform in your home not only means it'll have new ways to serve ads, but will also let it collect new types of dataabout its users, which is used to better target advertising for its users across all form factors.

Google does not need to pressure its already shrinking margins by building a bunch of new products just to serve ads and collect data -- it's much cheaper and just as effective to form partnerships and let its software do the work.

Amazon is not in your pocket, Google might be

Google already has a roadmap for this partnering strategy with its lucrative Android smartphone operating system.

The company gives away Android for free, but makes money through its suite of apps that can collect data and serve ads, like Chrome and Maps. Morgan Stanley analysts have actually recommending that Google should defend its retail ads turf by giving its Home Mini devices away for free, too.

But Amazon has to release so many other products because it's missing from one critical part of people's' lives: their pockets. The company tried to launch its own smartphone in 2014, but it flopped.

"Amazon doesn't have the luxury of being in 80 percent of the world's phones, like Android," Patrick Moorhead, founder of analyst firm Moor Insights says. "They had to take a dramatically different tact. This is the reason they're so aggressive. I think Amazon is putting an exclamation point on saying, 'We are going to win the home, folks!'"

Amazon shocked everyone with their wide array of products. Google's next event will be all about its premier Android phones, likely showing off how well they take advantage of the company's artificial intelligence chops.

Additional Info

  • Origin: cnbc/GhAgent