SAN FRANCISCO — The Amazon Echo is turning out to be a sleeper hit.
The stand-alone, voice-activated digital assistant is on back order, it's linked to layoffs at premium speaker maker Sonos and it appears to be prompting other device makers (think Google's Nest) to work on their own look-alike services.
This is a nice come-uppance for Amazon, which saw its entry into smart phones crash and burn with Kindle Fire.
Far from being simply a popular new tech toy, analysts see the Echo and its digital assistant persona Alexa as a game-changer. The question for many is whether Amazon will end up owning this vital market by the time it matures.
Like the iPod
While Amazon and others tout the Echo’s abilities in the connected home realm, the lure for many seems to be an easy-to-use way to play music, including everything in Amazon Prime's music catalog.
“If you’re buying an Echo, that becomes your in-home speaker,” said Rob Enderle of the Enderle Group in Bend, Ore..
He's getting deja vu from 2001, when the iPod was first released. The pocket-sized digital music player helped usher in a new and almost unrecognizable computer scene where everyone carries a computer (i.e. a smartphone) in their pocket, driving up Apple sales, profits and share price. Apple is now the world's most valuable tech company.
“When Apple came out with the iPod, suddenly all the FM radios and the CD players went away. All the iPod did was play music. But eventually it led Apple to the iPhone and then it kicked all the phones off the market. It was amazingly viral,” he said.
It's already starting to happen with the Echo. Sonos, the maker of the popular WiFi speakers, surprised many in the tech industry when it laid off employees earlier this year and said it would shift focus to voice-activated speakers, citing big advances in voice recognition from Alexa and apps like Siri, Cortana and Google Now.
"Alexa/Echo is the first product to really showcase the power of voice control in the home. Its popularity with consumers will accelerate innovation across the entire industry," said Sonos CEO John MacFarlane in a blog post announcing the changes. "Voice is a big change for us, so we’ll invest what’s required to bring it to market in a wonderful way."
Sonos didn't have further comment on the layoffs.
Others mulling
The rest of the tech world seems to be taking note. According to a report in tech-industry news site The Information, Alphabet is looking into creating a voice-enabled device along the lines of the Echo, leap-frogging off its "OK, Google" voice recognition software. Google-parent Alphabet didn't comment on the report.
There’s also a lot of enthusiasm from people who want to create Echo-friendly devices, said analyst Charles King with tech analysis firm Pund-IT in Hayward, Calif. “At the Consumer Electronics Show, there was tremendous interest among the big commercial developers."
Already Fitbit, Uber, NBC News, Domino’s and financial services firm Capital One, among others, have integrated their services with Alexa.
“I think the Echo could be the transformative device so far as what people have generally called the smart home. This is a market that’s been around for ten years but Amazon has now done the heavy lifting that will allow other companies to get into the connected home market with minimum investment,” he said.
Selling well
Amazon doesn't disclose sales figures on the device, but according to Forrester analyst Sucharita Mulpuru, "we know they've sold over 10,000 and the reviews are overwhelmingly positive. That suggests it's indeed a sleeper hit," though no yet a blockbuster, she said.
Reading the tea leaves, the frequent backorders for customers looking to buy an Echo make it a good bet that sales are brisk, said Enderle.
"If they can’t keep up with sales, on a product that doesn’t have any hard-to-source materials, that suggests that demand is exceeding their most aggressive forecasts," he said.
Skills = Apps
One of the real powers of Echo is that it’s a semi-open system. Amazon allows developers to build what it calls “skills” for the Echo, effectively apps that are folded into its functionality. They have to be vetted by the company but so far over 400 third-party skills have been added, says Amazon spokeswoman Brittany Turner.
All agree that this type of non-phone-based digital assistant is going to take off, though exactly who will end up winning market share is the big unknown. “A company like Samsung could get involved, or even Apple. We’re in really early days with this,” said Pund-IT's King.
The Echo clearly has the first-mover advantage. “From what I’ve seen so far, Amazon’s is among the most promising technologies in this space that I can remember ever having seen,” he said.
Contributing: Jefferson Graham from Los Angeles.
