In 2010, analysts said that the smartphone trend was going to make Silicon Valley investors rich.
It was a savvy bet. Between 2010 and 2015 the number of smartphone users in the U.S. tripled, jumping from 62.6 million to 189 million.
Today, smartphone growth is dwindling, and tech industry giants are looking for the next big thing. Or maybe they’ve already found it.
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Analysts now think the growth has shifted from smartphones to smart homes. Statista, a German database company, estimates that the number of connected households will nearly triple from 31.6 million in 2016 to 80.4 million in 2021.
The usual suspects are all frothing at the mouth to seize this opportunity. Alphabet’s (ticker: GOOG, GOOGL) Google, Amazon.com ( AMZN), and Apple ( AAPL) are virtually at each other’s throats trying to cash in.
Google. Google began building its smart home systems in earnest in 2014, when it bought smart thermostat company Nest for $3.2 billion.
Unfortunately, Nest hasn’t spread its wings yet. In 2014, Nest had a “smart thermostat” and “smart smoke alarm.” Three years later, it offers only two additional products: indoor and outdoor cameras.
For a company that was supposed to help “innovate upon devices in the home, making them more useful, intuitive, and thoughtful,” as GOOG stated in its 2014 10-K, Nest has been a flop.
On the brighter side, Google Home, released in October 2016, is GOOG’s wireless, voice-activated speaker loaded with an AI-powered virtual assistant. It can play music, answer questions about weather and traffic, set alarms, and control other compatible smart devices. While Google Home arrived a full two years after the Amazon Echo, there are some upsides.
“Google has an advantage with a more sophisticated AI layer, which will certainly be important and could help them ultimately win” the smart home battle, says Don DeLoach, Infobright president and CEO.
That AI layer, dubbed the Google Assistant, is informed by Google’s unparalleled ability to access search data and understand the user.
Amazon. The Amazon Echo is essentially a Google Home — except it was released two years earlier, and has been collecting user data and improving its Alexa AI continuously over that time. This first-mover advantage, constant improvement and the best online retail real estate in the U.S. (i.e. the front page of Amazon.com) helped make Alexa devices the best-selling smart home devices in the market.
Over the holiday season, sales of the Amazon Echo family were up more than 800 percent from the year before. Millions of Alexa devices have been sold worldwide, and the Echo Dot was the single best-selling item on all of Amazon, making AMZN the best smart home stock as it stands today.
But first-mover advantage isn’t the only reason AMZN is leading the way in the smart home revolution.
Expanding the audience to include the developer “is where Amazon has an edge on its competitors,” says Chris Stone, chief products officer at Acquia, the digital experience company.
“In November, Amazon launched its own cloud computing service, Lex, opening up Alexa’s technology to any developer, organization, or application,” Stone says. “Going forward, consumers will get tired of weather reports, turning on lights, ordering an Uber and listening to playlists from a cylindrical device, and the company that prioritizes integration will come out on top.”
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AMZN also offers the Amazon Dash, a branded button you order, keep in your home and press any time you run out of a common consumer good. Colgate, Tide, Trojan and Bounty are a few of the many brands offering Amazon Dash buttons.
Apple. AAPL doesn’t even make smart home devices, but it has focused on the software side of the smart home; its Home app serves as a controller for all smart devices compliant with Apple’s HomeKit software. Through Siri, or with your Apple TV, you can control lights and garage doors, lock your house or raise the blinds — as long as you own the connected devices.
One major difference between Apple and both GOOG and AMZN is that Homekit device-to-device communication is encrypted, so Apple has no idea what requests you make or how you use your home of the future.
“I think the security element can ultimately make Apple the winner, provided they are affordable enough to be a mainstream solution,” DeLoach says.
Moving forward. AMZN, GOOG, and AAPL aren’t the only three players in this space by a long shot. Samsung is also making its presence felt with its Samsung SmartThings Hub, the “heart of your smart home” that lets you control hundreds of compatible devices from many major brands.
And of course no discussion of tech titans would be complete without Facebook ( FB), which, like Google, probably knows more about you than your shrink, the NSA and your mother combined. It’s already developing an AI-powered virtual assistant, so fusing that into a smart home offering in the future is entirely feasible.
At the end of the day, no smart home stock is a sure thing. The race is on, but it’s in the early stretches. AMZN has the current lead (and the easiest system for developers), Apple has the strong security and ecosystem, and Google has the copious data.
How consumers value those qualities will determine the long-term winner — if there is just one.
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“It’ll be the user interfaces and services that determine the ultimate winner in this market,” says Tom Coughlin, IEEE senior member and founder of Coughlin Associates. “And the market is big enough that several companies could be successful.”
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Which Stocks Will Win the Smart Home Revolution? (GOOG, AMZN, AAPL) originally appeared on usnews.com
