Job Cuts and Losses Impact Smart Home at Amazon and Google

Job cuts at Amazon’s Devices and Services operations have raised questions around commitment to smart home at the company. According to the New York Times, reports suggest up to 10,000 jobs might be lost across Amazon’s devices organization, retail division, and human resources. However, much of the coverage has been on the impact on Amazon’s Alexa voice assistant platform and the associated smart home Echo devices that use it. Meanwhile, citing a Google internal document, The Information recently reported that Google is reducing the scope of its investment in its Google Assistant voice control platform to device made by the company itself. Is this a turning point for the smart home market?

News of job cuts and investment redistribution clearly come within a wider context. Amazon has blamed an “unusual and uncertain macroeconomic environment”. In early November, the company confirmed a hiring freeze through 2023. Rising inflation and wavering e-commerce sales have clearly impacted the company, which had expanded headcount significantly in 2020 only to face a changing environment over the past twelve months. Since June 2021, Amazon’s stock valuation fell by more than US$1 trillion.

Smart home voice control investment is clearly not solely or even significantly responsible for such dramatic change, though the outstanding success of the platform combined with its less obvious ability to drive direct revenues has made it the focus of reports of change at Amazon.

A product of the LAB126 unit at Amazon, the first Alexa powered Amazon Echo voice control front-end smart speakers began shipping in volume in mid-2015. Competitors around the world responded to the dedicated smart home voice platform by developing their own dedicated devices to compete head-to-head. Google Assistant, already available on smartphones, was hosted on a new line of Home-branded smart speaker designs starting in late 2016, while Apple started shipping its Siri supporting HomePod devices in early 2018. The impact was not only among the largest US players; Tencent, Xiaomi, Alibaba, and others all launched similar devices geared to the China market with similar business models and goals.

Concerns regarding continuing investment in Alexa and Google Assistant have sprung from the failure of these devices, despite shipping in the hundreds of millions, to bring significant revenues to their parent companies. That the supporting hardware was sold at or below cost has long been clear but accepted as a way to form a userbase to be mined for a range of additional service revenues. However, the potential to support clear and additional revenue streams has not developed quickly. With regard to lifting Amazon retail sales, voice remains an imperfect way to browse, select, or even just reorder products and services, while the advertising capabilities for Google to exploit are similarly challenged. The development of Smart Displays from Amazon and Google didn’t significantly alter that dynamic despite adding the key ability to view and browse selections. Reports target a growing lack of patience and enthusiasm within both companies continues to underwrite devices and platforms that don’t bring significant incremental revenues.

Low hardware pricing and the simplicity of voice interactions have been the foundation of voice control adoption. While interactions are dominated by non-revenue generating weather checking and requests to play music, voice control has also placed vendors at the heart of smart home deployments. Anyone who has grown accustomed to changing the room temperature or the lighting in a room via voice command is unlikely to want to return to physically manipulating a switch or even a smartphone app. As smart home voice control grew, it positioned its proponents at the heart of further smart home device investment. Third-party devices were selected based on compatibility with each vendor’s voice control platform ecosystem and voice control platforms became the de-facto control platform for millions of smart home installations. While ecosystems remained proprietary that meant voice control was the primary smart home customer point of engagement.

But while the economy has certainly changed, it comes just as the role of voice control has also pivoted. The recently published Matter specification, initiated and enthusiastically backed by Amazon, Apple, Google, and many others, makes voice control a cross-vendor service. Users are able to select the platform they prefer to control the devices or applications they want. Each voice control offering will work with any Matter compliant devices. Matter is a significant step change in the market and effectively puts paid to the closed ecosystem model that underwrote at-cost hardware pricing for voice control front-ends. Voice control in the smart home is not going away, but the business model that has supported its growth has to change. While dedicated voice control devices gain interoperability and smart home controller capabilities, pricing is likely to rise. However, again spurred by Matter adoption, controller functionality is migrating into new devices such as multi-function tablets that can operate replace dedicated front-end controllers (both Apple and Google are rumored to be developing tablets with stands that mimic Smart Displays) or SmartTVs. Device that can support voice control without having to be dedicated purchases.

Any reduction in voice control investment or support should be viewed not just as a reaction to the economic situation or the direct profit/loss associated with these devices, but also the current ability to monetize smart home services in general. Spurred on by Matter, the smart home market is reaching a new level of maturity no longer dependent on a single device type to grow adoption and investment. However, it remains well short of an ambient interface able to drive revenues through mediating and managing a host of services throughout the home and beyond. As adoption continues to grow, monetizing smart home services remains a long-term investment.