Thanks to the success of its home assistant software Alexa and the Echo hardware that brings it to life, Amazon, one of the original digital disruptors in retail, is beating tech giants like Google and Apple at their own game these days. 

In a repeat of its early gains against brick-and-mortar retailers, Amazon astutely recognized the potential for digital technology — in this case, AI-driven and voice interactive home assistants — to streamline purchasing at the same time that Google and Apple were geeking out on smart appliances. Sure, telling your home to dim the lights is fun, but the real magic comes when a multitasking parent can change the baby while ordering diapers by simply asking out loud.

Now, technology companies are in the unenviable position of having to play catchup in a category that is expected to be crucial to all sorts of connected engagements going forward. But despite its head start, Amazon’s leadership in the space is not guaranteed, with Google making a concerted push as well as Apple, Samsung, and possibly even a major retailer like Walmart all looking to engage consumers in the home. 

“There are a lot of companies out there that would probably like to have a bigger presence in consumers' homes but are unlikely to partner up with Google or Amazon — Walmart, for example,” Joe Branca, senior analyst for the Smart Home Strategies Service at Strategy Analytics, told Marketing Dive. “And there are companies like VoiceBox that make it easy to go to market with digital voice assistant devices.”

The year of the digital assistant

Digital home assistants are shaping up to be next year’s breakthrough technology product, with related hardware and software expected to have a big presence at the Consumer Electronics Show in January. The reason? Artificial intelligence and natural language processing have progressed to make consumer solutions possible while research suggests the need exists to connect services, order products and present personalized, context-aware information, such as restaurants near planned meetings.

Gartner forecasts that by 2019, digital assistants on smartphones and other devices will serve as the primary interface to connected home services in at least 25% of households in developed countries. Companies like Google and Amazon want to provide the software and hardware to enable this experience and are expected to ship 3 million digital voice assistant hardware units in 2017 and 15.1 million by 2020, according to Strategy Analytics.

Having a widely-used virtual assistant is something of a Holy Grail for consumer-facing tech platforms, as this would enable them to be an agent between brands and consumers in an even bigger way than before and to effectively own a significant portion of consumer engagement throughout the day.

For marketers, the home technology presents new opportunities to engage consumers, with paid search budgets on digital assistants forecast to grow by 100% annually between now and 2021, according to Juniper Research.

While marketers are likely to pay to provide targeted results much like they do with voice search, privacy issues loom large, with digital home assistants reliant on gathering data about users like search and location history, shopping habits and demographic information.

A one-horse race?

Apple’s Siri is an early example of a digital assistant, but despite initial buzz, it has failed to capture the imagination of consumers. Instead, Amazon has gained a significant head start in the category by building its AI-driven digital assistant around its e-commerce platform and the Prime shipping program.

Forrester Research forecasts there will be more than 6 million Amazon Echo devices in U.S. homes by the end of this year, Thomas Husson, vice president and principal analyst at Forrester Research, told Marketing Dive. The company also recently launched in the U.K. and a local language launch is underway in Germany.

Another sign of Amazon’s success is how quickly it has been able to build Alexa’s developer community and add skills — mini apps for engaging and transacting on the platform. There are more than 3,000 Alexa skills, while integrations with Sonos and Ford are in the works to make Alexa more widely available to consumers. A new streaming service with a $4 monthly fee for those exclusively using Echo speakers could also help attract new users.

While Amazon faces some challenges — including the lack of a strong presence on mobile and the need for users to memorize the right words to get Alexa to work — its early lead is significant.

“They have the opportunity to deliver a really pervasive digital assistant,” Strategy Analytics’ Branca said. “The more devices that integrate Alexa, the harder it will be for competitors to succeed in the market.”

Home sweet home

While Google Home has several potential advantages over Echo, it also faces several challenges. Ultimately, at lot is at stake here for Google, so the company is likely to throw everything it can at building a presence in the home.

“I think for Google the objective is to embed an intelligent agent in as many consumer products and services,” per Husson. “Search is more and more vocal and visual and taking place in many more places. To stay relevant to consumers (and consequently marketers), Google needs not just to provide answers but to power two-way contextual conversations.”

Google’s advantages over competitors include a significant wealth of user data that could be leveraged provide meaningful assistance throughout a user’s day. Complementary services like same-delivery from retail partners and travel search and booking could also be integrated with Home. Google Home even comes fully integrated with Google Cast, meaning users can cast music to the speaker or video to a Chromecast-connected TV.

"It’s still very early for this technology — there’s been a lot of promise, but few can really deliver on this vision,” a Google spokesperson told Marketing Dive. “Google has a unique blend of expertise in natural language understanding, deep learning, computer vision, and understanding user context, so we think we can make good headway. We can understand intent behind words to handle follow-up questions and complex, multi-step tasks.”

At launch, Google Home does not have the same number of third-party integrations as Alexa. Convincing developers to integrate with Google Assistant will be important to encourage consumers to use it regularly.

Commerce is another challenge Google faces, especially in light of its poor track record — Checkout and Google Wallet are just two examples of Google's commerce strategies that have failed to resonate with consumers. As Amazon’s success indicates, commerce is a crucial element for driving value and use for digital assistants.

“Google faces an uphill battle to succeed with both Google Home or Allo because it does not have a strong track record of selling much of anything direct to consumers at scale,” Julie Ask, vice president at Forrester Research, said in a statement.

Competition heats up

Other companies beside Amazon and Google are likely to make a play for a role in home digital assistants. For example, Samsung already has a significant presence in consumers’ homes via smart TVs and appliances. Despite its recent problems with the exploding Galaxy Note 7, the company’s recent acquisition of digital home assistant Viv indicates a bigger play is in the works.

Apple is expected to jockey for a bigger role next year and is likely to take a similar approach to Amazon by bundling Siri, Apple TV and music streaming within a home hub.

The possibility that a major retailer like Walmart could throw its hat into the ring adds intrigue. Walmart has a growing omnichannel strategy in place and has been reluctant to hand over too much control to tech giants in the past — as evidenced by the retailer’s launch of its own mobile payments solution, Walmart Pay. Even if the retailer partnered with a company like VoiceBox, which provides voice technology, it would still need to provide more services than simply purchasing to gain significant adoption.

Ultimately, it's possible there will be room for two or more players in the digital home assistant space if consumer adoption is strong enough. What is sure is that a number of big names will be trying to catch up in a category cracked open by Amazon.

“The main digital platforms are competing in the space to stay relevant and continue to mediate relationships between brands and consumers,” Forrester’s Husson said. “I am not sure yet there will be one winner to take it all. The ones who will succeed will provide relevancy to consumers — enabling more personalized and contextual conversations.”