Amazon’s Echo Strategy

I have read over the Internet that some pundits are estimating that Amazon sold tens of millions of Echo devices – much more than their closest rival, Google’s Home.

Impressive as this may sound, it is not the first time that Amazon has used a strategy of dumping a cheap/subsidised device onto the market with the goal of winning market share early on in the game. The original Kindle Fire tablet that was introduced in 2011 shared the same strategy and was also a hit during the holiday shopping season, topping Amazon’s best seller charts as well. The Kindle Fire never became dominant though.

The lesson that I would learn from this is that flooding the market early on with cheap devices will not win you a strong position for the future. The tech market constantly evolves and products reliably get better and better each year, almost like clockwork. Even though smart speakers may look completely cloud-dependent with very few requirements for local hardware, I can reliably predict that in the next few years, this will no longer be the case. If the market for smart speakers persists (which is by no means a given), they will for example at least evolve to incorporate some local AI features to allow them to become smarter while maintaining a certain level of privacy. Cheap devices that are a few year’s old and do not have these improvements will not provide any kind of significant moat, and customers will be eager to switch to the new ones.