A Foolish Take: Apple Gains a Foothold in the Smart Speaker Market

When Apple (NASDAQ: AAPL) launched its HomePod smart speaker earlier this year, many critics claimed that its high price tag of $349 would prevent it from gaining ground against Amazon‘s (NASDAQ: AMZN) Echo and Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Home devices, which cost as little as $50.

Apple’s Siri also lacked Amazon’s Alexa skills and e-commerce backbone, as well as Google’s larger ecosystem of search and cloud-based services. Those flaws, it seemed, would limit HomePod’s appeal to hardcore Apple loyalists.

Despite those headwinds, a recent report from Consumer Intelligence Research Partners indicates that Apple has established a foothold in the U.S. smart speaker market, nabbing a 6% share.

Market share of smart speakers in the U.S.

Data source: CIRP, as of June 30, 2018. Chart by author.

Apple remains an underdog, but its tiny share generates higher revenue per device than Amazon’s and Google’s devices. The Mac maker can also use HomePods to tether more users to paid subscription services like Apple Music.

That strategy supports the growth of Apple’s services unit, which posted 31% annual sales growth and accounted for 18% of its top line last quarter. The HomePod won’t move the needle for Apple anytime soon, but it’s one way for the tech titan to maintain a presence in the smart home market.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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