If Software is Eating the World

What’s Alexa got to do with it?

With the advent of Alexa, Google Assistant, Siri, and Alibaba and Baidu killing it in smart speaker adoption in China, consumer voice AI is eating the world, but to what end?

Case in point, Alexa echo devices don’t make much of a profit for Amazon on hardware sales. It’s always been about the software ecosystem and the add-on value it could create. The longer-term goal could be to make money off an app marketplace through skills. “Skills” are in a sense what Alexa calls its app store.

Alexa’s 70% share in the smart speaker marketshare in the U.S. is likely a healthcare play. As you might have heard, Amazon, Apple, and Google are all pivoting to healthcare services.

Following the runaway success of the original Echo device, Amazon has launched a dizzying number of new Alexa-powered products to get its gadgets into more living rooms and kitchens. On the face of it, the value proposition is not clear, Alexa is sort of dumb compared to Google Assistant, and voice commerce never took off.

Amazon’s Advertising Prowess Could be Fueled by Alexa

I, along with others, have been arguing the other side of the case. Alexa is listening and it could fuel Amazon’s advertising prowess in the future.

Related reading (not my own article):Amazon Just Became the Everywhere StoreAlexa is coming for your eyes, ears, hands, and…. dog?onezero.medium.com

Alexa devices, as software Ecommerce automation agents in the smart home, could also help households automate restocking of essential items. Voice commerce doesn’t have to be human, it can be programmed in advance.

Software is eating the world and automation is coming. I’d argue Amazon will also be involved in how this takes places, broadly speaking, along with Google’s own Waymo One.

Software Is Still Eating the World

In such a world, companies like Google and Amazon aren’t just the platforms and algorithms online but the part of the automation logistics in the offline brick-and-mortar reality of our smart homes and smart cities, a world of connected artificial intelligence in the Internet of Things of the 4th industrial revolution.

Amazon has found a massive audience for its portfolio of Echos, giving the company a clear early lead in the burgeoning voice assistant space. I think Alexa’s prowess in the smart home could help fuel Amazon to become an AI company involved in the healthcare and education spaces.

Amazon will increasingly have access to our personal data, but as for Echo devices, we probably shouldn’t fear the loss of privacy quite yet. Smart speakers are not all-seeing gods, nothing quite like the architecture China is developing with upgraded CCTV cams. Still, Amazon’s own facial recognition future is following a predictable trajectory.

The Super AI-Consumer Platforms Are Forming

Today’s stock market actually does favor AI, cloud and software aspects of technology. In fact, FAANG stocks, while not doing great this month or this year, have in recent years begun to dominate. The AI bubble is not going to burst anytime soon — in fact it’s full steam ahead. The trade war is nothing much as an appetizer for the AI arms race of the 21st century and while the United States has an early lead, China is building the future of the next grid.To Win in Artificial IntelligenceYou need to be a 0.1% Rich Companymedium.com

I believe it’s quite unlike anything we’ve ever seen before. Software is eating the world, but AI will devour us. You can already feel it with a distinctly unhuman algorithmic internet that doesn’t serve people directly, but Ad-machines, super platforms and mini programs in apps. People online are a bit more like bots and playing the part.

If Convenience Is King, What Is AI?

Thus smart speakers are also conditioning people to behave in certain ways. If convenience is king, AI is the medium. Alexa is weaponizing our addiction to convenience and preparing us for an AI-first world.

Marc Andreessen penned his famous “Why Software Is Eating the World” essay in The Wall Street Journal eight years ago. A lot has changed in that short time, so much so it’s hard to imagine now in 2019. Alexa has come out of nowhere to dominate and it shows Amazon’s larger ambitions.

Around 9 months ago, Amazon said it had sold over 100 million Alexa-powered gadgets, and a report soon after from Consumer Intelligence Research Partners showed Amazon with 70% control of the U.S. smart speaker market. Amazon’s no longer synonymous with just E-commerce, it’s coming into our homes and setting down camp as a AI-voice consumer leader. This is a bit like how Facebook and Google became the middle men for the early internet.

Whisper to Me Softly, Amazon

Amazon’s Echo Frames will enable Alexa to ‘whisper’ in our ear. Getty images.
Amazon’s Echo Frames will enable Alexa to ‘whisper’ in our ear. Getty images.

Now with Echo Frames and Echo Buds you might even be bringing Alexa to work and to the gym with you. To those meetings and cafe conversations. Alexa needs to compete with how you interact with your phone in apps and with how you stream content because Amazon Prime wants to monetize you better.

Amazon doesn’t have to chase Ad dollars like Google and Facebook, because Amazon wants you to use its services more often organically, as part of a super platform that now Apple is trying to replicate with its pivot to software services. This means the future of AI-as-a-service will become more ubiquitous.

Let’s think about what Alexa is becoming. Amazon’s longer-term focus may be in building an app store model where it takes a cut of each transaction. While still immature and not yet mainstream, the app store equivalent for Alexa is called skills and includes over 100,000 services, like guided meditation, oral quizzes, exercise offerings and comedy shows from third-party developers.

The Dominance of the 4A Companies is All About AI

The future of AI and advertising for the consumer is all about the personalization of convenience, and ecosystems like Amazon, Apple, Alibaba and Alphabet (Google) will help them do that.

The software as a service field will mean consumers will increasingly do their entertainment, healthcare, shopping, search, chat and so forth all through these enormous AI platforms. These four companies can thus be so much more profitable.

The IoT, 5G and 4th industrial revolution will spawn AI-centric super platforms and mega ecosystems so ubiquitous they will kill out much of their competition and determine a lot of innovation by how they evolve.

At first, the majority of these ecosystems will be U.S. based, but as we get further into the century, more and more will be coming out of China. Tencent, Meituan, Baidu and ByteDance certainly have potential here.

In Search of Next Platforms Where Data Is the New Oil

In spite of a lot of hype with a recent (not so related) brain-computer interface acquisition by Facebook, it does not appear they or Microsoft will be able to keep up. While both companies do incredible things with AI, they won’t likely be significant companies that transition well into being super platforms for the consumer. Microsoft mostly certainly might enable B2B forms of it.Facebook and the Brain-Computer InterfaceIt’s no secret that Facebook has an over-reaching interest in the future of the BCI.medium.com

Still, coming off the recent Amazon event, Alexa features most prominently in the colonization of AI software into our homes and lives. If the traditional app market exceeds $100 billion globally, what will the AI-Voice app market for skills become? What will the value-added sales be like? What will the IoT nature of connected apps be able to do?

Facebook’s hype of VR, chatbots and now a brain-computer interface might never come to fruition after all.

Amazon’s Echo push is not a hardware play. In an era of subscriptions and huge revenue from Amazon Prime, the software is just in its infancy with humanity. The leading Voice-AI interfaces and automation companies will find ever new ways of increasing revenue.

Getty images
Getty images

The Leaders of Automation

In August 2019, UBS, which values Waymo at anywhere from $45 billion to $135 billion, said Alphabet’s self-driving car unit could generate as much as $114 billion in revenue by 2030 through ride-sharing services that allow customers to book a ride in one of its self-driving cars. That’s just Waymo One alone.

The 4A companies, together with their super-platform domino effect, could very radically transform what artificial intelligence becomes in the 2020s and 2030s. Just remember how much the internet has changed in five, ten or fifteen years. Indeed the pace of the 2030s will feel rather “exponential” as compared with the actual innovation taking place today.

If Amazon is focused on building the best possible experience for its customers, the rest will take care of itself and the rest is called Alexa. Alexa could pivot into being a conversational interface much like Huawei and Google are busying working on. If they can achieve that, the channel will also have an advertising factor that will be worth a lot.

Alexa as an AI Consumer Funnel

Alexa onboards you to Amazon, Prime locks you down. People with echo devices naturally spend more within the Amazon ecosystem. It’s all about customer value and average spend and frequency.

For now, the company is focused on making Alexa even more ubiquitous. But what could Alexa become? It could become what Google was to search: sort of like a utility you realise you cannot do without.

Software will continue to eat the world, in this world of algorithms, data science and machine intelligence. Alexa will be listening and checking in on us, to make sure we’re happy citizens in the super platforms.Tag: alexa skillsAmazon Alexa is already capable of identifying different voices to give personalized responses to different users in…techcrunch.com

If Amazon is writing its own facial recognition laws to pitch to lawmakers amid lobbying efforts, how hard will it be to make Alexa rule? It’s only a matter of time. Indeed, all the lab rats in Amazon’s lab are trying to figure out how best to monetize Alexa.

Automation is one of the biggest events of the 21st century humanity will ever go through. The companies that best leverage AI during that transition won’t just be winners, they will be like island nations unto themselves. They will become so powerful that it makes their $1 billion valuations today look like nascent times.

Software is eating the world, but machine intelligence is just starting to squeeze your data and find out what you are really worth.

As AI enters healthcare, education, logistics, transportation and “life-as-a-service” in 360 degree directions, software voice platforms like Alexa can truly take their place as another layer on top of apps in the immersion economy. It’s not just attention that they will be after, it’s not even just your wallet, it’s how you manage your life.

From Alexa skills to Siri interactions, the world we know is changing and machine intelligence is taking on new industries and transforming them. Software is eating the world, but consumer adoption is also rapidly telling us that Alexa will be a big part of this for years to come.

All Rights Reserved for Michael K. Spencer

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