Amazon and Google Can't Keep Up With Local Devices in China

The U.S. has one of the most advanced smart speaker markets in the world, dominated by a who’s who of Big Tech that includes Amazon, Apple and Google. That isn’t necessarily the case abroad, though, particularly in the fast-growing Chinese market, where local players such as online commerce company Alibaba, search engine Baidu and consumer electronics company Xiaomi hold sway. In fact, Baidu sent shock waves through the industry earlier this year when analytics firm Canalys announced it shipped 4.5 million smart speakers in Q2, which was second only to the 6.6 million shipped by Amazon. That marks a growth of 3,700% for Baidu’s Xiaodu smart devices, which came out a year prior. Not surprisingly, Chris Apostle, chief media officer at digital marketing agency iCrossing, said 3,700% is probably not a sustainable growth rate. Nevertheless, he expects to see “explosive growth” in voice search globally as advertising starts to ramp up, manufacturers lower prices and more consumers adopt the devices. For his part, Benjamin Condit, chief strategy officer of Mindshare China, said smart speakers are relatively new in China. They were introduced about three years after Amazon first announced its Echo device in 2014, but they’ve rapidly gained acceptance because voice technology is part of the Chinese government’s push for AI adoption. There’s another simple reason: Speakers from Alibaba and Baidu sell for as little as $14 whereas an Echo Dot costs $50. “Amazon can’t currently compete in China because it is not plugged into China’s digital ecosystem,” Condit said. “Cost is a secondary barrier to Chinese competitors, who have the scale to offer unbeatable prices.” There’s also the issue of language. Condit noted Baidu’s voice data sets, which are used to help voice assistants interact with users in a more natural way and to improve accuracy, are almost entirely based in Chinese. [kickout id="1"] “This is a major inherent advantage for … smart speaker manufacturers in China compared to international players, since with all things AI driven, the more robust and organized your data set, the faster you can improve your performance,” Condit said. “In this case, the head start currently owned by China’s biggest voice players—Alibaba, Baidu and Xiaomi—is practically insurmountable for an Amazon or Google, with or without restrictions in the market.” Alibaba, Baidu and Xiaomi did not respond to requests for comment. In fact, Condit said perhaps the only international player that may still have a chance when it comes to large-scale voice data sets in China is Apple, thanks to the Chinese-language version of digital assistant Siri installed on all iPhones sold there. “With neither [Amazon nor Google] existing in China’s current digital ecosystem for all practical intents and purposes, they lack the consumer data, integrations and partnerships to compete any time soon with local players,” he said. Amazon, Apple and Google did not respond to requests for comment. But there’s a silver lining for them. Condit said consumers in China have really embraced voice technology, with 25% making payments—usually for online purchases—via smart speaker. That's compared to only 10% in the U.S., where interaction skews more toward asking for facts or to play music. U.S. players could potentially learn a thing or two about consumer behavior from their Chinese counterparts and use that as a guide for the content and experiences they offer. Duane Forrester, vp of industry insights at online brand data management firm Yext, pointed to a report from market research company eMarketer, which found that voice integration is so prevalent in China, digital assistants are in appliances like refrigerators and rice cookers. This, he said, indicates a growing demand for voice control at a more granular level than in the U.S. “Marketers would be wise to pay attention to the technology China is developing. Over the last decade, it has not only caught up, but in many regards, overtaken the Western world,” Condit said. “By understanding this innovation before it arrives in the West, marketers can prepare themselves and their brands for this technology—i.e., what it means to find a brand voice in a screenless world.” Condit also noted it’s possible the next iPhone-like phenomenon could come from Chinese manufacturers, who could then go on to dominate the world as Apple has done. “At a certain point, consumers’ desires for the latest innovation, especially if it brings convenience, may outweigh their reluctance to adopt a new brand,” he continued.