At its AWS re:Invent conference last week, Amazon announced two new monetization updates for Alexa skill developers: in-skill purchases and the ability to make payments via Amazon Pay.
In-skill purchases will enable developers to sell premium content or digital subscriptions within their skills, and the extension of Amazon Pay will allow third-party developers to accept Amazon Pay for in-skill purchases.
The new tools will allow developers to generate revenue from voice apps, and ultimately pay off for Amazon. Monetization has been challenging for voice app developers across platforms, but Amazon has been making a concerted effort to enable developers to earn revenue, most notably through voice app subscriptions. While this model has helped Amazon emerge as an early leader with the most voice apps of any platform, the current solution is limited in scope. Implementing new monetization tools for Alexa skills bodes well for Amazon’s long-term success in the nascent voice assistant market:
- It will likely encourage developers to focus on creating high-quality skills.The opportunity to make money via in-skill purchases will incentivize developers to improve the in-skill experience in order to retain users and increase usage. That’s because developers will need to add value to their skills to convince consumers to sign up for premium content.
- It sets the foundation for mainstream adoption of Alexa skills.As developers make their skills more engaging in order to drive in-app revenue, consumers may find more value in Alexa over rival voice assistants, allowing Amazon to gain a stronger footing in the market. While it’s likely that Amazon’s competitors will follow suit in improving monetization efforts, Amazon will see a first mover advantage.
Although Amazon is focusing on monetization solutions, the biggest problem Alexa skill developers face is user acquisition. One of the main issues with Alexa is discoverability of skills; users simply don’t know how to use Alexa beyond making simple commands, like asking the voice assistant to play music or read a weather update. For example, while Alexa has access to more than 25,000 skills, about 53% of consumers use only one to three of them, while 14% of consumers haven’t even enabled a third-party skill, according to Dashbot. To drive greater adoption of Alexa, Amazon will need to provide more visibility for third-party skills from businesses and developers.
Smart speakers are the latest device category poised to take a chunk of our increasingly digital lives. These devices are made primarily for the home and execute a user’s voice commands via an integrated digital assistant. These digital assistants can play music, answer questions, and control other devices within a user’s home, among other things.
The central question for this new product category is not when they will take off, but which devices will rise to the top. To answer this question, BI Intelligence, Business Insider’s premium research service, surveyed our leading-edge consumer panel, gathering exclusive data on Amazon’s recently released Echo Show and Echo Look, as well as Apple’s HomePod.
Peter Newman, research analyst for BI Intelligence, has put together a Smart Speaker report that analyzes the market potential of the Echo Look, Echo Show, and HomePod. Using exclusive survey data, this report evaluates each device’s potential for adoption based on four criteria: awareness, excitement, usefulness, and purchase intent. Finally, the report draws some inferences from our data about the direction the smart speaker market could take from here.
Here are some of the key takeaways:
- Amazon’s new Echo Show is the big winner — it has mass-market appeal and looks like it will take off. The combination of usefulness and excitement will drive consumers to buy the Echo Show. The Echo Look, though, seems like it will struggle to attract that same level of interest.
- Apple’s HomePod looks likely to find a place in the smart speaker market but won’t dominate its space like the iPhone or iPad did.
- The smart speaker market will evolve rapidly in the next few years, with more devices featuring screens, a variety of more focused products emerging, and eventually, the voice assistant moving beyond the smart speaker.
In full, the report:
- Showcases exclusive survey data on initial consumer reactions to the Echo Look, Echo Show, and HomePod.
- Highlights the aims and strategies of major players in the smart speaker market.
- Provides analysis on the direction this nascent market will take and the opportunity for companies considering a move into the space.