Google and Amazon both want to produce the smart speaker that is in everyone's homes. Stiff competition means that they will be looking over each other's shoulders to make sure they one-up their competitors.
This became abundantly clear during the holiday season, when both lowered the prices of their smart speakers to get into more homes. While this strategy may be effective in getting more products out, it's not beneficial for bottom lines.
This holiday season saw Amazon and Google both cut the prices of their smart speaker products, a move that was great for consumers who rushed to stores to buy the products but bad for the companies. Both managed to cut the prices so low that they were likely to have lost money on the move.
The Amazon Echo Dot and Google Home Mini, the smallest versions of the smart speakers were available for as low as $29 during the holiday season. Midlevel devices by both companies were lowered to $79.
Price levels may have hurt the companies. To make the Amazon Echo Dot, Amazon spends $31 in parts, according to ABI Research. Google Home Mini costs about $26 in parts. This is without including other expenses such as shipping and overhead.
Amazon said it sold millions of Echo Dot speakers and that it was the best-selling product during the holiday season. Despite low prices, Google gave away Google Home Minis with buyers of Google's Pixel 2 smartphone.
Amazon and Google aren't the only companies with smart speakers. While they may have the advantage at the moment, both are awaiting the arrival of the Apple HomePod. Apple planned to release the HomePod in 2017 but failed to release the speaker.
Amazon currently controls about 70 percent of the smart speaker market. This could come to an end when Apple releases the long-delayed HomePod.
What could hurt Apple is the low cost of the speakers compared to the HomePod. Apple currently prices the HomePod at $349. While there are loyalists to the brand that will shell out that kind of money for the device, sales of the $1,000 iPhone X may have taught Apple that brand loyalty can only go so far. There are rumors that Apple will drop the price of the iPhone X.
Another company that recently announced its foray into the smart speaker market is Roku. The streaming device maker is unveiling their home audio licensing program to produce Roku-powered smart speakers.