Apple takes a page from the Google Nest playbook, but isolated HomePod still faces big challenges to wider adoption

The news: While MacBook Pros and the new M1 Pro and M1 Max processors were the big announcements at Apple’s fall event, the company also refreshed its popular AirPods wireless earbuds and announced new colors and capabilities for its HomePod mini smart speakers.

How we got here: Apple was late to the smart speaker party with the $350 HomePod in 2018. 

It sold poorly and was discontinued in favor of the smaller and cheaper $100 HomePod mini in 2020. One year later, Apple added colors and voice features like the ability to “broadcast” messages across various HomePods—features that Google’s $35 Home mini speakers offered years ago.

  • A report from CIRP in August said the US smart speaker market hit 126 million devices as of June 2021, with Amazon owning the lion’s share of the market at 69% and Google coming in second at a 20% share.  
  • HomePod penetration grew slightly to 7 million units in 2021, putting it at less than 10% of the US smart speaker market.
  • Unlike its competitors, which offer cross-platform functionality, HomePod is tied to the Apple ecosystem and won’t work with Android devices or PCs. Apple also only has one smart speaker model, while Amazon and Google have multiple form factors.

The problem: Apple, which traditionally comes from behind in more mature market segments before dominating them (e.g., iPod, iPhone, iPad, Apple Watch), is going to have a hard time making a bigger dent in the smart speaker space.

Apple’s HomeKit smart home ecosystem is similarly small compared with Amazon’s and Google’s burgeoning arrays of smart cameras, doorbells, sensors, and lights. 

  • Market leader Amazon is creating an echo device for every corner in consumer’s lives, including smart TVs, connected car speakers, and even karaoke microphones.
  • And Google’s Nest isn’t sitting around idly. More Nest smart speakers (4.1 million) were shipped than Amazon Echos (3.3 million) in the US during Q2 2021, per Omdia. 

The bigger picture: HomePod mini’s limitation is that it is locked into Apple’s ecosystem and relies on a tiny HomeKit smart home platform.

  • Smart speaker pricing is also a race to the bottom, with competitors flooding the market with cheaper options—a game Apple clearly refuses to play.
  • Moreover, Insider Intelligence’s ecommerce survey, conducted by Bizrate Insights on 1,066 US adults in August, revealed that 35% of respondents interacted with smart speakers to manage smart home appliances, while only 15% used them to access digital content like music.

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