One of the most striking trends for the start of 2023 has been the ongoing restructuring at the tech giants. Despite the year having barely begun, Amazon’s 2023 layoffs are rumoured to total 18,000, while Google’s shares dropped 6% in October 2022 following reports of shrinking profits and claims that 12,000 jobs might be on the line.
The effects of these decisions may well be felt far and wide this year. But for us it raises an interesting question about the Internet of Things (IoT).
Smart devices like Google Home aspire to introduce the IoT to everyday consumers. However, despite voice assistants popping up in almost half of UK homes, the departments responsible for making them are often operating at a loss – Amazon Alexa is a prize example of this, being reportedly on pace to lose $10 billion. So, what do these high-profile financial struggles mean for the future of the IoT?
Success at any cost
Although smart speakers are the most visible part of the IoT, it’s no secret that they are ‘loss leaders’ for manufacturers. The devices are sold as cheaply as possible, sometimes even below production cost.
While this may have you asking what the point is, placing a purpose-built device that can theoretically be monetised (via purchases through Alexa etc.) in homes across the world potentially means achieving profitability over time.
For the company to successfully recoup losses, consumers must spend enough through their smart speaker – and the valuable data collected via these interactions must be put to further use.
Unfortunately, this is not always the way of things. 2021 research shows that purchasing via a smart speaker is among the least popular use cases, with just over a quarter (26%) doing so regularly and a tiny 3.9% doing it on a daily basis. Reflecting this, Business Insider cites “failed monetisation attempts” as the reason that Amazon’s Alexa division “would be the primary target of layoffs.”
Part of the reason for this disconnect is that some of the design choices that have been made to support long-term monetisation have actually become major barriers for consumer adoption.
Head in the clouds
While voice as an interface has proven popular, perhaps the biggest flaw with smart speakers is their reliance on the cloud. While these devices rely on sending captured data out of the home and back again once processed, it is understandable that many users have substantial data privacy concerns.
Looked at from a technical perspective, it’s hard not to sympathise with the consumer even more. Does an act as simple as flicking on lights really require a cloud connection? The fact is that we already have the sort of AI-enabled system-on-chips that can perform the functions of a smart speaker without any networking capability whatsoever.
Once we de-prioritise the provider’s original objectives for smart speakers – which is a business model that has failed to deliver – we can instead look at how we can prioritise user experience. And in doing this we may well unlock the full potential of the IoT.
What does this mean in practice? Firstly, it means focusing our attention on simpler, user-centric IoT models – at least in the short term. They objective must be to make common interactions with smart devices as quick and as painless as possible for users.
We are already seeing the launch of processors that will help in these efforts. These new chips are designed to make the IoT more accessible – combining greater data with flexibility and privacy.
We also need to see further investment in ‘standardisation’ technologies that open ecosystems up instead of locking them down – maximising the utility of any speaker to the user.
Devices developed using these principles will evolve into hubs sitting at the heart of the entire smart home – coordinating and automating a full range of sensors and gadgets throughout the home, creating truly personalised services based on each individual’s voice or presence, and protecting personal data.
Championing localised intelligence and interoperability, rather than profitability and opportunism, will not only make the IoT more attractive and usable to consumers – this progression could be monumental for the brands looking to leverage this profitable technology.
If you would like to learn more about how XMOS is supporting this user-centric approach, click the button below to speak to our Sales team.