In This Article:
Last October, Facebook (NASDAQ: FB) introduced its Portal smart speakers to keep pace with Amazon (NASDAQ: AMZN) and Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) Google. Many critics called Facebook's launch a tone-deaf move, since it followed a series of privacy and security debacles at the world's biggest social network.
Facebook hasn't disclosed any sales figures for the Portal yet. But some big price cuts in April, which reduced the Portal's prices by up to 50%, indicates that the speakers aren't flying off the shelves.
Image source: Facebook.
Research firm eMarketer estimates that Amazon will control 63% of the U.S. smart speaker market this year, followed by Google with a 31% share and a 12% share for everyone else. Yet Facebook isn't giving up -- it recently announced that it will launch two new versions of the Portal this fall.
Why Facebook won't abandon the smart speaker market
Facebook wants to stay in the smart speaker market for several reasons. First, it extends the reach of its core apps -- Facebook, Instagram, and WhatsApp -- beyond PCs and phones and into homes. Its screens can also be used to play videos and games, ramp up e-commerce services (like its Facebook Live shopping videos), and display more video ads.
It allows Facebook to tether more users to its family of apps, which are accessed by about 2.1 billion users every day. Facebook can then accumulate more data and craft better targeted ads for its core advertising business, which widens its moat against Google and Amazon.
Facebook also doesn't want to be left out of a growing hardware market. Global smart speaker shipments could surge from 208 million this year to 500 million by 2023, according to research firm Canalys. Global smart speaker shipments could also surpass tablet shipments by 2021.
Image source: Facebook.
Why Facebook's Portal devices are still destined to fail
Unfortunately, Facebook's new Portal devices probably won't fare much better than the old ones for a few simple reasons. First, Facebook's users simply don't trust the company yet. In a HuffPost/YouGov survey last December, two-thirds of respondents stated that they didn't trust the social network to handle their personal data.
Amazon and Google have too much of a head start in this market, and both companies can leverage the strength of their ecosystems to lock in users. Amazon's Echo and other Alexa-enabled devices are tethered to its e-commerce ecosystem and an expanding universe of third-party services. Google's Home devices pull data from its sprawling ecosystem of services while hosting plenty of third-party apps.