Complex Made Simple

A growing tech company that you should invest in, and buy its speakers

Last time AMEinfo spoke about smart home speakers we praised the Echo Dot for being one of the best, and our point still stands. But, Amazon’s smart speakers compete with a few vendors like Apple, Google, Facebook (eventually), and the $100 million company Sonos.

A $100 million company that only makes speakers? Yes.

Sonos? Why should I invest in this?

Sonos is a company known for its famous multiroom wireless speakers. It filed to go public on Friday.

Aside from a first look at the company’s financials, Sonos is on track to pass $1 billion in revenue for the first time this year.

The IPO filing contains both some interesting insights about the company’s customer satisfaction and its stellar financials that have huge ROI potential.

As of March 31, 2018, Sonos customers had registered more than 19 million speakers in 6.9 million households worldwide, according to Statista, meaning that on average every Sonos user has 2.7 speakers in its home.

In fact, the filing reveals that 61% of Sonos households are equipped with more than one speaker and that 4 in 10 of those households have at least three of the company’s products.

Moreover, customers who buy one Sonos product, buy an average of 1.4 additional devices within four years of the initial purchase, indicating a considerable degree of customer satisfaction.

Read: Microsoft’s Surface Go tablet to rival iPad’s struggling sales

Losing money in this investment?

Even though Sonos is apparently hitting the right note with its customers, potential investors should carefully consider whether to buy shares in the upcoming IPO.

Despite Sonos’ loyal customer base, the company is facing off against tech giants many times its size.

To make things worse, the likes of Apple, Amazon, and Google are not only Sonos’ main competitors, but the company also depends on them.

One of the significant advantages of Sonos’ system is the fact that users can play music from a variety of sources on their speakers.

Those sources include the streaming services of Apple, Amazon, and Google, who, if they decide to pull their services from Sonos’ platform, could deal their competitor a significant blow.

Specifically, Sonos is leveraging Amazon’s Alexa in a variety of speakers, as it seeks to build market share in the emerging space.

Sonos’ success in the smart speaker market could be crucial for determining Amazon’s strategy with its Echo speakers and instructive for companies considering working with the e-commerce titan as hardware or platform partners.

In the past year, Sonos released its first two voice assistant-enabled speakers: The Sonos One and Sonos Beam; both with support for Amazon’s Alexa.

Sonos risks relying on Amazon’s strategic decisions to continue its current course, which it acknowledges as a liability in its IPO.

Read: Weekend Tech-Talk: Foldable displays are almost a reality

A healthy relationship

But, while Sonos must consider the risks it faces in using a platform that’s developed and maintained by a competitor, the success of its voice-enabled efforts could be crucial for Amazon, according to BI intelligence.

The e-commerce leader has taken numerous steps to cultivate hardware partners to expand its voice assistant footprint.

Amazon has worked with some electronics companies and manufacturers, allowing them to build Alexa into devices ranging from lamps to thermostats to TVs, as well as other smart speakers just like Sonos has.

It’s also released reference development kits that partners can use to design devices that will feature Alexa. Meanwhile, Amazon’s recent moves in the smart speaker hardware space have been to expand the breadth of smart speaker form factors.

The company has debuted a wide variety of devices, with and without screens, in what seems to be an attempt to find what types of devices will resonate with consumers, while also furthering e-commerce purchases.

The top-selling Echo Dot, though, hasn’t been updated since October 2016. This all suggests that Amazon wants companies like Sonos to succeed, even as it continues to expand its ecosystem.

Amazon’s approach to smart speaker hardware seems to be similar to Google’s initial plan to Smartphone hardware with its Nexus line. The Nexus phones were intended to showcase the potential of Android-based Smartphone hardware and be a model for phone manufacturers to aim for and improve on.

Read: Dark social – the untapped opportunity

Money to be had

Since late 2016, Amazon has offered Alexa as a platform for partners to use in their hardware, while it develops flagship devices that show what the voice assistant is capable of.

Sonos is one of the companies that is following through on leveraging this platform in a polished high-end device and could serve to augment the spectrum of Alexa-enabled devices, providing the high-quality audio option that Amazon’s Echo lineup lacks.

This mutually beneficial arrangement could also show other companies how to create an Alexa-based smart speaker and expand the overall lineup of voice-controlled devices available to consumers.

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