Amazon Alexa and IBM Watson Won The 2016 Voice Assistant Wars and Are Already Winning 2017

VentureBeat’s Khari Johnson made a pretty strong argument in late December that Amazon and Microsoft were the winners of the 2016 chat wars. However, I think he is using the wrong lens for evaluation.

If it’s chat in terms of messenger bots, then he may be right about Microsoft and wrong about Amazon, which has only a nascent presence there today. If he is including voice, Amazon certainly won the year on many criteria but Microsoft didn’t exhibit real user traction to justify consideration for a top spot.

His nod to Microsoft based primarily on the big developer community of 78,000 using its Bot Framework has some merit. Then again, we haven’t seen the fruits of those developers to the same extent that we have from the Facebook Messenger developer community that is less than half the size. Comparing either of these to Amazon Alexa is an apples-to-oranges situation today. In an earlier VentureBeat article, I suggested segmenting this market on two dimensions:

  • A B2C versus a B2B focus by the vendor and its developer community
  • A messaging versus voice based solution

If we focus on the coupling of voice and AI, the real winners in 2016 by a large margin were Amazon Alexa in the B2C category and IBM for B2B. Early data from 2017 seems to be reinforcing that conclusion.

The Case for Amazon Alexa Winning in B2C

The case for Amazon Alexa’s 2016 B2C dominance among voice assistants are manifold. Any reasonable forecast confirms that Amazon sold more Echo devices in 2016 than in the previous two years and some analysis based on Consumer Intelligence Research Partners (CIRP) and Amazon data suggests that the total user base grew by over 133%. Subsequent analysis by VoiceLabs and others concludes that the growth was much higher.

That is the demand side of the equation. On the supply side of new applications and devices for consumers, the number of Alexa skills (i.e. interactive voice applications) grew from just 130 in January to nearly 7,000 at the close of December and over 9,000 just six weeks later (10,000 if you include the skills that are specific to the UK and Germany). And, third-party developers ranging from Hyundai and GE to a host of startups all announced Alexa integration in 2016 followed by an avalanche of new Alexa-enabled devices at CES. Google announced the Google Home, a competing device along with integration into its new Pixel phone, but that just served to validate the market created by the Echo and the Alexa voice assistant. Google Home 2016 sales estimates of 500,000 devices is notable, but represents less than 10% of the Echo install base. Amazon was the clear B2C winner. No one else was close.

The Case for IBM Winning in B2B

IBM’s dominance in B2B oriented AI and voice solutions was equally distinctive. Again, we see a vendor that had taken technology out of the lab and is showing tangible progress. IBM announced several projects in 2016 with hospitals such as Cleveland Clinic and the UNC Lineberger Comprehensive Cancer Center. It also announced a new AI-driven medical imaging product developed with its recently acquired Merge Healthcare unit. That was complemented by announcements with Siemens, Quest Diagnositcs, Celgene, GM, BMW, Pearson, Lotte, Slack, Udacity, Staples and the list goes on.

IBM’s momentum has also increased since the beginning of 2017. Despite pausing its project at MD Anderson Cancer Center, IBM has announced at least seven new Watson partnerships and customers in healthcare in 2017 along with wins in cybersecurity, rail transportation and tax preparation. IBM’s Watson has traction with B2B end users and partners at a scale and scope that no other company currently matches.

Max Mansoubi of S-Labs pointed out in a recent LinkedIn discussion the classical distinction between digital assistants and digital advisors. The former does something for you while the latter offers insight enabling you to make better decisions. We see almost every company in the voice and AI space – with IBM and Alphabet’s DeepMind notable exceptions – focused on the digital assistant category. That makes sense. Most are focused on B2C applications where the assistant use cases deliver clear value. IBM biases toward the digital advisor category and that aligns well with many of the most pressing B2B use cases.

Everyone Else Was Just Positioning in 2016

Microsoft, Google, Samsung, and Facebook all commanded tangible media attention around their voice and AI initiatives in 2016. However, their tangible announcements around consumer or business adoption were lacking. The first two months of 2017 appears to be more of the same. That fact doesn’t mean these companies didn’t make progress. For example, Google Home may have less than 10% of Amazon’s installed base, but it is up from zero market share.

The less significant progress by these companies simply means they are in much earlier stages than Amazon and IBM which showed tangible customer and partner adoption in 2016 and have continued their momentum into 2017. For everyone else 2016 was about positioning. They were advancing their technology and products while grabbing enough mindshare so customers and the media would be looking for more in 2017.

This will be the year that competition really heats up and customers will see more choices from B2C and B2B vendors. I like the points that Mr. Johnson made about Microsoft’s progress in 2016 with developers and product development and these could serve as great assets in 2017. However, the evidence suggests that IBM made much more tangible progress. By evaluating the market from a B2C versus B2B perspective and distinguishing between chat and voice-enabled assistants, Amazon and IBM led the pack in 2016 and are still leading today by a big margin.