Alibaba doubles down on smart speakers with $1.14bn investment

HONG KONG — Chinese technology conglomerate Alibaba Group Holding announced on Wednesday that it will invest 10 billion yuan ($1.41 billion) in the development of artificial intelligence-enabled smart speakers, a move aimed at cementing its leadership in an emerging and fiercely competitive market.

The Hangzhou-based company said the fresh funding will be used to advance its technology development and speed up an ongoing integration between its smart speaker and other business segments. For instance, shoppers can use the Tmall Genie, as Alibaba’s smart speaker is called, to watch a livestreaming presentation hosted by the company’s e-commerce site Taobao and place an order directly from the device.

“By tapping into Alibaba’s diverse ecosystem and cutting-edge technology, we are committed to bringing more unique experiences to our Tmall Genie users through enriched content and services,” Wei Ku, the head of the Tmall Genie team, said in a statement.

Part of the investment will also be allocated to help its business partners embrace smart devices, the company said. Global fast-food chain KFC, for instance, plans to offer a smart speaker-assisted dining experience with the help of Alibaba. Starting from the second half of this year, diners at more than 5,000 KFC outlets in China will be able to order their meals through smart speakers and pay via voice command, according to the statement released today.

Alibaba’s announcement comes as the Chinese smart speaker market is already on the rise. Roughly 45.9 million smart speakers were sold in the country in 2019, a 109.7% increase from a year earlier, according to global market intelligence firm IDC.

A staff member sits next to an Tmall Genie smart speaker during a media demonstration. Alibaba has big plans for the device, including integrating it more closely with its e-commerce services. 

  © Reuters

Market observers say much of that growth is fueled by subsidies from Chinese smart speaker makers. Alibaba’s cheapest smart speaker model once sold for as low as 89 yuan, while Baidu, China’s search engine giant and the second-largest smart speaker producer by market share, offered a model for less than 100 yuan.

“Chinese internet companies such as Alibaba and Baidu do not want to make money from selling smart speakers,” said Ethan Qi, a Beijing-based analyst with global consultancy Counterpoint Research. “Instead, they view the device as a critical doorway to connect with Chinese customers and to offer other services.”

For Alibaba, whose business empire covers everything from e-commerce to entertainment and media, this means allowing customers to use its smart speaker to watch videos produced by Alibaba’s streaming site Youku or listen to songs offered by Alibaba Music. Baidu users, meanwhile, can use its speakers to search for news and have it read out loud for them, rather than having to read it on a small smartphone screen.

For now, Alibaba is the industry leader, selling 15.6 million smart speakers in 2019, according to IDC’s estimates. But rivals are catching up. Baidu sold 14.9 million smart speakers last year, up 278.5% from the 2018 levels, the same data showed. Meanwhile, the number of smart speakers sold by Chinese smartphone vendor Xiaomi increased by 89.7% to 11.3 million units.

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