Digital Assistants: How Artificial Intelligence Competition is Undermining “Hipster Antitrust” – Part II
TagsAIAmazonAppleBusiness Modelscompetitiondigital assistantsdigital assistants seriesDisruptionDisruptive InnovationFacebookGooglemachine learningMicrosoftSamsungvoice
Yesterday’s post reviewed the burgeoning competition in the still relatively new artificial intelligence (AI) space of voice-powered digital assistants, ending with the observation that voice may be the cusp of a radical transformation replacing mouse and gesture-based digital interfaces with speech. This Part II post explores in more detail the impact of that digital assistant competition on the tech industry and its significant implications for competition policy and antitrust enforcement.
In light of the accelerating penetration and reach of AI, here are four key questions about this evolving market that should be most important to its consumer success and impact on competition.
1. What’s the End Game? Each of the major players — so far Amazon, Google, Microsoft, Samsung, Apple and soon to be Facebook — has a different business model and ecosystem. Some sell hardware, some software, others consumer electronic devices and some advertising targeted with digital information — all compete for the limited time and attention of consumers. Amazon sells much more than books and DVDs, including cloud computing services and now groceries, but the majority of its revenues come from retail, where it competes with the likes of Walmart. Hence, the intense competition among these companies in this new product category reflects the fact that despite different origins and business aims, the major technology developers and Internet services are now direct and substantial competitors. How each of these players responds to the growing demand for virtual voice assistants will have a direct correlation to who eventually wins or loses. Just like the mobile smartphone wars that saw iOS and Android triumph over the original market leaders in BlackBerry, Nokia and Windows Phone, tech companies have kicked off a huge competitive battle to ensure their virtual assistants stay relevant. Amazon may have an early lead, but is nonetheless working furiously on expanding Echo hardware options, Alexa functionality and third-party development. There is lots of capital investment involved here, so anticipating consumer demand, execution and innovation will likely be key to the futures of many in Silicon Valley and Seattle involved in AI research & development.
2. Will Digital Assistant Competition Derail Spurious Allegations of a Tech Cartel? Recode calls voice assistants “the next looming battle in the tech world” that “may completely devalue the platforms they run on.” What this suggests is that voice controls may become de facto digital gateways which end up tying together a wide range of smart and connected devices, from IoT to entertainment, not just today’s lighting, HVAC and home automation. That in turn could essentially commoditize PC and mobile operating systems, much as Netscape’s “middleware” threatened Windows two decades ago.
As one pundit explained, for instance, given Samsung’s “vast range of appliances, which are already sitting in consumers’ homes,” Samsung’s Bixby assistant “could help it lessen its long-running dependence on Google — even turning its one-time partner into little more than a ‘dumb pipe.’” From this perspective, digital assistants not only demonstrate how each of the largest tech firms is aggressively invading the others’ core markets, but that “platform” competition, already robust, may be just a glimmer of even fiercer competitive struggles to come. That should sharply reduce the superficial attractiveness of claims, as Project DisCo colleague Marianela Lopez-Galdos points out, that the large Internet players are somehow “too big” in today’s tech marketplaces. Indeed, some have predicted that digital assistants may radically reshape several industries, especially retail, advertising and media, in a “third apocalypse” transition from paper and physical goods to the Internet and then to voice.
3. Might “Baking In” Digital Assistants Lead to Market Leverage? The leading tech firms are today racing each other to make their virtual assistants available in as many different devices as possible…integrating them into everything from cars to home appliances. Some analysts believe this could lead to “virtuous network efforts that reinforce usage and lock in their dominance.” To work well, these technologies will operate on an existing Internet provider and tap into the account data and services it offers, which some critics suggest could lead to the assistant recommending services and products that “further the super-platform’s financial interests, rather than our own interests.”
The competitive market system has more trust in consumers than those critics. Lock-in is a debatable antitrust concept typically applied to aftermarket replacement parts. And some of the biggest players, like Samsung, have been slow to get their virtual assistants ready for prime time; Bixby, for example, was initially not enabled in Samsung’s Galaxy S8 smartphone in the United States.
But even if convenience and cross-device interoperability make consumers partial, or religiously loyal, to one tech firm, that doesn’t necessarily translate into economic or competitive dominance. In contrast to Siri, look at start-up Viv, for instance, which is betting that it can become “the intelligent interface to everything” with a Lord of the Rings-type voice-powered app that will “control your car dashboard or any of your smart home appliances.” Viv fervently believes that “no one company in the world has the resources to plug in all the different services,” which suggests it is far too early to assert that digital assistants could ultimately prove to be a means of securing or maintaining market power in the tech industry.
4. What Do Digital Assistants Mean for Antitrust Market Definition? After the landmark EU antitrust fine on Google for “manipulating” comparative shopping search results, the company responded by reiterating its argument that other major Internet services all compete in the search “market.” That’s a point buttressed by the rise of digital assistants, which epitomize the changing nature of technology markets and the relentless drive of Internet search to achieve more focused and personalized replies.
Because “search is the key driver in digital assistants,” their growing acceptance will increasingly blur the lines between search engines, shopping sites, smartphone apps and websites. That may not help Google now in its compliance with and appeal from the EU action, but over the longer term — which of course may be very short in real life — the malleability of market boundaries and aggressive AI competition among online services should help rebut claims that not only Google, but Facebook and Amazon as well, are somehow illegal monopolies. Indeed, if voice eventually becomes a more ubiquitous interface to digital information than PC or mobile operating systems, as well as apps, many of the assumed antitrust “markets” in the technology industry will be very ripe for re-examination.
Some 15 years ago — a lifetime in tech circles — this author represented a speech-to-text startup that wanted to create a “voice dial tone” product for telephone companies. That venture was met with cultural, regulatory and legal resistance, and so the company moved on to lower-hanging fruit, like the ever-present (and annoying) voice prompts used in customer service automated phone systems. Today, that idea for voice-activated communications is not only no longer far-fetched, it is here with Amazon Echo’s IP communication feature, dubbed “Alexa Calling,” and a new capability of Google Home supporting free phone calls to landlines and cellphones.
That in itself is a powerful illustration of the disruptive impact digital assistants have already had in the tech space. More importantly, it is reflective of a broader shift in industry competitive dynamics. Technology facilitates disintermediation, which in turn puts pressure on CEOs (even in concentrated markets) to “disrupt your industry, or else.” Venerable General Electric told the Wall Street Journal that “ten years ago, innovation was based on features and functions. Now it’s about your business model and transforming your industry… It’s a battle to the death.” Nowhere are these pressures and risks more evident than in the emerging market for virtual digital assistants.