Amazon pioneered a new market potentially worth $10 billion (AMZN)
AP/Elaine Thompson
- Amazon's Alexa devices have the potential to bring in more than $10 billion in revenue by the year 2020.
- Sales of the devices, along with voice-enabled ordering from Amazon, bring a whole new business opportunity to the company.
- Watch Amazon's stock price move in real time here.
Amazon was one of the first to bring smart speakers to a mainstream audience with its Echo device, a decision that could generate a fresh $10 billion in revenue by 2020, according to Mark Mahaney, an analyst at RBC.
"With tens of millions of users and 20K+ skills, we see Alexa’s value prop as becoming increasingly powerful as awareness and ownership ramp," Mahaney said in a note to clients.
To get an insight into how big of a business Alexa devices can be, Maheny surveyed more than 2,000 people about their awareness of Amazon's Alexa and how they use the devices. Over the past nine months, survey respondents' awareness of Alexa devices grew by 12 percentage points to 89%. A total of 15% of respondents own an Alexa devices and nearly 60% of those owners use the device every day.
Amazon benefits when you buy an Alexa device, of course, but they can make even more money if users buy more products through voice interactions. Mahaney found that 15% of Alexa device owners use them to place orders on Amazon.
Mahaney thinks that a combination of voice-enabled sales, device sales, and revenue from the Alexa platform will generate $10-$11 billion in revenue for Amazon by 2020. About $5 billion of that will come from device sales, and $5-$6 billion will come from voice sales, Mahaney said.
"In terms of Platform revenues, nice things happen when you have a 100M+ installed base, which we believe Alexa can reach by 2019," Mahaney said.
With the holiday season in full-swing, devices powered by Alexa represent nine of the top 10 best-selling electronics products on Amazon. Mahaney is optimistic and rates the company an "outperform" with a target price of $1,200.
Amazon shares are up 52% over the past year.
Read more about Mahaney's predictions for the tech world in 2018 here.
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