Are Echo and Alexa Actually Impacting Amazon’s Stock Price?

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Does Alexa affect Amazon’s stock price? originally appeared on Quora the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Brian Roemmele, Founder + Editor at Read Multiplex, on Quora:

The short answer is yes. However the possibility exists that we have not yet seen the Iceberg, let alone the tip of it.

  • The average Amazon Echo user increased purchases by ~10%
  • Fundamentally a vast majority of Amazon Echo users are Prime members
  • Average Amazon Prime user spends ~$1500 per year
  • Echo users increase sales at Amazon by ~$150 per yer
  • There are ~ 10 million Alexa enabled devices in early 2017
  • If half (5 million) Alexa enabled device owners spend ~$150 more per year Amazon experiences ~$750,000,000 new revenue

This additional income alone should have some material or psychological impact to Amazon stock. But there is more.

After the CES (Consumer Electronics Show) 2017, from LG Refrigerators to automobiles by Hyundai, Volkswagen and Ford to an array of other devices the expansion of the Amazon “store” will grow in a stunning way. This was called the Voice First CES for good reason, it is [1]. By the end of 2017 there may very well be over 1 billion Alexa enabled devices. It is clear not all users will be Prime members, however there is early data that suggest a material number will become members if they are not yet members.

The Alexa Everywhere strategy will allow Voice Commerce to expand in a far more accelerated pace than any other form of commerce we have observed in history. I call this the Voice First revolution and I spoke to this over the last decade. More information can be found here [2], [3].

Opportunities And Opportunities Potentially Lost

Voice Commerce and Voice Payments will bypass the current pay per click and pay per view advertising models from the old web infrastructure. Today Amazon has a stunning first mover advantage. However if payment companies can finally see the opportunity in Voice Commerce and Voice Payments there are many paths to be a material part of the Voice First future. I know how to get there but frankly not a single legacy or young company is listening.

Voice First, Voice Commerce Has No Place To Go But Up

In the end the material or psychological impact to Amazon’s stock will continue to soar as investors fully understand this is not a novelty but a true paradigm shift.

The Free #VoiceFirst Device

  1. Echo Dot wholesale cost is ~$25 + ~$10 per year Alexa wholesale hosting cost
  2. Amazon can offer a Free Echo and thereby increase revenue by ~$100 per year

If Amazon takes advantage of a Free Voice First device business model, a classic razor/razor blade model, the potential to get to 1 billion devices in ~18 months is quite possible. If this is the path, the impact to the stock price would be orders of magnitude higher.

This is a Voice First revolution:

Revolutions overthrow the current order.

[1] CES 2017: Voice is the next computer interface | ZDNet

[2] Brian Roemmele’s answer to Is Amazon Echo (and/or Siri and other voice assistants) actually useful, or is it just a novelty? Are usage and retention of these products growing?

[3] There is A Revolution Ahead and It Has A Voice

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

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