Amazon and Google likely sold smart speakers at a loss

Reuters reports Amazon and Google cut the pricing of their virtual assisant speakers so sharply over the holiday season that both companies were likely selling the units at a loss. Google's Home Mini and Amazon's Echo Dot were discounted to $29, a steep cut versus the usual $50 pricing.

By lowering the speakers to an "impulse buy" price point, Amazon and Google hope to get consumers hooked on the products. The low pricing also makes it harder for other companies to enter the market. Apple for example is still working on its $349 HomePod speaker, that device was supposed to ship in 2017 but got delayed to early 2018.

Amazon and Google, meanwhile, are eager to give consumers a taste of their respective digital assistants, Alexa and Google Assistant, at impulse-buy prices, hoping to lock in customers and profit from later sales of goods and data about buying habits.

The Home Mini and Echo Dot do not match the sound quality of the HomePod, but consumers may see less need for a superior, pricier speaker from Apple once they have a rival set up. Even the midlevel Amazon and Google devices were discounted to $79 over the holidays.

Analysts estimate the Echo Dot contains about $31 worth of parts, while the Google Home Mini has a bill of materials of around $26. After factoring in overhead, shipping and other expenses, but companies likely sold the speakers at a loss.