Make your robot smart, but make it unique

After a long hiatus, Sony brought back its robot dog Aibo last week to much fanfare. Aibo is now equipped with myriad sensors and cloud-powered artificial intelligence that allows the robo-pet to detect human emotions. As the AI learns what users like and don’t like, Aibo adapts how it behaves. Following the release of this news, Sony’s shares rose 11 percent, the Wall Street Journal reported.

It’s an exciting time to be alive, and an even more exciting time to be working in robotics. Unfortunately, we’re not headed for a robot-filled utopia anytime soon. Sony is selling Aibo for 198,000 yen, which is more than $1,700. The cloud service that enables Aibo’s smarts also costs about $25 per month.

The robotics market as a whole is in good shape. Spending on robotics is expected to reach $188 billion by 2020, according to IDC. Many companies are pumping cash into making devices smarter because that’s where the real money is.

Creating smarter robots, drones or other vehicles and devices often means choosing whether to go with an existing cloud service provider like Amazon’s ubiquitous Alexa or building one from scratch. The latter strategy is far riskier, but the rewards are much higher if a company is successful. The so-called frightful five—Amazon, Apple, Facebook, Google and Microsoft—won’t give up their stranglehold on the market so easily, but niche AI products have a market.

(Data: Tractica, Image: Statista)

Just this week WIll.i.am’s startup I.am+ revealed to Reuters that it raised $117 million in new venture capital, perhaps thanks to its newly announced voice assistant designed for customer service. Will.i.am has the advantage of being a well-known figure as a musician and member of the Black Eyed Peas, but plenty of startups with promise can build their own VC warchest. Several startups at the Startup Launchpad show this year also provided their own cloud services, recognizing the importance of having certain services and data handled in-house.

This is probably part of Sony’s thinking, as well. Given the price of the newly-refreshed Aibo, the product is niche enough that it doesn’t need an AI assistant that consumers are already familiar with. The familiarity of Alexa, along with its open APIs, has made it a favorite among startups and manufacturers. Alexa is seemingly in everything these days.

The flexibility of Alexa isn’t everything, though. It helps adoption, but most users in the U.S. are still more familiar with Google Asistant, Apple’s Siri and Microsoft’s Cortana, because those are the digital assistants that come pre-installed on the smartphones and computers people use every day.

There’s room for all kinds of different AI and digital assistants, though. By 2020, shipments of household robots are projected to reach 19.3 million units, according to a report from Tractica. Toy and educational robot shipments will reach 11.9 million units. That’s up from 4.3 million and 2.3 million in 2015 respectively. Toys are also slowly growing as a proportion of the consumer robotics market, climbing from 35 percent to 38 percent of shipments during that period.

(Data: Tractica, Image: Statista)

In both of these markets, robots are getting smarter. Roombas are mapping houses and toy robots are having conversations with kids and teaching them how to code.

Does every robotics company need its own in-house AI? Not necessarily. Many startups, especially in China, are happy to rely on Amazon or another company to imbue their hardware with intelligence. Any company relying solely on its hardware for revenue, however, will find it hard to compete.

Hardware is a notoriously low-margin business. Hardware startups find the most success by marrying good hardware with compelling software and services. Increasingly, that means startups are spending what money they have to build their own smarts.

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