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OK Google, meet Alexa: Interoperability emerges as key antitrust issue

Thus far, Google has blocked voice assistant interoperability, but a representative signaled this week that the company's stance could evolve.

Eddie Lazarus at the hearing

Eddie Lazarus, Sonos's chief legal officer, said that voice interoperability is only one of a number of issues Sonos wants regulators to address.

Photo: Anna Moneymaker/Getty Images

Sonos Chief Legal Officer Eddie Lazarus came to Washington on Tuesday to demand legislative action against Google and Amazon. He walked away with an informal invitation from Google's senior public policy director, Wilson White, to talk things over.

"I already [emailed] Wilson," Lazarus told Protocol following a subcommittee hearing attended by both men. "If he's serious, we're going to go up there and do it."

The issue that led to White's unexpected gesture — in addition to facing off in Washington, the two companies are currently battling each other in court over alleged patent infringement — is voice assistant interoperability.

Google has long told device makers that it won't allow them to run the company's Google Assistant if they simultaneously offer access to competing voice assistants. For Sonos, this means that its customers have to choose between making Amazon's Alexa or the Google Assistant the default voice assistant for its microphone-equipped smart speakers.

That's not how the company would like to handle this issue. Sonos has developed technology that allows the concurrent use of multiple voice assistants, effectively leaving it to end users to choose whether they call on Alexa or the Google Assistant to handle certain tasks. That way, someone could ask Google for the weather, and then tell Alexa to add something to their Amazon shopping list, simply by using different wake words.

"Google contractually prohibits us from using that technology," Lazarus told lawmakers Tuesday. "You can't mix and match between the big companies."

Pressed by Sen. Amy Klobuchar on the issue, White defended Google's approach. "We are trying to balance the interoperability with other things we care about, which is the user experience, [...] privacy, security," he said.

White admitted that Google is allowing two simultaneous assistants on select Samsung phones, but implied that this wasn't easily replicable for smart speakers. "There are some technical challenges around having two voice assistants that are listening at the same time," he said.

Lazarus disagreed. "We have the technology that solves the problems that he described," he said, adding that Sonos had offered to demonstrate it to Google in the past, and had in fact shown it to regulators around the world.

This gave White an opening for his surprisingly public overture. "Early in my career I was an engineer, so I'd love the opportunity personally to see the demo," he said. White also signaled that Google's official position on the issue could change. "This will evolve," he said. "We will get to a place where we are bringing more innovation to consumers."

It's worth noting that not all tech companies are as protective of their voice assistants as Google. Amazon in particular has been a proponent of a more open approach; the company founded the Voice Interoperability Initiative to promote solutions similar to that developed by Sonos.

However, Lazarus suggested that this was an easy position for Amazon to take, given Google's refusal to play ball. "Because of Google's stance, Amazon's Voice Interoperability Initiative is an onramp into the Amazon ecosystem," he said.

Lazarus also told Protocol that voice interoperability is only one of a number of issues Sonos wants regulators to address. Other points of contention brought up during Tuesday's hearing included tech companies selling smart home products below cost, and allegedly pressuring smaller companies to give up trade secrets in order to integrate with their smart home platforms. These issues may be much harder to resolve than whether Alexa and Google Assistant can be accessed concurrently.

"This is an easy one, but one that would be great for consumers," Lazarus said.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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