Brief:

• Apple agreed to buy Pullstring, a startup that enables the design and publishing of voice apps, as the tech giant seeks to compete more effectively with Amazon and Google in voice-powered apps, per a report from Axios citing multiple sources. A group of former Pixar executives, including CTO Oren Jacob, founded Pullstring in 2011 to make interactive voice apps for toys before expanding into Internet of Things (IoT) products, 

• Pullstring makes software tools for voice apps, and artificial intelligence to power those experiences and toys such as Mattel’s talking Barbie and Thomas the Tank Engine toys, per TechCrunch. The company was criticized in 2015 for creating “child surveillance devices,” but said its products had security features to protect privacy.

• Apple also hired Sam Jadallah, the former CEO of smart-lock company Otto that shut down about a year ago, to lead its home initiatives, including voice-powered devices like the HomePod smart speaker. Jadallah also worked for Microsoft for more than 10 years, per CNBC.

Insight:

Pullstring's technology may help Apple to strengthen ties with app creators and gain broader developer support for Siri, which is critical for offering voice-enabled services that will encourage consumers to use its virtual assistant. The acquisition comes as the tech giant works to lessen its reliance on the iPhone, whose sales fell 15% in the final three months of last year. Apple pioneered voice-enabled technology with the introduction of its Siri virtual assistant more than seven years ago, but the company has fallen behind Amazon and Google in voice-powered platforms like smart speakers that work as hubs for connected homes. Amazon has a 70% share of the U.S. smart-speaker market with its Echo devices, according to Consumer Intelligence Research Partners. Google Home trails with 24% of the installed base while Apple's HomePod is a distant third with only 6% of the market. Apple risks losing out on the growing market for IoT devices and services without a stronger presence in smart speakers.

Apple in the past year has restructured its management team to reflect bigger investments in budding technologies like AI that powers Siri. In the past few months, Apple promoted AI head John Giannandrea, a former Google technologist, to its executive team while pushing out top Siri voice-assistant executive Bill Stasior and retail chief Angela Ahrendts, per The Wall Street Journal. Apple needs to expand Siri's reach into homes amid strong competition from Amazon Alexa and Google Assistant. Both those platforms already have thousands of voice-powered apps. 

The acquisition of Pullstring follows Apple’s purchase in December of U.K. startup DataTiger to boost the digital marketing for its fast-growing services business that includes Apple Music, Apple Pay and the App Store. DataTiger’s AI-driven marketing capabilities could help Apple customize messaging amid a bigger investment in content. Apple plans to spend more than $1 billion on original shows this year to compete with rivals like Amazon, whose on-demand video streaming service is packaged with a subscription to Amazon Prime. Apple may bundle video into a monthly subscription plan that includes cloud storage, people familiar with the plans told the Journal. The company also is in talks with news organizations about offering a digital newsstand for $10 a month.