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Forget the iPhone, We Just Want to Talk to Our Echo

Amazon's Echo is hot, while Apple's iPhone most certainly is not.

Those are just two of the takeaways in Mary Meeker's annual report on internet trends. The partner at the Kleiner Perkins Caufield & Byers venture capital firm revealed her findings during a presentation at the Code Conference, a get-together for the sort of people who very much wants to hear what a major player at a Silicon Valley venture capital firm has to say about the sense of the world.

Meeker's presentation — all 213 slides of it — covers a lot of ground, on everything from global Internet growth (it's slowing down), photo sharing (we're doing a lot of it, particularly on Facebook and its assorted properties) and messaging apps (we use a lot of those, too). But it's the grim forecast for Apple and optimistic outlook for Amazon that's gained the lion's share of attention from Meeker's report.

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Specifically, Meeker forecasts a drop in iPhone sales during 2016. That would be the first time sales of Apple's smartphone haven't grown year-over-year. That same slide predicting a gloomy 2016 for the iPhone was juxtaposed with one forecasting continued growth for Amazon's voice-controlled Echo speaker, with Meeker estimating that sales topped 1 million units during the first three months of 2016. (Amazon hasn't announced sales figures for its speaker.)

The iPhone sales drop shouldn't surprise anyone who's been following the news. Apple reported falling phone sales during its last quarterly earnings announcement, and forecasts for the current quarter suggest that's not a one-time aberration. Apple says a large number of iPhone users upgrading to the iPhone 6 and 6 Plus, producing record sales that have proven awfully hard to top.

Things are tough all over for smartphones, though. Meeker's internet trends report noted that growth in smartphone unit sales is slowing year-over-year, as is growth in smartphone users around the globe. The problem: Most people have smartphones these days, so sales growth from first-time smartphone users is getting harder to come by. That may help explain a report in Nikkei Asian Review this week that claims Apple is looking at slowing down the pace of major upgrades to its iPhone lineup, as there aren't as many major enhancements to make as their used to be.

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Still, it would be a mistake to completely write off the iPhone as yesterday's news. All those people who upgraded to the iPhone 6 and 6 Plus a year ago are going to need new phones eventually, even if this fall's iPhone update is increasingly looking like a minor one. Apple could be timing its next major overhaul for 2017 with OLED displays and a new enclosure, which could lead to a spike in upgrades that restore some of the phone's luster.

As for Meeker's optimistic outlook for Amazon's Echo, that seems driven by a belief that we're increasingly turning to voice-powered products to do our biding. Nearly two thirds of smartphone owners in the U.S are using voice assistants, Meeker's report says, as talking to a device turns out to be much simpler than typing on it, especially as voice-recognition has improved.

Take Alexa, the voice assistant that gives the Echo much of its appeal. Last September, according to Meeker, Alexa boasted 14 Skills that tied into third-party services or apps; that figure has since reached 950.

Amazon's competitors are noticing, as Google is coming out with an Echo rival called Google Home and Apple is rumored to be working on something similar built around its Siri assistant. But while voice-powered products are undeniably on the rise, it will be interesting to see if their popularity continues, as users become more aware of the privacy implications of having a device that's listening to them all the time.