Amazon is losing money on its Echo smart speakers. This has been an open secret since Alexa got here into existence. It is the product of a bait-and-switch tactic that only an organization the scale of Amazon can get away with for a decade.
Of course, selling hardware at a loss could be an efficient strategy. Think of printers and razors that gain a foothold in firms' homes and make up for the loss with ink cartridges and blades, respectively.
From a saturation perspective, Amazon’s strategy could be considered successful. At the start of the 12 months, founder Jeff Bezos claimed that Alexa is now present in 100 million homes on 400 million devices.
However, the financial realities paint a really different picture. According to a recent report within the Wall Street Journal, Amazon’s device division lost an incredible $25 billion within the five-year period between 2017 and 2021. The Alexa department allegedly lost 10 billion US dollars in 2022 alone.
At a certain point, a loss-making offer simply becomes a loss. This reality collapsed in late 2023 when several hundred were laid off from the Alexa division. Eleven-figure annual losses, coupled with a poor macroeconomic forecast, are an unsustainable situation even for a corporation with annual sales of over $600 billion.
Alexa isn't the one smart assistant that has fallen back all the way down to earth in recent times. Along with offerings like Bixby and Cortana disappearing entirely, consumer enthusiasm for Google Assistant and Siri has also waned.
In recent months, nonetheless, each Google and Apple have made it clear they're not ready to offer up the ghost. Siri took center stage at WWDC in June, when Apple breathed recent life into the brand because of its recent Apple Intelligence initiative. Google also confirmed this week that the assistant is getting a Gemini-powered boost in the house.
A 2021 Bloomberg report found that despite Alexa’s popularity Most queries concern certainly one of the next three tasks:: Play music, control lights and set timers.
A former Amazon executive put it much more bluntly to the WSJ: “We hired 10,000 people and developed a wise timer.” Given all of the criticism Alexa has received over the past decade, this criticism is probably essentially the most profound.
Although the corporate continues to release Echo devices, including an improved Spot announced last month, it has taken its foot off the gas. No doubt there was a whole lot of soul-searching happening within the spheres. Much like Google and Apple, Amazon sees generative AI as a lifeline for Alexa.
The 10,000-person timer's problem stems from devices not meeting customer expectations. Hiring outside developers to develop skills is an element of a bigger initiative to make Alexa more useful. Amazon has also tried to enhance the assistant's conversational capabilities over time.
In this respect, generative AI is a game changer. Platforms like ChatGPT have demonstrated incredible capabilities in natural language conversation. Late last 12 months, Amazon offered a preview of Alexa's generative, AI-powered future.
“We've at all times viewed Alexa as an evolving service and have been continually improving it since its launch in 2014,” the corporate wrote. “A protracted-standing mission has been to make a conversation with Alexa as natural as a conversation with one other human, and with the rapid evolution of generative AI, what we envisioned is now well close by.”
November marks ten years for the reason that announcement of Alexa and Echo. There couldn't be a greater time to unveil an image of what the subsequent ten years might seem like. Whether the assistant gets one other decade depends partly on how the subsequent few months unfold.
