Amazon’s strategy to generate revenue from its Alexa-enabled devices has reportedly backfired, resulting in significant financial losses for the company. From 2017 to 2021, Amazon lost over $25 billion on its Echo, Kindle, and other devices, according to a report from the Wall Street Journal, which referenced internal documents and unnamed sources familiar with the situation. Despite having hundreds of millions of customers, the primary functions of Alexa-enabled Echo speakers appear to be setting alarms and utilizing various free applications, rather than facilitating purchases on Amazon.
A former senior Amazon employee expressed concerns about the situation, noting that the company had expanded its workforce by 10,000 employees while primarily creating a “smart timer.”
In response to these challenges, Amazon CEO Andy Jassy is exploring solutions and is said to be planning to launch a subscription service for Alexa. However, engineers developing this paid version have expressed skepticism about its potential effectiveness.
An Amazon spokesperson asserted that the company prioritizes the value created for customers using its services, not solely device sales. They mentioned that the Devices & Services division has established several profitable ventures for Amazon and is poised for continued success.
On another note, Amazon’s new AI-enhanced version of Alexa, showcased in September, is reportedly not yet completed, according to former employees. Concerns have been raised about the company’s lack of sufficient data and access to necessary chips for running the advanced language model intended for the assistant. Furthermore, it has been reported that Amazon is shifting its focus towards developing generative AI for its cloud computing service, Amazon Web Services, rather than advancing the AI version of Alexa.
In response to the criticisms from former employees, Amazon has stated that these claims are inaccurate and misinformed, emphasizing that the Amazon Artificial General Intelligence team has the required resources, including in-house Trainium chips and Nvidia GPUs. The company’s objective for Alexa continues to be the creation of a premier personal assistant.