Amazon’s strategy to profit from its Alexa-enabled devices has reportedly fallen short, resulting in losses of billions for the company.
The online retail giant incurred over $25 billion in losses across its Echo, Kindle, and other devices from 2017 to 2021, according to internal documents and sources familiar with the situation, as reported by the Wall Street Journal. Despite having hundreds of millions of users, the Alexa-enabled Echo speakers are primarily utilized for basic functions like setting alarms and accessing free applications, rather than for shopping on Amazon.
A former senior Amazon employee expressed concern, saying, “We worried we’ve hired 10,000 people and we’ve built a smart timer.”
In response to the situation, Amazon CEO Andy Jassy is seeking solutions and is reportedly planning to introduce a paid version of its voice assistant. However, some engineers involved in the development of this paid Alexa version are skeptical about its potential impact.
An Amazon spokesperson emphasized the company’s focus on the value created for customers through its services, rather than just device sales. They stated, “Our Devices & Services organization has established numerous profitable businesses for Amazon and is well-positioned to continue doing so going forward.”
In the meantime, the new AI-powered version of Alexa, which was showcased in September, is reportedly not ready for deployment, according to former employees. The company faces challenges in acquiring sufficient data and the necessary hardware, such as chips, to support the large language model (LLM) that is intended to enhance the virtual assistant’s capabilities. Additionally, Amazon is purportedly prioritizing generative AI development for its cloud computing branch, Amazon Web Services, over the AI-powered Alexa.
Amazon has countered claims from former employees, asserting they are misinformed regarding the company’s current AI initiatives and maintaining that the Amazon Artificial General Intelligence team has access to both in-house Trainium chips and Nvidia GPUs. The company’s objective for Alexa continues to be creating “the world’s best personal assistant.”