Amazon’s strategy to profit from its Alexa-enabled devices appears to have backfired, leading to significant financial losses for the company. According to a report by the Wall Street Journal, Amazon incurred over $25 billion in losses from its Echo, Kindle, and other devices between 2017 and 2021, based on internal documents and insights from anonymous sources.
Despite having a large customer base, many users utilize the Alexa-enabled Echo speakers primarily for basic functions like setting alarms or using free applications, rather than making purchases on Amazon. A former senior employee expressed concerns over the situation, stating, “We worried we’ve hired 10,000 people and we’ve built a smart timer.”
In response to these challenges, Amazon CEO Andy Jassy is reportedly pursuing solutions, including the introduction of a paid tier for its voice assistant. However, some engineers involved in developing this paid version have expressed skepticism about its potential effectiveness.
An Amazon spokesperson emphasized the company’s focus on delivering value through its services beyond just device sales, noting that the Devices & Services division has established several profitable businesses and is well-positioned for future success.
Additionally, Amazon has recently introduced a new AI-powered version of Alexa; however, former employees have indicated it is still not adequately prepared for rollout. The company reportedly lacks sufficient data and the necessary chips to support the large language model required for the new iteration of its virtual assistant, as reported by Fortune. Amazon has also allegedly shifted its priorities to concentrate on generative AI developments for Amazon Web Services.
Amazon has pushed back against claims made by former employees, asserting that their understanding of current Alexa AI efforts is flawed and that the Amazon Artificial General Intelligence team has access to essential resources, including proprietary Trainium chips and Nvidia GPUs. The company reiterated its commitment to creating the best personal assistant in the world.