Amazon’s strategy to generate revenue from its Alexa-enabled devices has reportedly backfired, resulting in significant financial losses for the company. According to a report by the Wall Street Journal, the online retail giant lost more than $25 billion on its Echo, Kindle, and other devices from 2017 to 2021, based on internal documents and insights from unnamed sources.
Despite boasting a user base of hundreds of millions, it appears that Amazon’s Echo speakers are primarily utilized for simple tasks such as setting alarms and using free applications, with limited engagement in shopping on the platform. A former senior Amazon employee expressed concerns about the investment in human resources, reflecting a sentiment that their efforts may have led to the creation of a “smart timer” rather than a revenue-generating service.
In response to these challenges, Amazon CEO Andy Jassy is reportedly seeking solutions and is set to introduce a paid subscription tier for its voice assistant. However, some engineers involved in the development of this paid version have voiced skepticism about its potential impact on the company’s profitability.
An Amazon spokesperson emphasized the focus on the value delivered through customer interactions with their services, beyond just device sales. They stated that the Devices & Services division has achieved several profitable ventures and is poised for future success.
On another front, the new AI-driven version of Alexa, which was showcased in September, is reportedly still in development and lacking readiness, according to former employees. The company faces challenges in obtaining sufficient data and essential hardware, such as the chips necessary for operating the advanced language model supporting the upgraded assistant. Moreover, Amazon has shifted its priorities to enhance generative AI capabilities for its cloud computing segment, Amazon Web Services.
In response to concerns raised by ex-employees, Amazon asserted that their claims regarding the current state of Alexa AI are inaccurate, asserting that the Amazon Artificial General Intelligence team has access to the necessary in-house Trainium chips and Nvidia GPUs. The company reaffirmed its commitment to its goal of creating the world’s best personal assistant.