Amazon’s initiative to generate profit from its Alexa-enabled devices has reportedly backfired, resulting in substantial financial losses for the company. According to internal documents and sources familiar with the situation, Amazon suffered over $25 billion in losses from its Echo, Kindle, and other devices between 2017 and 2021. Although the tech giant boasts hundreds of millions of customers using these devices, it appears that users primarily employ the Alexa-enabled Echo speakers for basic functions like setting alarms, rather than making purchases through Amazon.
One former senior employee expressed concerns about the effectiveness of their investment, noting the paradox of hiring thousands of staff while developing a product that may not align with customer purchasing behavior.
In light of these challenges, Amazon’s CEO Andy Jassy is searching for solutions and is reportedly considering a paid subscription model for Alexa. However, some engineers working on this version have expressed skepticism about its potential success.
An Amazon spokesperson emphasized the company’s focus on the value created for customers using their services, not solely through device sales, noting that the Devices & Services division has established several profitable avenues for the company.
On another front, Amazon’s new AI-powered Alexa, which was showcased in September, reportedly faces significant developmental hurdles. Former employees argue that the company lacks sufficient data and access to the necessary hardware to support the advanced language model behind the new assistant. Furthermore, it has been suggested that Amazon has shifted its priorities to concentrate more on generative AI for its cloud division, Amazon Web Services.
In response, Amazon has dismissed the claims from former employees as inaccurate and stated that its Artificial General Intelligence team has the required resources, including proprietary Trainium chips and Nvidia GPUs, to advance its Alexa AI objectives. The company’s overarching goal remains to create the premier personal assistant in the market.