Amazon’s strategy to generate revenue through its Alexa-enabled devices has reportedly fallen short, leading to significant financial losses for the company. Between 2017 and 2021, Amazon incurred losses exceeding $25 billion from its Echo, Kindle, and various other devices, as revealed by the Wall Street Journal, which cited internal documents and sources familiar with the situation. Despite boasting hundreds of millions of customers for its devices, the Echo speakers are primarily used for tasks like setting alarms and accessing free applications, rather than driving purchases on Amazon.
Concerns about the effectiveness of their approach were echoed by a former senior employee at Amazon, who remarked, “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 exploring potential solutions, prompting the company to introduce a paid tier for its voice assistant. However, some engineers involved in developing this premium version of Alexa have expressed skepticism about its potential impact.
An Amazon spokesperson stated, “We’re focused on the value we create when customers use our services, not just when they buy our devices,” and highlighted that the Devices & Services organization has established several profitable ventures for the company and is prepared to continue doing so.
Furthermore, the launch of Amazon’s new artificial intelligence-enhanced Alexa, showcased in September, seems to be lagging behind schedule, according to former employees. The company reportedly lacks sufficient data and access to the necessary chips to implement the advanced language model driving the new iteration of its virtual assistant. Instead, Amazon has shifted its focus away from AI development for Alexa to prioritize generative AI for its cloud computing division, Amazon Web Services.
In response to these claims, Amazon asserted that former employees are misinformed about its ongoing AI endeavors and confirmed that the Amazon Artificial General Intelligence team has access to both in-house Trainium chips and Nvidia GPUs. The company’s objectives regarding Alexa remain unchanged, with a commitment to create the leading personal assistant in the industry.