Amazon’s strategy to generate revenue from its Alexa-enabled devices appears to have backfired, resulting in significant financial losses for the company. Between 2017 and 2021, Amazon reportedly lost over $25 billion on its Echo, Kindle, and other devices, according to the Wall Street Journal, which cited internal documents and sources familiar with the situation. Despite having hundreds of millions of customers, these Alexa-enabled Echo speakers are primarily used for basic functions like setting alarms rather than for making purchases on Amazon.
A former high-ranking employee expressed concerns about the direction of the company’s investment, highlighting that a considerable workforce has been allocated without achieving substantial results. In response to these challenges, Amazon CEO Andy Jassy is seeking solutions, including the introduction of a paid subscription option for Alexa. However, some engineers involved in developing this premium version doubt its potential effectiveness.
An Amazon spokesperson emphasized that the company prioritizes the value created for customers using its services, beyond just device sales. They stated that the Devices & Services division has been successful in establishing profitable ventures and is well-equipped for future growth.
On the artificial intelligence front, Amazon’s recently introduced AI-enhanced Alexa, unveiled in September, is reportedly not ready for rollout, as former employees noted a lack of sufficient data and access to essential chips. The company has shifted focus towards generative AI for its cloud computing segment, Amazon Web Services, leading to a deprioritization of the AI-enhanced version of Alexa.
In defense of its efforts, Amazon has countered claims from former employees, asserting that its Artificial General Intelligence team has access to the necessary chips and resources to fulfill its ambition of developing the ultimate personal assistant.