Amazon’s strategy to generate revenue from its Alexa-enabled devices appears to be failing, leading to significant financial losses for the company. Reports indicate that between 2017 and 2021, Amazon lost over $25 billion on its Echo, Kindle, and other related devices, according to internal documents reviewed by the Wall Street Journal.
Despite boasting hundreds of millions of users for its devices, the Alexa-enabled Echo speakers are primarily utilized for basic functions like setting alarms rather than for shopping on Amazon, diminishing the device’s commercial potential. A former senior Amazon employee expressed concerns about the company’s investment, 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 exploring a solution by introducing a paid tier for its voice assistant. However, some engineers involved in the development of this paid version are skeptical about its potential effectiveness.
An Amazon spokesperson emphasized the company’s focus on the overall value created for customers using their services rather than solely on device sales. They noted that the Devices & Services division has already established several profitable ventures for Amazon and is well-positioned for future growth.
Additionally, Amazon’s new AI-powered Alexa, which was showcased in September, is reportedly far from ready, according to former employees who pointed out issues with data access and the lack of necessary chips for running the new large language model. It has been suggested that Amazon may be prioritizing generative AI projects for its cloud computing division, Amazon Web Services, over the development of its AI-powered assistant.
Amazon has countered these claims, asserting that its former employees lack accurate information about its current efforts, stating that the Amazon Artificial General Intelligence team has access to both in-house Trainium chips and Nvidia GPUs. The company’s goal for Alexa remains unchanged: to create the best personal assistant in the world.