Amazon’s strategy to profit from its Alexa-enabled devices appears to have fallen short, resulting in substantial financial losses for the company. Reports indicate that from 2017 to 2021, Amazon incurred over $25 billion in losses associated with its Echo, Kindle, and other associated devices. This revelation comes from internal documents and insights from sources familiar with the situation, as reported by the Wall Street Journal. Despite boasting hundreds of millions of customers, the primary use of Alexa-enabled Echo speakers has been for tasks like setting alarms rather than driving sales on Amazon’s platform.
A former senior employee expressed concerns about the company’s investments, 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 seeking solutions, with plans to introduce a subscription-based tier for Alexa. However, some engineers working on this project have expressed skepticism about its potential impact.
An Amazon spokesperson responded by emphasizing the importance of customer value derived from their services, rather than just device sales. They stated that the Devices & Services organization has successfully established profitable business segments and is well-equipped for future success.
On another front, Amazon’s ambitious AI-driven version of Alexa, showcased recently, is reportedly not ready for deployment according to former employees. They mentioned issues with data availability and the necessary hardware required to support the advanced language model. Meanwhile, the company has decided to prioritize generative AI development for its cloud services division, Amazon Web Services, over the new Alexa project.
In defense, Amazon has contested claims made by its former employees, asserting that the Amazon Artificial General Intelligence team has sufficient access to both their proprietary Trainium chips and Nvidia GPUs. The company reaffirmed its objective to develop the “world’s best personal assistant” through Alexa.