The voice assistant Alexa is called a “colossal failure” – $3 billion in losses for Amazon’s technical division and $10 billion by the end of the year

The voice assistant Alexa is called a

Amazon is currently going through the biggest layoffs in the company’s history, with plans to cut about 10,000 jobs. One of the most affected areas was the Alexa voice assistant. Business Insider writes about this, detailing the “rapid collapse of Amazon’s voice assistant and hardware division.”

Alexa has been around for 10 years, but the service has never become a source of stable income – in fact, it does not make any money at all. The Alexa division is part of the Worldwide Digital group of companies, which also includes Amazon Prime video. The division lost $3 billion in the first quarter of 2022 alone, with Alexa accounting for the vast majority of the loss. Business Insider claims that Amazon’s hardware team could lose $10 billion this year.

A number of current and former employees of the company’s hardware department described the situation as a crisis. Almost all plans to monetize Alexa have failed, with one former employee calling Alexa a “colossal failure” and a “missed opportunity.” This month’s release is the end result of years of trying to turn things around. The service was given a big “head start” at the start, it was the “favorite project” of former CEO Jeff Bezos. In 2019, a general crisis meeting was held to try to resolve the Alexa monetization issue, but it was unsuccessful. By the end of 2019, Alexa faced a hiring freeze, and Bezos began to lose interest in the project around 2020.

Alexa Amazon Echo

Although the Alexa Echo line is among Amazon’s best-selling products, most of the devices are sold at cost. An internal document describes Alexa’s business model as follows: “We want to make money when people use our devices, not when they buy our devices.”

The hope was that people would start buying things on Amazon using voice requests. However, few people agreed to trust II spending money – as a rule, people prefer to choose the product themselves. By the fourth year of the experiment, Alexa was receiving a billion interactions a week, but most of the conversations were trivial commands that could not be monetized – like turning on the lights or telling about the weather.

Amazon has also tried to work with companies to train Alexa – a voice command helps buy a Domino’s pizza or call an Uber, for which Amazon receives a deduction. By 2020, the service team stopped publishing sales targets due to its limited use. The team also tried to portray Alexa as passively incentivizing users to spend money on Amazon, but research showed that the correlation was negligible.

At the same time, Alexa is in third place in terms of popularity among voice assistants: Google Assistant has 81.5 million users, Apple’s Siri – 77.6 million, and Alexa – 71.6 million.

Are voice assistants profitable?

If the third most popular voice assistance service with tens of millions of users is making huge losses, the question arises, are such services profitable at all? Last month, Google announced virtually identical problems with the Google Assistant business model. It’s impossible to monetize simple voice commands that most consumers really want to do. All of Google’s attempts to monetize Assistant through display ads and corporate partnerships have failed. Because the product was eating up server time and causing heavy losses, Google responded in a similar fashion to Amazon by cutting the division’s resources.

While Google and Amazon compete in a price war, offering services at cost, Apple’s plans to create smart columns are more focused on direct profit. HomePod’s starting price of $350 was much higher than the competition, but it was a more sustainable business model. However, Apple’s device as a whole did not appeal to consumers and the project was canceled in 2021. A mini version is still sold for $99, and Apple does not give up on the idea of ​​a large speaker, although the prospects for the development of the direction are vague.

Steve Rabuchin: “Amazon is making a bullish bet on Alexa”

Source: Ars Technica

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