Amazon Alexa to Lose $10 Billion This Year
Amazon is going through the biggest layoffs in the company’s history right now, with a plan to eliminate some 10,000 jobs. One of the areas hit hardest is the Amazon Alexa voice assistant unit, which is apparently falling out of favor at the e-commerce giant. That’s according to a report from Business Insider, which details “the swift downfall of the voice assistant and Amazon’s larger hardware division.”
Alexa has been around for 10 years and has been a trailblazing voice assistant that was copied quite a bit by Google and Apple. Alexa never managed to create an ongoing revenue stream, though, so Alexa doesn’t really make any money. The Alexa division is part of the “Worldwide Digital” group along with Amazon Prime video, and Business Insider says that division lost $3 billion in just the first quarter of 2022, with “the vast majority” of the losses blamed on Alexa.
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Just about every plan to monetize Alexa has failed, with one former employee calling Alexa “a colossal failure of imagination,” and “a wasted opportunity.”
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The report says that while Alexa’s Echo line is among the “best-selling items on Amazon, most of the devices sold at cost.”
It’s not clear to me how it’s losing so much money if they’re selling the hardware at cost. Are they spending that much on the associated employees and server resources?
Via John Gruber:
What is (was?) Alexa about, strategically? I’ve often heard that the vague idea was that people would buy Alexa devices for obvious stuff (playing music, setting timers) but that eventually they’d starting using Alexa to buy stuff from Amazon — and thus wind up buying more stuff from Amazon than they would if they didn’t have an Alexa device in their house.
I find Alexa kind of annoying because it’s always trying to sell us stuff. The product recommendations are unhelpful, and we don’t want to subscribe to anything beyond Prime. But we keep using it because for basic questions, kitchen timers, and free music it works so much better than Siri.
Internally, the team worried about the quality of user engagements. By then Alexa was getting a billion interactions per week, but most of those conversations were trivial, commands to play music or ask about the weather. That meant less opportunities to monetize. Amazon can’t make money from Alexa telling you the weather — and playing music through the Echo only gives Amazon a small piece of the proceeds.
We are often told technology companies are reinventing the way many of us will purchase products, but I do not buy that narrative.
Previously:
Update (2023-11-20): Annie Palmer (via Hacker News):
Amazon is cutting “several hundred” jobs in its Alexa division, and axing several unspecified initiatives in the unit.
Todd Bishop (via Hacker News):
Dave Limp, the longtime executive in charge of the Devices & Services division, announced in August that he would be leaving the company. Former Microsoft executive Panos Panay was named his successor in September.
Amazon has made recent cuts in other departments including music and gaming.
I worked in the Amazon Alexa division. The level of incompetence coupled with arrogance was astounding. Many of the people running Alexa had been there since 2012. Its was tyranny by those who started in that organization first. Backstabbing, politics, bad engineering, nepotistic promotions. The scientists were so far behind, almost all models were off the shelf implementations pulled from Github. Huge amounts of capital flushed down the drain.
The flip side might be that Alexa was ahead of its time, and that the ML capabilities werent there. But I bet Alexa spent more than OpenAI by a huge margin. Amazon’s fundamental flaw is trying to solve innovative business problems with incremental improvement. This only works in operations heavy businesses, like retail and AWS. AWS is really just extremely competent operations on top of server management.
But I went to the [Google] executives at the time in charge and said look, this really isn’t going to be an assistant if it doesn’t have the APIs into services that users need to accomplish actual tasks. Sharing some information and changing the music isn’t what a butler does, a butler anticipates your needs and executes on them -- and we can’t do that until we have the APIs to anticipate and execute.
I was, of course, ignored, because in my naiveness at the time and I didn’t realize it didn’t matter what the assistant DID, it mattered what the narrative to investors was about its potential. So 2017 I/O Sundar announces the assistant and it looks great inside Allo, and it’s a great demo -- mission accomplished.
Now 6 years+ later, it’s a stagnant, overspent team across the space -- because why? Because it can’t do anything for users. All these years and billions later it still can’t do anything important -- it has no user journey.
And it took me equally as long to realize, that still doesn’t matter. FAANG has gotten so large that the stock bump that comes from narrative outpaces actual revenue from working products.
Previously:
- More Stack Overflow Layoffs
- Problems With Promotion-Oriented Cultures
- Incentives in Product Design and Development
Update (2024-07-30): Scharon Harding (Hacker News):
But about seven years after launching a rewards program to encourage developers to build Skills, Alexa's most preferred abilities are the basic ones, like checking the weather. And on June 30, Amazon will stop giving out the monthly Amazon Web Services credits that have made it free for third-party developers to build and host Alexa Skills.
Mihail Eric (via Dan Luu, Hacker News):
Amid this news, a former Alexa colleague messaged me: “You’d think voice assistants would have been our forte at Alexa.”
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The reality is Alexa AI was riddled with technical and bureaucratic problems.
A decade later, the payoff for Echo hasn’t arrived. While hundreds of millions of customers have Alexa-enabled devices, the idea that people would spend meaningful amounts of money to buy goods on Amazon by talking to the iconic voice assistant on the underpriced speakers didn’t take off.
Via Nick Heer:
According to Mattioli’s reporting, in a span of just four years — 2017 through 2021 — Amazon lost $25 billion on “devices”. According to SEC filings (PDF), this category would likely include things like Fire TV sticks, Ring doorbell cameras, Kindles, and Alexa products. It is unclear to me what portion of these losses can be specifically attributed to Alexa devices.
1 Comment RSS · Twitter
There was an issue with my WiFi so my kitchen Google home mini stopped working for a couple of days.
Made me realize how much I use it, and how I wouldn't go back to a combo of non voice controlled radio and timer.
If it broke I would replace it with another Google home mini. But others than doing trivial kitchen tasks I'm not using it for much. Definitely not shopping.
