According to recent reports published by Business Insider, The Guardian, and Ars Technica, Alexa is already considered a complete failure by the company's CEO, Jeff Bezos . Although 2022 is drawing to a close, Amazon's voice assistant has failed to meet the profitability expectations set at its inception. On the contrary, it appears poised to incur a €10.000 billion loss for the company this year.
Let's remember that Amazon Echo debuted in 2014 and was hailed as the company's first real success in terms of hardware manufacturing. Unlike other devices, the version conceived by Bezos featured a smart speaker: Alexa . The company quickly sold over 100 million Alexa-enabled units, but now it's considered a major disappointment for users . Far from being a flagship product, it's estimated to be a financial disaster for the Amazon CEO.
Amazon expected Alexa to be the next iPhone.
In 2011, Apple caused a sensation in the tech industry with the introduction of one of the first voice assistants, Siri, launched on the iPhone that same year . Amazon immediately sought to gain ground in the same market and, three years later, unveiled a completely new class of devices: a smart speaker powered by Alexa . In doing so, it hoped to become the next iPhone for the industry.
At one point, Jeff Bezos's company sold over 100 million Alexa-enabled devices . The American entrepreneur and magnate's main objective was to encourage people to buy things on the site through the Echo device. Therefore, he sold it at a low price, making Alexa an inexpensive and uncomplicated —in other words, very basic—device.
“Alexa has overcome uncertainty and economic difficulties in the past, and will continue to do so. We have great opportunities ahead in our most recent initiatives, which we have been working on for several years, and we are committed to continuing.”
Jeff Bezos, CEO of Amazon.
Thanks to the initial sales of Amazon's Alexa-enabled devices, which exceeded company expectations, Bezos envisioned Alexa and voice computing becoming a platform . Therefore, he created an application store called "Alexa Skills" to foster greater innovation and, at the same time, compete with the App Store.
In addition, Amazon decided to launch its own products featuring Alexa. The iconic Amazon voice assistant was thus incorporated into devices such as televisions and microwaves . Amazon even licensed Alexa to other manufacturers, aiming to make the assistant ubiquitous in homes, as it was a universal solution for automating different areas of living spaces.
For all these reasons, many thought that voice computing would be the next big thing, and that Amazon could own it directly through Alexa. However, the opposite happened: Over time, Amazon Alexa became a colossal failure for Bezos's bottom line . The tycoon invested €10.000 billion in Alexa and is now on track to lose that entire capital injection.
Initially, Alexa's voice technology, the brand's Echo smart speakers, and the Prime Video streaming service generated a combined operating loss of over €3.000 billion . However, more than 50% of this decline was due to losses recorded by Alexa and related speakers, which is considered the largest among all of Amazon's business units.
According to Eugene Kim of Business Insider , Amazon's Alexa division is set to lose €10.000 billion in 2022 alone . This has also impacted the workforce that operates the Alexa team, and although it once employed 10.000 people, it is now a direct target for the job cuts implemented by Jeff Bezos.
Amazon also tried to partner with companies to enhance Alexa's abilities and avoid the large financial losses that were looming, but it did not gain the desired support.
Many current employees on the company's hardware team, including some former employees, have indicated that nearly all plans to monetize Alexa have failed , leading to a deep division within the company. Therefore, the current layoffs ordered by Jeff Bezos are the result of "a colossal failure of imagination" and "a missed opportunity"—none of which worked after numerous monetization attempts.
Since late 2019, Alexa saw a hiring freeze and Bezos began to lose interest in the project around 2020, even though it was his favorite project.
Amazon's mistakes that led to Alexa's failure
The main mistake Amazon executives made regarding Alexa's failure is the business model behind the voice assistant . Because of its initial success, Bezos and his team thought that selling the Echo device at cost would encourage users to buy more things on Amazon, but this didn't work. As they point out, they wanted to make money when people used their device, rather than keeping most of the profit when they bought the devices.
At the time, the strategy seemed ideal, as statistics showed that Amazon Alexa was receiving one billion interactions per week. Indeed, they focused on generating the most revenue through the use of the voice assistant . However, they failed to consider how they would sustain themselves when many users abandoned this technology to try other market innovations.
While Alexa was receiving one billion interactions during the week, most of these were trivial commands to play music, ask questions about the weather, set a timer, or check dates; which are not monetizable.
Consequently, that plan never materialized for Amazon . After a while, it became clear that many people didn't want to rely on an artificial intelligence like Alexa to make purchases and spend their money without reading reviews or seeing images of the products. Furthermore, the advertising displayed by this voice assistant was intrusive for most customers.
Another weakness that led to Alexa's failure is the ambition of its CEO, Jeff Bezos. Driven by his desire to be involved in almost every business , the company didn't design its own platform for Alexa , and consequently, it's unable to control a specific operating system, such as Microsoft, Apple, or Android. Instead, it essentially runs a modified version of Android, which minimizes its impact on the technology industry.
Given the lack of clear and precise guidelines for Amazon devices, the company has had to cope with this massive financial loss on Alexa. This highlights the fact that the hardware is not profitable and, consequently, there is no incentive to continue iterating on the voice assistant. At the same time, this situation led to the development of the controversial Astro robot, essentially an Amazon Alexa on wheels.
As a result of Alexa's situation, many are questioning the profitability of voice assistants, an aspect that has already caused problems for companies like Google or Apple.
