Amazon Alexa: ‘colossal failure’ that could cost $10 billion only this year

Amazon is now pursuing the largest layoffs in the company’s history, with plans to eliminate about 10,000 jobs. One of the hardest hit areas is the Amazon Alexa voice assistant. The technology appears to be losing popularity within the company, according to a Business Insider article that details the “rapid collapse of Amazon’s voice assistant and overall hardware division.”

Alexa has been around for 10 years and is a pioneering voice assistant that has been copied by Google and Apple. However, Alexa never managed to create a steady income stream because Alexa doesn’t actually make money. The Alexa division is part of the “Worldwide Digital” group along with Amazon Prime video, and Business Insider reports that the division lost $3 billion in the first quarter of 2022 alone, with the “vast majority” of the losses attributed to Alexa. Obviously, that’s twice as much as any other division, and the report says the hardware team could lose $10 billion this year. Looks like Amazon is tired of burning through all that money.

Alexa in crisis

BI spoke to “a dozen current and former employees of the company’s hardware department” who described “a division in crisis.” Nearly every plan to monetize Alexa has failed, with one former employee calling Alexa a “colossal failure of the imagination” and a “missed opportunity.” The layoffs this month are the end result of years of trying to make a difference. Alexa was given a huge upfront in the company, Alexa was once the “pet project” of former CEO Jeff Bezos. In 2019, a general crisis meeting was held to try to solve the problem of monetization, but it was inconclusive. By the end of 2019, recruitment was frozen at Alexa, and Bezos began to lose interest in the project around 2020. Of course, Amazon now has a brand new CEO, Andy Jassi, who apparently

The report states that while the Alexa Echo line is among the “best-selling items on Amazon, most devices are sold at cost.” One internal document describes the business model as follows: “We want to make money when people use our devices, not when they buy our devices.”

However, the second part of the plan was never implemented. Alexa doesn’t play ads during pauses, so the hope was that people would buy things on Amazon using their voice. However, few people want to trust AI when they spend their money or buy a product without seeing a picture or reading reviews. The report says that by the fourth year of the experiment, “Alexa was getting a billion interactions a week, but most of those conversations were trivial commands to turn on music or ask about the weather.” These questions are not monetized.

Amazon has also been trying to partner with companies to develop Alexa skills so that you can use voice commands to buy Domino’s pizza or call an Uber, and Amazon can get a cut. But even here the company did not succeed. The article states, “By 2020, the team stopped posting sales targets due to lack of usage.” The team also attempted to portray Alexa as a product halo, with users more likely to spend money on Amazon even if they don’t make purchases by voice, but research on this theory found that these users’ “financial contributions” are “often less than expected.”

In a public memo to employees, Jassi said the company is still “convinced of growing” Alexa, but after huge cuts to the Alexa team. One employee told Business Insider that there is currently “no clear direction for devices” going forward, and that since the hardware is not profitable, there is no clear incentive to keep iterating popular products. This lack of direction has led to the self-contradictory $1,000 Astro robot, which is essentially an Amazon Alexa on wheels. Business Insider now ranks Alexa third in the US voice assistant wars, with Google Assistant having 81.5 million users, Apple’s Siri with 77.6 million, and Alexa with 71.6 million.

Are voice assistants doomed?

One may wonder – is the time for voice assistants in Big Tech over? It seems that everyone suffers from them. Last month, Google announced almost identical problems with the Google Assistant business model. It’s impossible to monetize the simple voice commands that most consumers actually want to follow, and all of Google’s attempts to monetize its assistant through display ads and partnerships with companies have failed. Due to the fact that the product was eating up server time and causing large losses, Google reacted in the same way as Amazon, reducing the division’s resources.

While Google and Amazon are hurting each other with a price war, Apple’s smart speaker plans are more focused on bottom line. HomePod ‘s original $350 price tag was a lot more expensive than the competition, but it was probably a more sustainable business model. However, Apple’s model did not sit well with consumers and the HomePod was killed off in 2021. There is still a $99 “mini” version , and Apple hasn’t given up on the big speaker idea, presumably going back to developing it. Siri may be unprofitable for the iPhone, but Apple still craves consistent ad revenue and is willing to invest in the development of its assistant.