Can Alexa find a path to monetization?
Echo devices continually rank among Amazon.com’s best sellers, but the Alexa business is reportedly bleeding money and management is facing questions about the initiative’s viability.
According to The New York Times, Alexa was losing $5 billion a year as recently as 2018, when its ranks included 10,000 engineers. A Business Insider article indicates Amazon’s Worldwide Digital division, which operates Alexa and Prime Video streaming, is on track to lose more than $10 billion this year, largely tied to Alexa. The unit also reportedly felt the brunt of Amazon’s biggest-ever layoffs.
Launched in November 2014, Echo has become the dominant smart speaker in the U.S. As of June 2021, 69 percent of smart speakers in use in the U.S. were Amazon’s Echo brand, with Google Home at about 25 percent and Apple, five percent, according to Consumer Intelligence Research Partners (CIRP). Over 50 million U.S. homes had at least one Amazon Echo device. (Over 20 million had multiple units.)
However, Alexa, which sells at cost, continues to be tapped for trivial tasks such as playing music or checking the weather and hasn’t become the core household shopping tool as hoped for to support its monetization. Voice shopping’s continued inhibitors are the absence of screens on most devices and concerns over payment security and privacy.
In October, The Information reported that Google was likewise reducing resources to its Google Assistant division due to similar challenges monetizing the business via display ads and partnerships. Apple and Google are also seen having an advantage because they can incorporate voice commands into their mobile devices.
Amazon’s launch last fall of a small robot, Astro, that in addition to incorporating Alexa’s abilities can move around (starting price $1,000) was seen by some as a signal Amazon was looking at premium opportunities around Alexa.
In an employee note from mid-November on the layoffs, CEO Andrew Jassy said Amazon still has “conviction in pursuing” newer initiatives in development over the last several years, citing Alexa as well as Prime Video, Kuiper, Zoox, and Healthcare.
The New York Times reported Amazon aims to cut up to 10,000 jobs, or three percent of its workforce, with its devices, retail and human resources divisions primarily being impacted.
- Amazon Is Said to Plan to Lay Off Thousands of Employees – NY Times
- A note from CEO Andy Jassy about role eliminations – Amazon.com
- Alexa, Will You Ever Make Money? – Bloomberg/The Washington Post
- How Alexa, Echo, and other devices became a drag on Amazon’s revenue – Fast Company
- Amazon is gutting its voice assistant, Alexa. – Business Insider
- Amazon Alexa is a “colossal failure,” on pace to lose $10 billion this year – Ars Technica
- Facing Threat From Apple, Google Tries New Hardware Playbook – The Information
- Purchases Via Smart Speakers Are Not Taking Off – Insider Intelligence
- Why isn’t voice commerce taking off? – RetailWire
DISCUSSION QUESTIONS: Do you eventually see voice shopping taking off, or do you see other ways to drive incremental revenue from Alexa-enabled devices? How would you assess the strengths and weaknesses of Amazon’s range of Echo devices?