Alexa Turns 10, Amazon Turns to Generative AI

Amazon is losing money on Echo smart speakers. That’s been an open secret for Alexa’s entire existence. It’s the product of a loss-leader strategy that only an organization the dimensions of Amazon can afford to sustain for a decade.

Selling hardware at a loss can in fact be an efficient strategy. Think of printers and razors, which get corporate feet within the door and make up the loss with ink cartridges and blades, respectively.

From a saturation perspective, Amazon’s strategy may be considered successful. Earlier this yr, the founder Jeff Bezos claimed, that Alexa is now available in 100 million homes, on 400 million devices.

But the financial reality paints a really different picture. According to a recent report by The Wall Street Journal, Amazon’s devices division lost a staggering $25 billion in five years between 2017 and 2021. Alexa section apparently he went missing $10 billion in 2022 alone.

At some point, the loss leader simply becomes a loss. This reality collapsed in late 2023, when a number of hundred were laid off from the Alexa unit. Eleven-figure annual losses combined with a bleak macroeconomic outlook are unsustainable, even for a corporation with annual revenues of $600 billion.

Alexa isn’t the one smart assistant to come back to earth lately. In addition to offerings like Bixby and Cortana, which have disappeared entirely, consumer enthusiasm around Google Assistant and Siri has also waned.

In recent months, nevertheless, each Google and Apple have made it clear they’re not ready to surrender. Siri took center stage at WWDC in June, as Apple breathed latest life into the brand with its latest Apple Intelligence initiative. Google similarly confirmed this week that Assistant will get Gemini support in the house.

A 2021 Bloomberg report noted that despite Alexa’s popularity, most queries involve one in every of three tasks: play music, control lights and set timers.

A former senior Amazon worker put it much more bluntly, telling the WSJ: “We were worried about hiring 10,000 people and building a smart timer.” Given all of the published criticism of Alexa over its decade of existence, this could be the simplest cut.

While the corporate has continued to release Echo devices, including the improved Spot announced last month, the corporate has taken its foot off the gas. There’s little question been a variety of soul-searching among the many Spheres. Like Google and Apple, Amazon sees generative AI because the lifeline Alexa needs.

The 10,000-person timer problem is a results of devices failing to meet customer expectations. Getting third-party developers to create skills was part of a bigger effort to make Alexa more useful. Amazon has also tried to improve the assistant’s conversational skills through the years.

In this respect, generative AI is a game-changer. Platforms like ChatGPT have demonstrated incredible conversational natural language capabilities. Late last yr, Amazon offered announcement Alexa’s AI-powered future.

“We’ve always seen Alexa as an evolving service, and we’ve been continually improving it since the day we launched in 2014,” the corporate wrote. “Our long-held mission has been to make talking to Alexa as natural as talking to another human, and with the rapid advancement of generative AI, what we imagined is now within reach.”

November marks a decade because the announcement of Alexa and Echo. There might be no higher time to reveal an image of what the subsequent 10 years might appear like. Whether the assistant gets one other decade will depend, partly, on how the subsequent few months play out.