Amazon Alexa is facing an unclear future as the device is imposing major losses on the company’s revenue.
Key Details
- Alexa was launched in November 2014 but it is unlikely to have a future with the company.
- It is managed by Amazon’s Worldwide Digital group—which lost $3 billion in the first quarter of 2022. Almost all of the losses can be attributed to Alexa, which is facing “a division in crisis.”
- Amazon sells units at a loss to make revenue through added purchases later, and this strategy has failed with Alexa
- Amazon has committed to investing further into Alexa and Echo, but Business Insider reports that these divisions were among the worst hit by ongoing tech layoffs.
Why it’s Important
The news marks a major financial failure for a major division of Amazon that has spent more than a decade developing the voice-recognition and artificial-intelligence (A.I.) technology to put Alexa onto the market.
Amazon struggled to find ways to monetize Alexa after units were sold, as users mostly used them for trivial questions or commands. The team slowed new hiring in 2019. The company is projected in total to lose over $10 billion on Alexa.
“While Amazon’s business model has traditionally tolerated this kind of poor financial performance from its hardware businesses, that’s no longer true. Amazon’s Alexa and the devices team at large is now the prime target of the biggest layoffs in the company’s history,” says Business Insider.
“Current and former employees on the company’s hardware team described a division in crisis. Just about every plan to monetize Alexa has failed, with one former employee calling Alexa ‘a colossal failure of imagination,’ and ‘a wasted opportunity,’” says Ars Technica.
Amazon Alexa faced previous controversies over allegations that employees were listening to private conversations and data harvesting, which damaged the reputation of the device. It still proved successful in its sales and sold millions of units—at a loss though.
“Not many people want to trust an A.I. with spending their money or buying an item without seeing a picture or reading reviews,” says Ars Technica.
Of course, the technology provides value outside of its direct sales of the product. The voice-command system is in more than 130,000 other devices—many of those Amazon products—bringing value and helping generate sales to those products.
