Amazon is now experiencing the biggest 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, which appears to be losing favor with the e-commerce giant. This is revealed in a report by Business Insider, which details the “rapid collapse of Amazon’s voice assistant and larger 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 stream of income, so Alexa doesn’t actually make any 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.
Unit in Crisis
The BI report spoke to “a dozen current and former employees of the company’s hardware department”who described the “unit 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 runway at the company when it was reportedly 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 to no avail. By the end of 2019, Alexa was facing a hiring freeze, and Bezos began to lose interest in the project around 2020. Of course, Amazon now has a brand new CEO, Andy Jassi.
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, this plan was never implemented. It’s not like Alexa plays ad breaks after you use it, so the hope was that people would buy things on Amazon with their voice. Few people want to trust AI when they spend their money or buy a product without seeing a picture or reading a review. The report states that by the fourth year of the Alexa 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 also tried to partner with companies for Alexa skills, so a voice team could buy a Domino’s pizza or call an Uber, and Amazon could get a kickback. The report 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 studies on this theory found that these users’ “financial contributions””often fell.”less expectations.”
In a public memo to employees, Yassi said the company is still “convinced to pursue”Alexa, but that’s after huge cuts to the Alexa team. One employee told Business Insider that there is currently “no clear device directive”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 tracking now ranks Alexa third in the U.S. 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 all voice assistants doomed?
We have to wonder: is time running out for Big Tech voice assistants? Everyone seems to be fighting 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 assistants 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 cost price war, Apple’s smart speaker plans are more 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 OG HomePod was killed off in 2021. There is still a $99 “mini version”out there, and Apple isn’t giving up on the idea of a big speaker supposedly making a comeback. in works. Siri may at least be the loss-maker for iPhone sales, but Apple is also on the hunt for more consistent ad revenue.