As Alexa marks its 10th anniversary, Amazon pivots toward the future of generative AI, exploring new innovations and advancements in voice technology
Amazon incurs losses with respect to its Echo smart speakers. For the entirety of Alexa’s existence, it has been an open secret. It is the outcome of a loss leader strategy that is exclusively feasible for an organization of Amazon’s magnitude for an extended period.
Selling hardware at a loss can be an effective strategy, of course. Consider printers and razors, which serve as entry points for corporations and compensate for lost revenue through the sale of ink cartridges and blades, separately.
Amazon’s strategy can be considered successful from the standpoint of saturation. Jeff Bezos, the founder of Amazon, asserted in the early part of the year that Alexa is now present in 100 million homes and on 400 million devices.
Nevertheless, the financial realities present a completely different perspective. In the five-year period from 2017 to 2021, Amazon’s devices division suffered an astronomical $25 billion loss, as per a recent report from The Wall Street Journal. According to reports, the Alexa division experienced a loss of $10 billion in 2022 alone.
A loss leader terminates as a loss at a specific threshold. That reality was abruptly shattered at the conclusion of 2023, when the Alexa unit announced the layoff of several hundred employees.
Even for a company with over $600 billion in annual revenue, the combination of eleven-digit annual losses and a bleak macroeconomic outlook is an untenable situation.
In recent years, Alexa is not the sole intelligent assistant that has returned to Earth. In addition to the complete disappearance of offerings such as Bixby and Cortana, consumer enthusiasm for Siri and Google Assistant has also diminished.
In recent months, however, both Apple and Google have expressed their unwillingness to relinquish the specter. In June, Siri was the focal point of WWDC, as Apple revitalized the brand through its new Apple Intelligence initiative.
This week, Google also confirmed that Assistant is receiving a Gemini-powered enhancement in the home.
Bloomberg reported in 2021 that the majority of Alexa queries pertain to one of three tasks: setting timers, controlling lighting, and playing music, despite Alexa’s widespread popularity.
In an interview with the Wall Street Journal, a former senior Amazon employee expressed his concerns: “We were concerned that we had hired 10,000 individuals and had developed a smart timer.”
That may be the most effortlessly cutting of all the published criticism levied at Alexa over its decade-long existence.
Although the company has continued to release Echo devices, including an enhanced Spot that was announced last month, it has slowed down its pace.
There is no doubt that the Spheres have engaged in a significant amount of introspection. Amazon, much like Apple and Google, regards generative AI as the lifeline that Alexa requires.
The failure of devices to meet consumer expectations is the cause of the 10,000-person timer issue. In an effort to enhance Alexa’s functionality, there has been an initiative to encourage third-party developers to develop custom skills.
Additionally, Amazon has endeavored to enhance the assistant’s conversational abilities over the years.
Generative AI is a game-changer in that regard. ChatGPT and other platforms have exhibited remarkable conversational proficiency in natural language. Last year, Amazon provided a glimpse of the future of Alexa, which will be powered by generative AI.
“We have consistently regarded Alexa as a service that is in a state of evolution since its introduction in 2014,” the company stated. “Our long-standing objective has been to ensure that a conversation with Alexa is as natural as conversing with another human.
The rapid advancement of generative AI has brought this ideal within reach.”
It has been a decade since the announcement of Alexa and Echo in November. The timing is ideal for revealing a glimpse of the potential future of the next decade. Whether the assistant receives an additional decade will be contingent upon the outcome of the upcoming months.