Amazon Alexa, a smart voice assistant, revolutionised the way we interact with technology. Launched in 2014 with the Echo smart speaker, Alexa became accessible on Amazon devices, allowing users to control their homes, play music, or check the weather with simple voice commands. Alexa was immediately successful, with more than 100 million Alexa-enabled devices sold by 2018 (Gray, 2022).
Amazon’s goal with Alexa wasn’t to generate direct profit from the device itself, but to strengthen their ecosystem by encouraging users to make purchases on Amazon through it, boosting their revenue through engagement rather than device sales. Therefore, the devices were sold at a breakeven, at times even a loss. This strategy seemed promising, as within two years of rollout they had a billion user interaction a week. However, it turned out that voice assistants can only do a couple of tasks perfectly – set an alarm clock, play music or check the weather forecast – none of which generated revenue for Amazon (Naughton, 2022).
Amazon tried to monetize Alexa by partnering with companies such as Domino’s or Uber to streamline the ordering process and receive a cut from the transaction, however, this failed to generate engagement. They also tried positioning Alexa as a ‘halo product,’ expecting users to spend more on Amazon even without voice shopping, but studies showed no meaningful financial impact from these users (Amadeo, 2022).
All of these failures lead to Amazon Alexa’s team to become the prime target of the biggest layoffs in the company’s history. What was once one of the company’s fastest-growing projects turned into the downfall of its largest hardware division, marking the failure of Amazon’s business model of selling devices at cost and relying on future purchases for revenue (Kim, 2019).
With losses from Alexa devices accruing to 25 billion dollars between years 2017 and 2021, it might seem reasonable to just discontinue the product. However, with more than 500 million Alexa-enabled devices globally, Alexa is a success – just not a money-making one (Mattioli, 2024). Therefore, the Amazon CEO, Andy Jassy, is giving Alexa another try, possibly the last one.
A new version of Amazon Alexa, called ‘Remarkable Alexa,’ is rumoured to launch as soon as October 2024. Amazon is hopping on the AI train with this revamped product, powered by Anthropic’s Claude AI model. It will use AI to understand commands, set timers, answer questions and control home devices, similar to original Alexa, but now with the generative AI feature that would allow it to generate new responses instead of relying on pre-programmed answers (Diaz, 2024).
Alexa could now create a bedtime story with their favourite imaginary character, customise recipes based on ingredients in your pantry or write an email for you. However, this does come at a price. Remarkable Alexa is no longer free, but will become a subscription model and carry a price tag of anywhere between $5 and $10 monthly. With estimated 100 million active users, even if a conservative estimate of 10% users paid the monthly subscription, Amazon would generate at least 600 million dollars in revenue yearly at the $5 price point (Diaz, 2024).
Only time will tell if Remarkable Alexa can revive Amazon’s ambitions in the voice assistant market. With AI becoming increasingly used in everyday technology, Alexa’s transition to a subscription model could be a turning point, helping Amazon finally become profitable, or at least break-even in the sector. However, convincing users to pay for something that has long been free could be difficult. If successful, Remarkable Alexa could be Amazon’s key to unlocking the true potential of voice-assisted AI, but if it fails again, it might mark the end of an ambitious, but ultimately unsustainable experiment.
Would you pay for Remarkable Alexa? Let me know in the comments below.
References
Amadeo, R. (2022, November 21). Amazon Alexa is a “colossal failure,” on pace to lose $10 billion this year. Ars Technica. https://arstechnica.com/gadgets/2022/11/amazon-alexa-is-a-colossal-failure-on-pace-to-lose-10-billion-this-year/
Diaz, M. (2024, August 30). Amazon’s “Remarkable Alexa” upgrade to be powered by Anthropic’s Claude. ZDNET; ZDNET. https://www.zdnet.com/home-and-office/smart-home/amazons-remarkable-alexa-upgrade-to-be-powered-by-anthropics-claude/
Gray, C. (2022, April 20). How Amazon developed its famous virtual assistant, Alexa. Aimagazine.com. https://aimagazine.com/ai-applications/how-amazon-developed-its-famous-virtual-assistant-alexa
Kim, E. (2019, November 19). Amazon is gutting its voice assistant, Alexa. Employees describe a division in crisis and huge losses on “a wasted opportunity.” Business Insider. https://www.businessinsider.com/amazon-alexa-job-layoffs-rise-and-fall-2022-11?r=US&IR=T
Mattioli, D. (2024, July 22). Alexa Is in Millions of Households—and Amazon Is Losing Billions. The Wall Street Journal. https://www.wsj.com/tech/amazon-alexa-devices-echo-losses-strategy-25f2581a?
Naughton, J. (2022, November 26). Alexa, how did Amazon’s wrong call on voice assistants tee up a $10bn loss? | John Naughton. The Guardian. https://www.theguardian.com/commentisfree/2022/nov/26/alexa-how-did-amazons-voice-assistant-rack-up-a-10bn-loss
