Why Amazon’s Most Iconic Product Is Costing the Tech Giant Massive Sums of Money
Newly discovered documents reveal that one of Amazon’s most iconic products is a huge money-spinner.
The retail giant invested in Alexa voice technology in its relatively inexpensive Echo speaker products in the hope that people would use the technology to order more products online.
But this may have backfired: new market research shows that customers see the AI voice assistant as a secretary and mainly use it for free apps, such as setting their alarm and checking the weather.
“We were worried that we had hired 10,000 people and we built a smart timer,” a former senior employee told the Wall Street Journal.
Sources shared internal documents with the newspaper showing that Amazon lost more than $25 billion in its devices division between 2017 and 2021.
Newly unearthed documents reveal that one of Amazon’s most iconic products is a huge money-spinner. (Pictured: Amazon founder Jeff Bezos and his fiancée Lauren Sanchez in Sun Valley, Idaho earlier this month)
Amazon’s Echo smart speakers, which are powered by its voice assistant Alexa, have proven unprofitable for the e-commerce giant, according to a new report.
According to insiders, Amazon has spent billions on devices such as Echo, Kindles, Fire TV Sticks and video doorbells.
The cheapest Echo costs around $40, but much more advanced versions with color screens can cost hundreds of dollars.
As part of a plan to offset the losses, Amazon hasCEO Andy Jassy plans to launch a smarter, paid version of Alexa this year.
The voice assistant overhaul will likely be called Alexa Plus, but there’s no word yet on pricing. It could come bundled with a Prime subscription.
The new and improved Alexa will be equipped with a “conversational generative AI,” it says. It’s unclear exactly which AI model this will be, though.
This means she can respond to complex questions or requests faster and in more human language.
Amazon’s new project, known internally as “Banyan,” is the first major overhaul of the voice assistant since it was introduced in 2014 alongside the Echo speaker line.
Some Amazon employees who worked on the project say Banyan is a “desperate attempt” to revive the Alexa service, which has never turned a profit.
Sources shared internal documents with the newspaper showing that Amazon lost more than $25 billion on its devices business between 2017 and 2021
Amazon has pushed its employees to have the latest version of Alexa ready by August, the sources said, but it is unclear when that version will be available.
Researchers from the University of Oxford and Stanford found last year that Alexa users trust the voice assistant because they see it as a secretary rather than a machine.
When speaking positively about Alexa, users would refer to Alexa as “she” and “her.” However, when talking about the device in the context of the tech giant, they would use “it.”
Professor Ekaterina Duke of Oxford said: ‘This unstable use of pronouns may reflect users’ attempt to separate Alexa from Amazon, by finding Alexa ‘trustworthy enough’ while continuing to distrust its parent company.’