Amazon is losing billions on Alexa and smart speakers, but AI could fix everything

Amazon’s losses from Echo smart speakers with the Alexa voice assistant have reached $25 billion over the past five years. However, with the advent of artificial intelligence, the company saw the future of Alexa in conjunction with generative AI and does not intend to abandon its voice assistant.

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Amazon’s Alexa-powered Echo smart speaker has been selling at a loss since its introduction. This marketing strategy, known as “loss leader,” involves selling a product below cost in order to attract customers and profit from related products or services.

Although Amazon has achieved widespread adoption of its devices and, according to company founder Jeff Bezos, by the beginning of this year Alexa was present in 100 million homes and on 400 million devices, financial performance has been disappointing.

According to TechCrunch, citing The Wall Street Journal, Amazon’s device division suffered losses of $25 billion between 2017 and 2021. In 2022 alone, losses from this division amounted to $10 billion, while Amazon was forced to lay off several hundred employees.

The main problem with Alexa, according to analysts, is the limitations of its capabilities. Most requests to Alexa involve playing music, controlling lights, and setting timers. However, the company is trying to solve this problem by enlisting third-party developers to create new skills for the assistant, and late last year it introduced a preview version with support for generative artificial intelligence.

Interestingly, other voice assistants are also experiencing problems. Consumer interest in Google Assistant and Siri has declined, and Samsung’s Bixby and Microsoft’s Cortana have ceased to exist altogether. However, neither Google nor Apple are going to give up their voice assistants. At WWDC in June, Apple unveiled an updated Siri as part of its new Apple Intelligence initiative, and Google confirmed that Assistant would receive a Gemini-based update.

November marks ten years since the announcement of Alexa and Echo speakers. It is possible that in the near future Amazon will present its vision for the development of a voice assistant for the next ten years. “We have always considered Alexa an evolving service and have continually improved it since its introduction in 2014,” the company said. “Our long-standing mission has been to make communicating with Alexa as natural as talking to another person, and with generative artificial intelligence advancing so rapidly, what we envisioned is now within reach.”