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Alexa, play End of the Line by Amazon (and blame a $10-billion loss this year)

Shaurya Thapa
Shaurya ThapaNov 22, 2022 | 18:28

Alexa, play End of the Line by Amazon (and blame a $10-billion loss this year)

Alexa-supported devices are selling but Alexa's facilities cannot be monetised, leading to losses for Amazon (photo-DailyO)

Whenever you say, "Alexa play___'" (and Alexa ends up playing something totally different), you are not being charged a penny. And why would you be? After all, Alexa's only purpose is to serve you as a tech assistant. But as Alexa doesn't ask you for money to peform your commands, Amazon is losing big.

The voice assistant Alexa has been in use for over a decade since it was first used in the Amazon Echo speaker in 2013. And while a trailblazer in the world of virtual assistant technology, Alexa is bringing no major profits despite high research and development costs. So, unsurprisingly, a large chunk of the ongoing Amazon layoffs are happening in the Alexa department. 

Alexa falls under the "Worldwide Digital" group (that also includes Amazon Prime video), and as per a Business Insider report, this division has lost $3 billion in just the first quarter of 2022, a majority of the losses attributed to Alexa. The report adds that Amazon's hardware teams is estimated to lose $10 billion this year.

Amazon’s biggest layoffs to date: With over 10,000 Amazon employees set to lose their jobs (in an otherwise troubled winter for tech in general), insiders suggest that those associated with Alexa’s development are hit the hardest. 

While no specific reason has been offered, the company has had a very disappointing year.  Apart from Alexa, services like Amazon Care (a healthcare service) and Scout (a six-wheeled delivery robot) are also underperforming and a large chunk of its employees are expected to get their jobs axed.

On a global scale, Amazon’s Q3 loss (third financial year quarter) amounts to $2.5 billion as opposed to 2021’s $900 million.

Why is Alexa not profitable for Amazon? To put it in simple terms, Amazon gets money from Alexa-supported devices (speakers, TVs, phones, earphones, smart watches etc) once customers buy these devices. But when they use Alexa after the purchase, they will obviously not be charged for using the virtual assistant. 

Alexa doesn’t play any ad breaks whenever the user tells Alexa to play a song or perform a Google search. So, while Alexa might be a user-friendly product with the efforts of Amazon’s dedicated research team, it cannot be monetised much by the company. 

The pet project of former CEO Jeff Bezos has failed with the Business Insider report quoting employees as calling Alexa “a colossal failure of imagination” and “a wasted opportunity”. 

Sales for Alexa’s Echo line of speakers, including the latest fourth-generation Echo, are on an upward curve but that’s the end of the story. There are no premium features around Alexa to be unlocked after this. 

One anonymous insider also commented on Echo’s business report as, 

"We want to make money when people use our devices, not when they buy our devices."

What’s the future of Alexa? Even though Bezos was actively interested in its creation, he seemed to have started losing interest in Alexa from 2019 with the Alexa team even facing a hiring freeze that year. Business observers suggest that Bezos’s successor Andy Jassy is similarly not too keen at developing Alexa any further. 

While the voice assistant system has not been discontinued yet, Jassy revealed in a public note to his employees (dated November 18) that he still has conviction in pursuing services like Alexa but some job cuts would be inevitable. 

To quote his letter,  "Amazon has weathered uncertainty and difficult economies in the past, and we will continue to do so. We have big opportunities ahead, both in our more established businesses like Stores, Advertising, and AWS, but also in our newer initiatives that we’ve been working on for a number of years and have conviction in pursuing (e.g. Prime Video, Alexa, Kuiper, Zoox, and Healthcare). The key will be to do what Amazon does best – obsess over customers and invent relentlessly on their behalf – and if we do that, we should all be very optimistic about Amazon’s future. I know I am."

The bigger picture: This October-November has led to quite a disastrous "tech-winter" for Silicon Valley with layoffs happening in Meta, Twitter (which has been reduced to Elon Musk's playground at this point), and Amazon among other companies. Closer home, even BYJU'S has been involved in mass firings. With a month and a week left for this year to end, it is yet to be seen which other major tech-player would join the firing spree. 

Last updated: November 22, 2022 | 18:29
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