• A new report from Business Insider indicates that Amazon has no idea how to monetise its Alexa-ready devices and it is costing the company billions.
• The Alexa voice assistant is set to lose Amazon $10 billion this year alone despite high sales.
• Employees in the Alexa division have called the gadget a “colossal failure of imagination.”

Alexa, Amazon’s voice assistant unit, doesn’t make any money for the ecommerce giant, currently embroiled in its largest round of job cuts ever.

According to a new report from Business Insider [available in South Africa through VPN only] about the “swift downfall” of Amazon’s hardware division and its voice assistant, Alexa has become an enormous money sink for the company.

This year alone the “Worldwide Digital” group, which the Alexa division is part of, is set to lose $10 billion. Amazon Prime Video is also part of this group but internally Alexa is being blamed for the staggering losses, which are apparently double that of any other division.

The arrival of Alexa 10 years ago heralded a new generation of digital voice assistants that were copied by tech firms Google and Apple. These are often marketed as smart home cornerstones, capable of being control hubs for users. They can set timers, dim the lights, play music, read books, answer questions, notify of visitors, read cooking recipes, and have many other functionalities.

And yet according to the report, Amazon has never been able to create an ongoing revenue stream from Alexa units. Business Insider spoke with several current and former team members at the division who said that just about every plan to properly monetize Alexa has failed.

A former employee described the Alexa product as “a colossal failure of imagination,” and “a wasted opportunity.” The report says that the Amazon Echo line of products is among the company’s best-selling items, but “most of the devices are sold at cost.” Amazon reportedly wants to “make money when people use our device, not when they buy our device.”

This plan has never practically materialised. Reportedly, the company hoped that customers would use Alexa to buy things through voice commands. And while Alexa units get “a billion interactions a week” the vast majority of these are users asking their Alexas to play music or tell them about the weather.

Since ads aren’t played by Alexa between uses, these interactions are not monetisable. People don’t use Alexa to buy Amazon products because they seldom will simply just buy something without reading a review or seeing a picture.

The team at Amazon tried another method to monetise Alexa through the “Alexa skills” function, which allowed voice commands to order a pizza or an Uber and Amazon would get a percentage made from the order. This also didn’t work and by 2020 “the team stopped posting sales targets because of lack of use” of the skills feature.

As it stands Amazon still wants to do something with Alexa and has a “conviction in pursuing” the product but the team is without direction and is facing “huge cuts” according to one employee who spoke to Business Insider.

Despite being the first name in digital voice assistants, Alexa is the third best-selling voice assistant gadget in the US at 71.6 million users, followed by Apple’s Siri unit at 77.6 million with the Google Assistant leading the pack at 81.5 million.

According to Ars Technica, Google is facing similar problems with its own assistant and its division was hit hard by the company’s recent cost-cutting initiatives. Like Alexa, the Google Assistant doesn’t seem to be making money despite high sales.

Unless companies find a way to monetise these voice assistants they may eventually drop support, but one has to wonder how companies like Amazon and Google haven’t figured out how to successfully monetise such enormous user bases. The problem could just be one of limited imagination.

In South Africa, an Alexa-ready unit goes for around R1 000 to R1 800, excluding shipping.

[Image – Brandon Romanchuck on Unsplash]