In a timely manner, and to understand the crisis around the popular voice assistant, we have to return to a recent report signed by Business Insider, which indicates that this year, this product would represent losses close to 10 billion dollars (billion dollars).
This could have interesting implications for the range of devices currently offered to users, where lower-cost devices could increase in price or even disappear.
Let’s explain it. According to the source, citing people familiar with the matter, during the first quarter of this year, the business unit known as “Worldwide Digital” (which includes Alexa, Echo and Amazon Prime Video devices) had an operating loss of 3 billion dollars. Alexa was one of the great responsible.
The losses respond to many investments in updating and expanding the range of a device that has not met its business objective.According to a person involved in the project since its inception, Alexa was born with the intention of being monetizable through queries that could be monetized. In other words, the idea is that it was a shopping assistant. This has not happened.
Goodbye to cheap Alexa?
Alexa interactions have increased by more than 30 percent in the last year; however, queries such as weather status or commands to set an alarm are not monetizable.
Thus, since Amazon launched Alexa, it has only earned for each Echo or device sold, which, although not bad, is far from the company’s business expectations.
A piece of information to give context is not too much. A 2019 report found that revenue from Alexa skills in the first 10 months of the year was just $1.4 million, well below Amazon’s target, at the time, of $5.5 million.
The first trend response moves have been visible. Amazon last week confirmed a wave of layoffs that would start in the devices and services division (where Alexa is located).
However, if the company only earns from devices sold, it is possible that the bet on high ranges or higher prices is the bet, which would put those more affordable gadgets at risk.
However, Amazon could bet on volume. That is, more Alexa devices with fewer functions to earn more units sold, rather than individual tickets. However, this path would come with fewer updates and a possible lag in innovation compared to its rivals.
For now, nothing has been said and the only thing that remains clear is that the business around Alexa is in crisis, despite being one of the most recognized and used voice assistants in the world.