Amazon’s Worldwide Digital business unit apparently had a $3 billion operating loss in the first quarter of 2022. This is not all related to Alexa, this business unit also includes Prime Video (and more). This is backed up by reports in 2018 that stated Alexa and Echo lost around $5 billion in that year.
For those that have followed the voice assistant market for many years (like SAR Insight) it is perhaps not a major shock that Alexa is haemorrhaging money. The drive to push voice-controlled speakers such as the Echo to lower and lower price points shows that gaining profit on these devices is not the primary aim. Recent Black Friday deals had prices below $25 for the latest Echo Dot.
Alexa has been used as a loss leader from the start. One of the primary aims has been to enable voice purchasing, driving increased sales for Amazon.com. While this made sense a few years ago, the attractiveness of this for consumers has waned. Voice assistant platforms have not lived up to the expectations of the user, with only small improvements being made over the last few years.
While there are many reasons for this, I believe that one major reason has been the lack of interoperability of voice assistants, something I have written about for many years. The industry chose to create silos – Amazon Alexa, Google Assistant, Apple Siri, Baidu Duer, etc. which I feel was a big mistake and has held back innovation significantly. One of the main reasons for this approach was consumer data gathering, which has helped the parent companies amass vast amounts of data on consumer buying habits, which Amazon (for example) has been able to use to help sell goods and Google (for example) has been able to use to sell adverts. This is where the money has been made.
More than 2 billion voice-controlled devices ship each year and SAR’s latest Voice Assistant Platforms database shows that growth has slowed to a CAGR of 7% from 2022 to 2027. So, there is money to be made by the device brands by adding voice control, but is it a “must have” feature still? I’d appreciate your thoughts on this.
