Amazon’s Echo smart speakers, powered by the Alexa voice assistant, have long been sold at a loss, a strategy aimed at saturating the market and embedding the technology in millions of homes. Despite the widespread adoption—Amazon founder Jeff Bezos reported that Alexa is in 100 million homes across 400 million devices—the financial toll has been substantial.
From 2017 to 2021, Amazon’s devices division incurred losses totaling $25 billion, with the Alexa division alone losing $10 billion in 2022, according to The Wall Street Journal. The strategy, once seen as a long-term investment in market dominance, has proven unsustainable, leading to significant layoffs in the Alexa unit at the end of 2023.
While Alexa has achieved widespread usage, the majority of interactions remain limited to simple tasks such as playing music, controlling lights, and setting timers. This limited functionality has prompted internal and external criticism, with one former Amazon senior employee lamenting that the company had effectively built “a smart timer.”
The broader smart assistant market has also struggled, with consumer enthusiasm waning for rivals like Google Assistant and Apple’s Siri. However, both Google and Apple are making moves to reinvigorate their offerings. Apple’s new Apple Intelligence initiative and Google’s integration of Gemini AI are efforts to enhance their assistants’ capabilities.
Amazon, too, is looking to generative AI as a lifeline for Alexa. The company has acknowledged the limitations of the current system and is focusing on improving conversational skills through AI. Last year, Amazon previewed Alexa’s generative AI-powered future, emphasizing the potential to make interactions with the assistant as natural as talking to another human.
As Alexa approaches its ten-year anniversary in November, Amazon faces a critical juncture. The company must demonstrate how it plans to evolve the platform to meet customer expectations and address the financial challenges it faces. Whether Alexa remains a key part of Amazon’s ecosystem in the next decade will depend on how effectively the company leverages generative AI and other innovations to revitalize the assistant.
