Amazon Alexa bled $10 billion in cash in 2022

Posted:
in General Discussion edited November 2022
With Amazon Alexa reportedly responsible for $10 billion in expenses in 2022, teams working on the smart speaker are expected to see mass layoffs as a major cost-saving measure.

Amazon Echo
Amazon Echo


As a business, Amazon is known as one that is willing to take losses on the chin, in the pursuit of massive growth. While that has worked for the company so far, it appears that a pet project of founder Jeff Bezos is on the chopping block as Amazon attempts to rein in costs.

Amazon is expected to lay off around 10,000 employees, and while those job cuts will be all over the organization, one team that is set to be hit will be Amazon's "Worldwide Digital" unit, which covers products including the Echo smart speaker line, Alexa, and Prime Video. According to Business Insider, Alexa and general hardware teams are now the big focus of layoffs.

The targeting of the digital assistant and hardware teams is likely due to Worldwide Digital having an operating loss of over $3 billion in the first quarter of 2022, internal data indicates. A source clarified that the majority of the unit's losses were related to Alexa and other devices.

The unit's losses are the highest of all Amazon's arms, and is double that of its physical retail store and grocery business.

Worldwide Digital has been expensive for Amazon, with it costing the company approximately $5 billion in 2018, and it's on track to lose about $10 billion in 2022.

Part of the issue is that, under the control of Jeff Bezos, Amazon expected Echo devices and Alexa to recoup their cost and generate revenue by encouraging customers to place more orders verbally.

Under expectations of it initially being loss-making, as well as the original Echo selling over 5 million units in its first two years, the team swelled in 2016 to more than 10,000 employees. With it being a pet project of Bezos, the team also received more protection from internal changes that affected others.

Hey Alexa, the party is over

As time moved on, Amazon found that Alexa was used for a billion interactions a week, but since most were typical requests digital assistants get rather than directly product-related, there were fewer chances for monetization.

In 2019, hiring for the team froze, with it only backfilling roles rather than expanding further. Employees were also losing morale over the project, which wasn't helped by the hiring change.

That year, Amazon also focused more on the financial workings of Alexa, including hiring a team to track user behavior in relation to purchases and Prime subscriptions. The feedback was brutal, with employees revealing the results repeatedly fell short of were they needed to be.

Not long after, in 2020, Bezos started to lose interest in Alexa, with less involvement on marketing campaigns.

Sources now say the team is floundering on what kind of long-term strategy it could adopt, but with little impact. Hardware team members had planned on updated wireless headsets and an AR product, but the projects may not make it through Amazon's cost-cutting process.

With a preference to work on developing the $1,000 Astro home robot, the decision to chase more affluent customers reportedly caused some internal dissent.

The layoffs are almost certain to hit the teams, with David Limp, Amazon SVP of devices and services, confirming in a teamwide email that reports about team layoffs were true. "It pains me to have to deliver this news as we know we will lose talented Amazonians from the Devices & Services org as a result," Limp wrote.

While bad for the hardware and Alexa teams, the layoffs will be seen as helpful to those working on Apple's Siri, as well as teams working on augmented reality products. With Amazon's efforts reduced by mass layoffs, that reduces the threat of one of Apple's rivals, leaving Google as the main opponent in the digital assistant marketplace.

Read on AppleInsider
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Comments

  • Reply 1 of 26
    Amazon lacks customer trust when it comes to handling data. I won’t be surprised if it got sold to police or governments. I don’t even trust their palm reader tech or Ring security system. 
    watto_cobra
  • Reply 2 of 26
    I'll take "Companies that can't make money because of their lack of respect for customer privacy," Alexa.
    watto_cobra
  • Reply 3 of 26
    Expect a new subscription for Alexa services which don’t generate income. Things like turning lights on and off.
    dewmerezwitsRyBreadFileMakerFellerwatto_cobra
  • Reply 4 of 26
    Amazon lacks customer trust when it comes to handling data. I won’t be surprised if it got sold to police or governments. I don’t even trust their palm reader tech or Ring security system. 
    Is that actually true, though? I know plenty of people with some form of Echo in their house who also say they don’t care about their privacy or personal data. Any time I’ve mentioned Amazon’s mishandling of data to them they had no idea but also just shrug it off. 

    The only place I really see any concern around handling of data or privacy is in these types of forums, which tends to be a more tech focused niche of people. Even this isn’t absolute. A friend of mine loves to refer to herself as a “techie-girl” and is one of those I mentioned above. 

    So, is there really (much) lack of customer trust with Amazon?
    dewmewilliamlondonFileMakerFellerwatto_cobra
  • Reply 5 of 26
    dewmedewme Posts: 5,755member
    Good article. In my opinion the Alexa technology is at least a generation ahead of the best version of Siri, wherever that happens to reside, which is probably on the iPhone. It’s very apparent to me that Amazon has invested a ton of money into refinement Alexa technology in anticipation of the technology helping to drive sales both on its storefront and through preferred integration with other Amazon products.

    If my use of Alexa technology is any indicator, I’d say that 99% of what I use the Alexa technology for has zero benefit to Amazon’s bottom line. The 1% is mostly the Alexa technology querying me for feedback on past product purchases or Amazon offering a product discount for ordering something using Alexa.

    I don’t buy into the argument that Amazon investing less in Alexa technology is going to benefit Apple because just like Alexa, Siri isn’t driving product sales in a measurable way. It’s a convenience function that’s sadly far less capable than Alexa, but I seriously doubt that its monetization impact is even as good as Alexa’s. Perhaps the reason Siri technology seems so behind Alexa technology is because Apple is only investing in Siri technology at a level that is more commensurate with its ROI on the sales side of the equation. But even here I think Apple is eating a lot of costs just to keep the convenience factor in the products that use it. Unlike Amazon, Apple makes a gigaton of money on device sales while Amazon is probably selling a lot of its devices at a loss to pull through sales from other channels.

    Hopefully Amazon will continue to invest in Alexa technology at a sustainable level. Even without any great advances the functionality of the Alexa technology will likely maintain its lead over semi-competing technologies like Siri for a few more years. I say semi-competing because neither technology is a drop-in replacement for the other. There are a few areas of overlap, like using Alexa with Apple Music, but for the most part these are two basically closed systems that play in their own ecosystems. The Alexa technology does have an API that third parties can integrate into their products, but it’s not displacing Siri technology in any of those cases because Siri is (as far as I know) exclusive to Apple products.

    The Alexa technology is quite amazing and I’m sure that Amazon could find other product and system makers who would license it at a much deeper level if Amazon decided to open it up as a product.
    muthuk_vanalingamwilliamlondonFileMakerFellerwatto_cobra
  • Reply 6 of 26
    dewmedewme Posts: 5,755member
    Amazon lacks customer trust when it comes to handling data. I won’t be surprised if it got sold to police or governments. I don’t even trust their palm reader tech or Ring security system. 
    Is that actually true, though? I know plenty of people with some form of Echo in their house who also say they don’t care about their privacy or personal data. Any time I’ve mentioned Amazon’s mishandling of data to them they had no idea but also just shrug it off. 

    The only place I really see any concern around handling of data or privacy is in these types of forums, which tends to be a more tech focused niche of people. Even this isn’t absolute. A friend of mine loves to refer to herself as a “techie-girl” and is one of those I mentioned above. 

    So, is there really (much) lack of customer trust with Amazon?
    I trust Amazon as much as I trust Apple, Google, and Microsoft. 
    muthuk_vanalingamwilliamlondon
  • Reply 7 of 26
    badmonkbadmonk Posts: 1,334member
    I love Amazon prime but the problem with Alexa is that the devices were too cheaply priced for their abilities & pushed out the door without concern for a sustainable longterm model.

    The issue was not only privacy but it was trust more importantly.  Amazon’s pricing is so scattershot & often mercenary (based on what they know about you I suspect).

    So no one is willing to trust a verbal exchange to order from them without concern of price.

    If Jeff & the executive class lived like normal people they would have realized it was never going to scale to the point where people would engage in frictionless verbal ordering.

    And a robot spy that is walking around your home?  Well-to-do people are not going to go for it.
    muthuk_vanalingamwatto_cobra
  • Reply 8 of 26
    jayweiss said:
    Expect a new subscription for Alexa services which don’t generate income. Things like turning lights on and off.
    A prepaid paid per switch. 
    “Sorry you don’t have enough funds on your account to turn off the switch.”  
    watto_cobra
  • Reply 9 of 26
    So this is why they put HAL2000 on Orion. 
    FileMakerFellerwatto_cobra
  • Reply 10 of 26
    jimh2jimh2 Posts: 666member
    Privacy means nothing to most people as they have no idea that they can be tracked and listened to. They like the products and Amazon is selling them at well below their actual costs which is fine, so no one knows who would buy them if the units were priced to make money.  
    watto_cobra
  • Reply 11 of 26
    Thanks for summarizing an article behind a paywall. 
    edited November 2022 watto_cobra
  • Reply 12 of 26
    genovellegenovelle Posts: 1,481member
    jayweiss said:
    Expect a new subscription for Alexa services which don’t generate income. Things like turning lights on and off.
    2 cents per click of the light switch. 😂 
    watto_cobra
  • Reply 13 of 26
    genovellegenovelle Posts: 1,481member
    I have always said these business model was unsustainable. Investors made Bezos and Musk the richest men in the world while their companies lost money hand over fist for years. grifting at “Epic” levels, pun intended. 
    williamlondonlolliverFileMakerFellerwatto_cobra
  • Reply 14 of 26
    omasouomasou Posts: 640member
    huuummm...wonder how this impacts BMW plans to base the BMW voice assistant on Alexa.

    Bet those two pictured aren't smiling at their recommendation. BMW Boss: Hey Stephan can you come up to my office....

    https://www.press.bmwgroup.com/global/article/detail/T0404088EN/next-generation-bmw-voice-assistant-to-be-based-on-amazon-alexa-technology?language=en
    edited November 2022 watto_cobra
  • Reply 15 of 26
    danoxdanox Posts: 3,423member
    Amazon lacks customer trust when it comes to handling data. I won’t be surprised if it got sold to police or governments. I don’t even trust their palm reader tech or Ring security system. 
    Is that actually true, though? I know plenty of people with some form of Echo in their house who also say they don’t care about their privacy or personal data. Any time I’ve mentioned Amazon’s mishandling of data to them they had no idea but also just shrug it off. 

    The only place I really see any concern around handling of data or privacy is in these types of forums, which tends to be a more tech focused niche of people. Even this isn’t absolute. A friend of mine loves to refer to herself as a “techie-girl” and is one of those I mentioned above. 

    So, is there really (much) lack of customer trust with Amazon?
    Yes, for Amazon corporate, but Amazon retail division is the only trustworthy part of the company I like. Give Amazon retail, money and get usable products in return that’s it no interest in anything else they do.
    watto_cobra
  • Reply 16 of 26
    dewmedewme Posts: 5,755member
    badmonk said:
    I love Amazon prime but the problem with Alexa is that the devices were too cheaply priced for their abilities & pushed out the door without concern for a sustainable longterm model.

    The issue was not only privacy but it was trust more importantly.  Amazon’s pricing is so scattershot & often mercenary (based on what they know about you I suspect).

    So no one is willing to trust a verbal exchange to order from them without concern of price.

    If Jeff & the executive class lived like normal people they would have realized it was never going to scale to the point where people would engage in frictionless verbal ordering.

    And a robot spy that is walking around your home?  Well-to-do people are not going to go for it.
    Trust has nothing to do with it. The voice based ordering process is simply a bad fit for how people like to shop. The smart refill buttons were a flop also because they simply were not a natural fit with how people manage stuff in their lives. 

    A lot of these geeky technology flops are tied to their creators not recognizing basic human behaviors. It’s always amazing how ideas that get bantered about between geeks and marketeers gathered around a beer keg don’t hold up to the scrutiny of regular people concerned about doing regular things in real life. The same is true of people who get all spun up about some gadget or entity spying on them when there is no concrete evidence to prove that their concerns are legitimate. Both sets of people are falling for beliefs that aren’t always backed by reality. 
    edited November 2022 muthuk_vanalingamwilliamlondonFileMakerFeller
  • Reply 17 of 26
    chadbagchadbag Posts: 2,029member
    Jeff could have slid me a cool mil or two and I could have told him this is how it would turn out in exchange. He could have saved billions of dollars.   Ever since they announced Alexa and people were talking about ordering their crap through Alexa I knew it would crash and  burn. 

    Disclaimer: Amazon trucks come to my house almost daily some weeks. So this is not any anti Amazon bias in my part. 

    dewmewilliamlondonmuthuk_vanalingamwatto_cobra
  • Reply 18 of 26
    zimmiezimmie Posts: 651member
    jayweiss said:
    Expect a new subscription for Alexa services which don’t generate income. Things like turning lights on and off.
    A prepaid paid per switch. 
    “Sorry you don’t have enough funds on your account to turn off the switch.”  
    “The door refused to open. It said, “Five cents, please.”
    He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.”
    “I think otherwise,” the door said. “Look in the purchase contract you signed when you bought this conapt.”
    In his desk drawer he found the contract; since signing it he had found it necessary to refer to the document many times. Sure enough; payment to his door for opening and shutting constituted a mandatory fee. Not a tip.
    “You discover I’m right,” the door said. It sounded smug.
    From the drawer beside the sink Joe Chip got a stainless steel knife; with it he began systematically to unscrew the bolt assembly of his apt’s money-gulping door.
    “I’ll sue you,” the door said as the first screw fell out.
    Joe Chip said, “I’ve never been sued by a door. But I guess I can live through it.”

    — Philip K. Dick, Ubik
    FileMakerFellerwatto_cobra
  • Reply 19 of 26
    results of the "figure out how to monetize it later" era, which has just ended. Money is no longer free. You'll see a lot of these subsidized efforts drying up.
    dewmewilliamlondonlolliverFileMakerFellermuthuk_vanalingamwatto_cobra
  • Reply 20 of 26
    dewmedewme Posts: 5,755member
    MrBunside said:
    results of the "figure out how to monetize it later" era, which has just ended. Money is no longer free. You'll see a lot of these subsidized efforts drying up.
    Exactly. The tech sector is now facing the same realities that a lot of other market sectors that depend on consumer spending face, especially when discretionary purchasing is tempered by uncertainty on the employment side and inflation. It doesn’t count unless it sells and if it doesn’t sell people get pink slips. 

    This is all part of a negative feedback loop that will naturally cull things that are not resilient to a consumer spending stress test. Bad ideas and marginal ideas will shrivel and may go away. 

    If there is a kernel of value in what the technology represents it may return someday and could even explode in value, similar to what occurred with laser and fiber optics technology that floundered for quite a while before becoming an indispensable technology on so many fronts. 

    The technology behind all of these voice assistants, including contributions to neural science, has an intrinsic value that will most assuredly outlive their current implementations. Don’t undervalue the technology based on how it’s been used and in some cases misapplied in contemporary settings. All you have to do is look back at some of those garish fiber optic lamps from the 1970s to realize that early applications of novel technologies aren’t always an indicator of the tremendous potential the technologies can eventually deliver. 
    FileMakerFellermuthuk_vanalingamStrangeDays
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