Amazon Alexa bled $10 billion in cash in 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
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.
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
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
Comments
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.
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.
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
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