Internal Amazon metrics have created a rosy view of the impact from Alexa and Echo on the company’s revenue from other services. This led Amazon to continue investing heavily in its devices business despite losing more than $25 billion on the division between 2017 and 2021.
That’s according to a report overnight by the Wall Street Journal, which cites internal documents and sources in a deep dive on Amazon’s devices business by reporter Dana Mattioli, author of a recent book about the company.
The WSJ reports that Amazon will be launching a paid tier for Alexa as soon as this month, despite concerns inside the company that the strategy won’t work. Reuters reported previously that Amazon was considering a $5 to $10 monthly fee for users to access a more conversational version of the voice assistant.
Amazon is under pressure to make using Alexa more like interacting with OpenAI’s ChatGPT. One challenge is the current nature of the underlying Alexa infrastructure, which relies on different services and apps depending on the nature of the user’s request, leading to a more disjointed experience.
The WSJ report focuses on an Amazon metric called “downstream impact,” which assigns financial value to a product based on how much customers spend within Amazon’s ecosystem. It was used to justify costs and losses for products like Echo devices. The report says Amazon CEO Andy Jassy is trying to address this.
Here’s the full statement from an Amazon spokesperson, provided to GeekWire.
As a company, we measure and review our businesses through different lenses. One such lens is how each of our various businesses can help each other grow. Within Devices & Services, we’re focused on the value we create when customers use our services, not just when they buy our devices. Our Devices & Services organization has established numerous profitable businesses for Amazon and is well-positioned to continue doing so going forward. Hundreds of millions of Amazon devices are used by customers around the world, and to us, there is no greater measure of success. We will never stop pursuing bold ideas—from self-driving taxis with Zoox, low-earth orbit satellites with Kuiper, and the world’s most useful personal AI with Alexa—that have the potential to make our customers’ lives better. We plan to continue pursuing these businesses with the same inventiveness and customer focus that we always have.
The company in September previewed a new feature, dubbed “Let’s Chat,” driven by generative artificial intelligence, designed to make its Alexa voice assistant more conversational on its Echo devices. It has yet to be released.
Since then, there’s been a changing of the guard in the Amazon Devices & Services business, with former Microsoft executive Panos Panay joining Amazon to lead the division, replacing Dave Limp, who became Blue Origin CEO.
