Loss-making Amazon’s Alexa turns 10

Amazon incurs losses from its Echo smart speakers. It has been known publicly for the entire time that Alexa has been around.

This is the outcome of a loss leader strategy that only a company the size of Amazon could pull off for ten years.

Of course, it’s not always a bad idea to sell hardware at a loss. Consider devices like printers and razors, which offer corporations a foothold while making up for the loss with ink and blades, respectively.

One could consider Amazon’s approach to be successful from the standpoint of saturation. Founder Jeff Bezos asserted at the beginning of the year that 400 million devices and 100 million homes currently have Alexa installed.

However, the realities of finances paint a completely different picture. Amazon’s devices division lost an incredible $25 billion over the five years between 2017 and 2021, according to a recent Wall Street Journal report. Around $10 billion was allegedly lost by the Alexa division in 2022 alone.

Several hundred employees of the Alexa unit were laid off at the end of 2023, shattering that illusion. Even for a company with an annual revenue of more than $600 billion, eleven-digit annual losses combined with a bleak macroeconomic outlook are intolerable conditions.

Moreover, even though Alexa is a loss-making, the company is moving ahead with it to generative AI.

Last year, Amazon provided a sneak peek at the future driven by generative AI and Alexa.

“We’ve always thought of Alexa as an evolving service, and we’ve been continuously improving it since the day we introduced it in 2014. A longstanding mission has been to make a conversation with Alexa as natural as talking to another human, and with the rapid development of generative AI, what we imagined is now well within reach,” the company wrote.

The announcement of Alexa and Echo was made ten years ago in November. The course of events in the upcoming months will determine whether or not the assistant receives another ten years.