What once embodied a significant beginning of the evolution of ‘smart homes,’ has now become unprofitable and redundant.
Amazon’s Alexa is a virtual personal assistant powered by voice activation. It was released in 2014 under the direction of Jeff Bezos and made waves for its interactive and engaging features.
Some of its capabilities include voice interaction, weather reports, news reports, streaming music, turning on smart lights, and other real-time information. This AI technology was developed using automatic speech recognition and natural language processing.
In September 2019, Amazon competed in the smart home industry by launching Echo, the world’s first smart speaker equipped with Dolby 360 sound. It was driven by Alexa.
As Bezos’ passion project, Alexa and Echo were protected from internal changes and had more than 10,000 employees working on Alexa-related tech in 2018.
We’ve been working behind the scenes for so many years. It’s just the tip of the iceberg.
– Jeff Bezos (2016)
As per Business Insider, Amazon began mass layoffs after Thanksgiving to rein in costs, as it is set to plummet towards a $10 billion loss by the end of 2022. This figure is double the estimated loss for 2018.
The divisions affected by this decision are Alexa and general hardware. This decision comes after recovering from an operating loss of $3 billion in the first quarter of 2022 itself. Lately, Amazon is also causing dissatisfaction amongst customers.
Microsoft’s voice assistant Cortana faced a similar fate when it was silenced in July 2020 as the tech giant didn’t see it as a competitor to Alexa or Google Assistant and accepted its defeat in the AI wars. Microsoft’s CEO Satya Nadella said they envisioned Cortana to become a transformational AI-powered assistant experience.
Cortana needs to be a skill for everybody who’s a Microsoft 365 subscriber. You should be able to use it on Google Assistant and Alexa, just like how you use Microsoft apps on Android and iOS
Critics believe Microsoft’s decision to drop Cortana was right.
If Alexa’s recent losses are to be scrutinized, how much more money can Amazon burn, before causing arson for its other counterparts?
HOW DID AMAZON ALEXA GO DOWNHILL?
Beyond entertainment, Amazon’s business model for Alexa was flawed. It never managed to maintain an ongoing revenue stream.
While Amazon attempted numerous initiatives to boost Alexa’s revenue, it has not yet reached any proper scale. A report from The Information stated that proceeds from Alexa aggregated to less than $2 million of its $5 million target.
With sales boosting by 15 percent in the quarter of October 2021, revenue was still lesser than expectations.
The investment by Amazon in this AI technology is ostentatiously expensive, and the server space required to process everything is colossal.
As maintained by PYMNT, Amazon had spent an astonishing $330 million in 2016 for just R&D for Alexa. The figure was estimated to reach $600 million in 2017. One can only imagine the quantitative data with the increase in the number of users since then.
Amid the pandemic, users inflated smart home devices to its pinnacle. As users ditch Alexa to move back into a post-pandemic world, the digital transformation’s triple-digit growth falls back to double-digits.
With children no longer conning the AI as they return to school, with young adults no longer asking Alexa for cooking recipes, and with Millennials and Gen X countering more important issues like inflation, Amazon’s voice activated assistant’s use has dwindled.
According to Expanded Ramblings, Alexa was already connected to nearly 100 million devices by December 2020. The most popular skill employed by users was ‘Setting a timer’, followed closely by ‘Hey Alexa, Play a song.’
According to experts, one of the biggest challenges is raising consumer awareness. A user does not possess in-depth knowledge of the capabilities of voice assistants. For instance, Alexa is ingenious – it can be utilized for ordering food or even tracking packages.
Navid Bahmani, an assistant professor of marketing at Rowan University in Glassboro, agrees. Consumers are frequently presented with a rosy picture of new technology but are unaware of the extent to which their smart home devices are built.
It’s the equivalent of buying a smartphone and not knowing that there’s an app store.
DRAWBACKS OF ALEXA:
Alexa’s voice recognition is not perfect. Users have had to repeat themselves multiple times. There have been many suspicions that to recognize its wake word, Alexa (by default), is always listening to a user. It stores them in the cloud, which is not secure or hacker-proof.
According to a 2019 report from Microsoft, 41% of voice assistant users had concerns about their data privacy.
This was fueled when a woman named Danielle contacted Amazon to investigate an incident. The family of Portland provided evidence to KIRO-7, that their smart speaker sent out a private conversation to one of their acquaintances. Their entire home was wired with Amazon’s devices. Danielle’s trust on AI-based Alexa wavered when the other person who was 176 miles away, told them that he heard their conversation about hardwood floors. Danielle unplugged her devices and swore off them, instantly.
An executive from Amazon investigated and reported it as an isolated incident, where the device Echo awoke on something similar to its wake word and recorded the conversation after receiving misinterpreted prompts and commands.
Alexa received pushback in 2021, when Amazon’s virtual launch event of the Echo Show 15 unveiled a feature of face recognition designed for smart home devices. It was named Visual ID and allowed Alexa to personalize recommendations after identifying users through facial recognition.
Amazon drew criticism from privacy advocates for enabling cameras in personal spaces.
WILL ALEXA SURVIVE?
With Google (Google Assistant) and Apple (Siri) as competitors, Alexa seems to be faltering. Could there ever be a monopoly over the market, or does it hinge more on being fragmented?
As Insider’s Eugene Kim reports, Alexa user growth will follow the footsteps of the slow growth seen in Amazon Echo’s smart speakers. Between 2022 and 2024, the growth estimated is less than 1 percent.
Experts believe that the ubiquitous Alexa isn’t attracting new users because it isn’t equipped with robust hardware to bundle with the voice product. There is no clear monetization model for Alexa.
Android phones have Google built-in; Apple iPhones have Siri. To use Alexa, a user requires instruments other than the usual.
There is a better core link between Google’s investments and AI technology. If Google pushes ahead to make voice the next evolution of computer interfaces, it will rival its own traditional text-based search business. Regardless, between Amazon and Google, the latter has a chance to emerge as the main player.
IS THE VOICE-ASSISTANT INDUSTRY SET TO GO ABLAZE?
A 2021 report found that smart speaker ownership in the US accounted for almost 50 percent of internet users.
As these tech titans’ view voice assistant technology as the next evolution of the computer interface after touch screens, they are willing to become spendthrifts despite the low returns.
“We are committed as before to Echo and Alexa. We will continue to invest heavily in them,” Dave Limp, Amazon’s Senior Vice President of Devices and Services, said in a statement.
An Insider Intelligence study established that 42 percent of the USA’s population will use at least 1 voice assistant in 2022, and that number will increase to 50 percent by 2026.
Navid Bahmani is also optimistic about the future of voice-powered virtual assistants. He said, “If anything, it’s very early in its stages. The industry isn’t going anywhere.”
The digital multiverse has dealt with astounding transformations in the past three decades. From Kodak to smartphone photography, generations have witnessed how technology is here to change and evolve the world into something incredible.
