Is the era of smart speakers over?

And then?

Then Amazon CEO Andy Jassy jumped in to comment. Jassy bluntly addressed the mass layoffs at Amazon — and Alexa’s fickle future. Jassy said they want to pursue Alexa as a project. But he also mentioned the rock-hard condition that is tied to this continuation. The stick had a name: The Alexa team would be heavily vaporized. Consequently, 10,000 employees would be dismissed.

That’s how it happened. Just one punch harder.

It was already clear in January 2023: the number of layoffs had increased – by 8,000 employees. A total of 18,000 people have been terminated as a result of the Alexa failure (The Verge reported).

As I said, that was in January of this year. As early as March 2023, the next wave of layoffs spilled over to Amazon’s employees – this time there were 9,000 jobs that were cut for reasons of economy. The second wave primarily affected the cloud department Amazon Web Services, the streaming service Twitch and the advertising department (Handelsblatt reported).

A five-digit and a nearly five-digit mass layoff within a few months. Why did Amazon have to cut jobs?

How to make money with apps?

Flashback: According to Business Insider, the Alexa division lost more than $3 billion in the first quarter of 2022 alone. It also said the lack of Alexa sales was responsible for most of the fiscal loss.

The pricing policy around Alexa is noteworthy. Actually, Amazon’s Alexa Echo product range is one of Amazon’s best-selling products. At the same time, Alexa Echo is sold at cost price. In other words: the production costs of an Alexa Echo correspond roughly to the sales that Amazon achieves with the sale.

Well, so the profit margin of the product is very small. But how did Amazon intend to make a profit with the voice assistant?

An internal document from Amazon provides information about this, which states:

Eureka! Of course, Amazon is clever and has saddled itself with a business model that relies on the monetization of apps – not on the sale of the language assistant itself.

Unfortunately, monetization went differently than Andy Jassy and Amazon wanted. On the one hand, in the fourth year of its existence, Alexa recorded one billion interactions per week – which sounds reasonable at first. As I said: on the one hand. On the other hand, Amazon had not counted on the (un)art customer sub-action.

Because: The majority of this user interaction was due to non-monetizable commands such as: Alexa, play my favorite song! or Alexa, is it raining today? In other words: no sales can be generated from Spotify music requests or weather information. Regardless of whether the user is sitting at home or using Alexa in the car.

Customers also rarely bought products via Alexa. The reason for this? It may have something to do with how customers make a purchase decision. If the product you want isn’t there either in pictures or in a customer review, many potential buyers are deterred – and don’t even buy it.

So Amazon’s effort to add monetizable voice commands to Alexa was a failure. The fact that Amazon is now also sawing off celebrity votes speaks for itself: Amazon continues to limit damage and mothball loss-making cooperations.

Amazon was once the beacon of hope for ex-Amazon boss Jeff Bezos.

Amazon Alexa: an anti-success story?

In 2018, Alexa was former Amazon CEO Jeff Bezos’ favorite child. A crisis meeting was convened in 2019 to get the inadequate sales figures under control. The meeting resulted in a hiring freeze for the Alexa project. A year later, in 2020, Bezos himself lost his previously increased interest in Alexa.

For Patrick, language assistants have always been cloaked in the dystopian image of a listening device. Maybe Patrick has read George Orwell or Ray Bradbury one too many times. So be it.

Only very few use a language assistant in their personal environment. And that despite the fact that his peer group consists of people with an affinity for technology. The user base within a few people who are enthusiastic about technology toys is certainly even lower, Patrick suspects.

The future for Alexa

And what comes now? According to a Business Insider report, Amazon wants to revive Alexa with an AI voice bot. The artificial intelligence is supposed to conjure up bedtime stories for children – and Amazon is imagining lucrative cooperations with companies such as Disney or Lego.

Another use case would be if your own memory fails again. Then you could ask Alexa: Hey Alexa, what’s the name of the TV series set during a zombie apocalypse – and based on a comic book Alexa then told you that you were looking for the series The Walking Dead. Whether Alexa will successfully ditch in the AI ​​lifeboat remains speculative for the time being.

Do you think the former hype about language assistants has recently fizzled out? Do you chat in and with a language assistant yourself – and are you satisfied with the experience? Write us about it in the comments!