The Wall Street Journal reported this week that Amazon’s division focused on Alexa-enabled gadgets lost $25 billion between 2017 and 2021.
Amazon claims to have sold more than 500,000 Alexa devices, including Echo speakers, Kindle readers, Fire TV sets and streaming devices, and Blink and Ring smart home security cameras. But since its debut, Alexa has struggled to make money, much like other voice assistants. In late 2022, Business Insider reported that Alexa was expected to lose $10 billion that year.
The Journal said it derived the $25 billion figure from “internal documents” and could not specify whether the losses in the devices business came before or after the reported period.
“No profit timeline”
The WSJ report claims to offer insight into why Devices was able to bleed so much money for such a long period of time.
First, the division appears to have been given some leeway in terms of financial success because of its potential for innovation and long-term profits: What the WSJ described as a “longtime devices executive” said that when Alexa first came out, Amazon’s gadgets team “didn’t have a profit timeline” when launching products.
Amazon has been known to sell its Echo speakers cheaply or at a loss in hopes of making future profits from Alexa. Dave Limp, then senior vice president of Amazon Devices, who left the company last year, told the WSJ in 2019 that “we don’t need to make a profit on a device when we sell it.” The WSJ noted that this strategy has been applied to other Amazon devices as well.
But people tend to use Alexa for its free services, like checking the weather and the time, rather than to make major purchases.
“We were concerned because they employed 10,000 people and made smart timers,” a former senior employee told the Journal.
An Amazon spokesperson told the Journal that more than half of Echo owners have used it to make a purchase, without providing details, but Alexa-related shopping revenue is negligible, according to a “former employee on the Alexa shopping team” who spoke to the Journal.
An Amazon spokesperson told Ars Technica in an email:
“At Devices and Services, we focus on the value that customers create when they use our services, not just when they buy our devices. Devices and Services has built many profitable businesses for Amazon and is well-positioned to continue doing so for the foreseeable future.”
Further hindering Alexa’s revenue are challenges selling services like security, and limitations on ad sales that frustrate Alexa users, the WSJ reported.
The huge losses don’t appear to have slowed product development. The WSJ claimed that the devices business lost more than $5 billion in 2018, but still funded the development of the consumer robot Astro. The robot is not yet available for sale to the public, and the business version broke just 10 months after its release. The Amazon Halo health tracker and Luna game streaming device, which also failed, were developed in 2019, the same year the hardware division lost more than $6 billion, according to the WSJ.
Amazon is reportedly laying off at least 19,000 employees since 2022, with its devices division being particularly hard hit.
