Alexa, how did Amazon’s bad call on voice assistants result in a $10 billion loss? | John Naughton

IIntrigued by an Ars Technica article on Amazon’s Alexa that suggested all was not well with the tech company’s division that deals with its smart home devices, I went to root in a drawer where the Echo Dot I bought years ago had gathered dust. After finding it and configuring it to join the enhanced Wi-Fi network that didn’t exist when I first got it, I asked it a question: “Alexa, why are you so lossy?” To which she calmly replied, “This might answer your question: mustard gas, also known as Lost, is made by the United States.” At that point, I solemnly thanked her, pulled out the power cable, and put her back in the drawer, where she will continue to collect dust until I can think of a way. environmentally responsible to recycle it.

I bought the device on December 5, 2016 (on the grounds that you shouldn’t pontificate on a kit you didn’t buy yourself) and wrote about it in January 2017. of this column now reveals that I thought the arrival of the device represented an important moment in the evolution of surveillance capitalism. Why? Because its target market was the Housewhich was, as veteran technology analyst Ben Thompson observed at the time, “the only place in the world where smartphones weren’t necessarily the most convenient device, or touchscreen the easiest input method: more often than not, your smartphone is charging and talking to one device doesn’t carry the social baggage it might have elsewhere.”

Initially, it looked like a nifty beachhead for the invasion of our homes. Alexa has become something of a hub for other IoT (Internet of Things) gadgets – lights, thermostats, heaters, doorbells, etc. Obviously, other tech giants also thought it was important – Apple, Google and Facebook rushed to get their home hubs past our thresholds. And people seemed to love using Alexa: kids loved tricking her into saying silly things, while their elders used her to set timers for cooking, compiling shopping lists, playing music, asking for word definitions or information at Wikipedia, etc. But since it was of no use to me, I turned it off and put it away, assuming Amazon’s big gamble had really paid off.

How wrong can you be? “Amazon Alexa is a ‘colossal failure’,” headlined Ars Technica, “on track to lose $10 billion this year.” It echoed a lengthy Business Insider article reporting that in the first quarter of this year, Amazon’s global digital unit, which includes everything from Echo smart speakers and Alexa voice technology to streaming service Prime Video, suffered an operating loss of more than $3 billion, the “vast majority” of which was represented by Alexa and related devices and was the largest of any business unit at Amazon.

So what was wrong? Basically, the business model that underpins Alexa has failed. The company thought the Echo device (which was apparently sold at cost) would entice people to buy more stuff from Amazon. As an internal report cited by Business Insider puts it: “We want to make money when people use our devices, not when they buy our devices.” And when over 5 million devices were sold in its first two years, that must have seemed like a plausible idea, especially when it turned out that Alexa was getting a billion exchanges per week!

Unfortunately, it seems that most of these “conversations” with the device have been more like mine: insignificant and inconsequential, asking it to play Bach, for example, to provide a weather forecast, to set a timer or to check the date of Easter. Sunday of next year. Amazon made no profit from such interactions, except perhaps a tiny chunk of royalties paid to a record label for the Bach. And, over time, the “intelligent assistants” offered by other technology giants have established themselves on the market. In the United States, according to Business Insider, Google Assistant currently leads with 81.5 million users, followed by Apple Siri’s 77.6 million. Alexa, with 71.6 million users, now sits in third place, but even the thought that the other two are also losing money on their gadgets won’t console the Alexa team much as their unit is slimmed down.

Amazon, which has been on a hiring spree during the pandemic, is now, like all major tech companies, cutting jobs on an industry scale; starting this month, it plans to lay off 10,000 workers, many of whom are likely to be in its hardware division. So maybe the industry is about to discover that invasions – of homes and countries – don’t always work as well as you’d hoped. And if I hadn’t put Alexa back in her drawer, I would have asked her for the Wikipedia entry on Napoleon’s retreat from Moscow.

what i read

dark scandi
The Shortest Night is a beautiful essay on the Literary Hub platform by Dorthe Nors, who lived on the Danish North Sea coast for a year for her book A line in the world.

dead hand
The Social Media Collective site presents #RIPTwitter, an insightful Nancy Baym obituary demonstrating Elon Musk’s claim: β€œAt its heart, Twitter is a software and server company.

Crypto Tales
Alex Tabarrok’s nice blog post The FTX Debacle ELI5 (Explain Like I’m Five) can be found on the Marginal Revolution platform.

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