Amazon Alexa is a “colossal failure,” on pace to lose $10 billion this year

Amazon is going through the largest layoffs in the company's history with a plan to eliminate some 10,000 jobs. The Amazon voice assistant unit is falling out of favor among the company's customers. Business Insider reported on the downfall of the voice assistant and Amazon's hardware division.

Amazon's voice assistant, which has been around for 10 years, has been copied a lot by other companies. The service doesn't make any money because it never created an ongoing revenue stream. The hardware team is on track to lose $10 billion this year, according to a report. Amazon seems to be tired of burning through cash.

A division in crisis

A number of current and former employees on the company's hardware team described a division of crisis. One former employee called the plan to monetizeAlexa a failure of imagination and a wasted opportunity. The layoffs this month are the culmination of years of trying to turn things around. When Jeff Bezos was the company's CEO, he gave the company's voice assistant a big runway. A crisis meeting was held to try to turn the monetization problem around, but it was not successful. Around 2020 Bezos lost interest in the project after seeing a hiring freeze and a lack of interest in the project. Andy Jassy, Amazon's new CEO, doesn't seem to be interested in protectingAlexa.

Most of the devices sold at cost are among the best-selling items on Amazon. One internal document said the business model was to make money when people use their devices, not when they buy their devices.

The plan never came to fruition. The hope was that people would use their voice to purchase things on Amazon. A lot of people don't want to trust an artificial intelligence with their money or purchases. By the fourth year of the experiment, most of the conversations were trivial commands to play music or ask about the weather. The questions are not monetizable.

Amazon tried to partner with companies to make it easier for people to use their voice to order Domino's pizza or make an appointment with an online service. The team stopped posting sales targets in 2020. Studies show that the financial contribution of users who are more likely to spend at Amazon, even if they aren't shopping by voice, fell short of expectations.

In a public note to employees, Jassy said that the company still has "conviction in pursuing" the voice assistant. One employee told Business Insider that since the hardware isn't profitable, there's no incentive to keep iterating on popular products. A lack of direction led to the creation of the Astro robot. According to Business Insider's tracking, Amazon's voice assistant is third in the US with 71.6 million users, behind Apple's voice assistant and the Google assistant.

Are all voice assistants doomed?

Time is running out for Big Tech voice assistants. People seem to be struggling with them. There were basically the same problems with the business model of the assistant. There is an inability to monetize the simple voice commands most consumers actually want to make, and all of the attempts to monetize assistants with display ads and company partnerships have failed. Amazon responded to the product being a big money loser by cutting resources to the unit.

Apple's smart speaker plans focused more on the bottom line than the other two companies did. The $350 price of the original HomePod was more expensive than the competition, but it was a sustainable business model. The OG HomePod was killed in the year 2021. Apple isn't giving up on the idea of a big speaker, with a comeback supposedly in the works. Apple is trying to make more money from ads, even though it can be a loss leader for the iPhone.