The Amazon business unit that focuses on Alexa-powered gadgets lost $25 billion between 2017 and 2021, The Wall Street Journal (WSJ) reported this week.
Amazon claims it has sold more than 500,000 Alexa devices, which included Echo speakers, Kindle readers, Fire TV sets and streaming devices, and Blink and Ring smart home security cameras. But since debuting, Alexa, like other voice assistants, has struggled to make money. In late 2022, Business Insider reported that Alexa was set to lose $10 billion that year.
WSJ said it got the $25 billion figure from “internal documents” and that it wasn’t able to determine the Devices business’s losses before or after the shared time period.
“No profit timeline”
WSJ’s report claims to offer insight into how Devices was able to bleed so much money for so long.
For one, it seems like the business unit was allowed some wiggle room in terms of financial success in the interest of innovation and the potential for long-term gains. Someone the WSJ described as being “a former longtime Devices executive” said that when Alexa first started, Amazon’s gadgets team “didn’t have a profit timeline” when launching products.
Amazon is known to have sold Echo speakers for cheap or at a loss in the hopes of making money off Alexa later. In 2019, then-Amazon Devices SVP Dave Limp, who exited the company last year, told WSJ: “We don’t have to make money when we sell you the device.” WSJ noted that this strategy has applied to other unspecified Amazon devices, too.
People tend to use Alexa for free services, though, like checking the weather or the time, not making big purchases.
“We worried we’ve hired 10,000 people and we’ve built a smart timer,” a former senior employee told the WSJ.
An Amazon spokesperson told the WSJ that more than half of people with an Echo have shopped with it but wouldn’t provide more specifics. Per “former employees on the Alexa shopping team” that WSJ spoke with, however, the amount of shopping revenue tied to Alexa is insignificant.
In an emailed statement, an Amazon spokesperson told Ars Technica, in part:
Within Devices & Services, we’re focused on the value we create when customers use our services, not just when they buy our devices. Our Devices & Services organization has established numerous profitable businesses for Amazon and is well-positioned to continue doing so going forward.
Further hindering Alexa’s revenue are challenges in selling security and other services and the limitation of ad sales because they annoy Alexa users, WSJ reported.
Massive losses also didn’t seem to slow down product development. WSJ claimed the Devices business lost over $5 billion in 2018 yet still spent money developing the Astro consumer robot. That robot has yet to see general availability, while a business version is getting bricked just 10 months after release. Amazon Halo health trackers, which have also been bricked, and Luna game-streaming devices were also developed in 2019, when the hardware unit lost over $6 billion, per WSJ.
Amazon has laid off at least 19,000 workers since 2022, with the Devices division reportedly hit especially hard.