Amazon can’t get the leverage it needs to make Alexa profitable. We tell you why.
Alexa is Amazon’s default voice assistant. Competing with Siri or Google Assistant, Assistant from Jeff Bezos’ grand old company is in the doldrums. As we saw a few days ago, Alexa will cause Amazon to lose money, roughly $10,000 million a year.
After losing this huge amount, Alexa was sidelined for various reasons. One wonders why Assistant might turn out to be a missed opportunity for big American business.
Amazon doesn’t make a profit from selling devices with Alexa
The first and foremost problem we have with Alexa today is that Amazon cannot make a profit by selling its Alexa products like Echo speakers, alarm clocks, etc. These devices are sold at cost and Amazon does not make any profit from these devices.
Maintenance of servers and building equipment is very expensive for the company. The low adjusted prices of these devices for Amazon make it unprofitable to maintain such a division as it currently is.
We use Alexa in a very basic way
Users use the wizard in a very basic way. That means we usually use the Assistant to play music, ask the weather of a place, or occasionally set an alarm.
Alexa, at first glance, was a very good idea for the consumer, which was not used by customers, was forgotten or removed from the assistant. At that time, they added the option to order online on different platforms. The truth is, we never use the features of this style. It should be added that orders cannot be fully monetized, so Amazon does not have a high profit margin.
Amazon is missing a golden opportunity with Alexa
Alexa isn’t quite ready to step up to the level Amazon is looking to get real value out of. Alexa can already control and automate a home, but it can do so from the same app, which suggests it’s not as automated as one would like. And, as we have seen, renovating or maintaining a house in this style today can be very expensive, which sometimes makes you wonder if it is really profitable to take the plunge.
Assistant can be configured to perform many functions such as routines. Imagine an autonomous home with multiple functions such as an assistant notifying us when the washing machine is finished or when we enter the house, when the lights turn on automatically.
We think Alexa is a completely missed opportunity for Amazon and us. For example, imagine that an assistant warns us before leaving the house (without asking us) that it is going to rain (without asking us) to bring an umbrella, or suggests a faster way to reach a destination that is more useful to us. You want to know where you’re going without having to ask.
However, to date, Amazon continues to lose billions of dollars from the Alexa division, so we can understand why the company is considering ditching the division. The future will determine whether assistants like Alexa continue to be useful and improve to make businesses profitable, or whether they are discontinued forever.