Amazon launches cost-cutting review focusing on Alexa

[issybird]

An article in the WSJ yesterday says Amazon is looking to cut costs in its Alexa devices division, which has had annual losses of up to $5 billion annually in some recent years.

As part of the monthslong cost-cutting review, Amazon’s leadership is closely evaluating its Alexa business, according to some of the people. The business has more than 10,000 employees and is a major recipient of investment capital, some of the people said. Internal documents viewed by The Wall Street Journal show that in some recent years Amazon’s devices unit, which includes Alexa, had an operating loss of more than $5 billion a year.

Amazon is currently considering whether it should focus on trying to add new capabilities to Alexa, a voice assistant available on a variety of Amazon devices. Adding capabilities would require greater investment, and many customers use Alexa for only a few functions, some of the people said.

Presumably the data they’re mining, and we all know she’s listening, doesn’t offset the costs. The R&D must be stratospherical. But how to limit the losses? I don’t see raising prices on the devices as a winning strategy; in part because the ones people already have are mostly good enough so the only incentive to upgrade is a deal and in part because it’s a one-off in terms of income for perpetual access.

Could they possibly consider making it a subscription service? Perhaps basic functionality for free but you pay for premium?

[JSWolf]

If Amazon was to make Alexa a subscription service, it would tank. Unless new features were added as part of Prime.

[DiapDealer]

Are we certain it's the Alexa devices division which has had annual losses of up to $5 billion annually in some recent years?

I'm reading this a little bit differently:

Internal documents viewed by The Wall Street Journal show that in some recent years Amazon’s devices unit, which includes Alexa, had an operating loss of more than $5 billion a year.

I'm reading that to say that Amazon devices unit in general had an operating loss of more than $5 billion a year. Wouldn't the Amazon’s devices unit include all Kindle readers, tablets, Firesticks/cubes, Echo, Ring, glasses, earbuds, etc... ?

I still don't know what the answer is, but I'm just thinking that the $5 billion loss is not being attributed directly to the Alexa unit itself, but rather the whole of the Amazon devices unit (of which Alexa is a part).

[JSWolf]

Would this also include Amazon Basics?

[tomsem]

I think Amazon has been subsidizing Alexa unit heavily in an attempt to capture 'smart home' and 'personal assistant' market share, since the beginning. Alexa-powered devices like Echo are cheap and probably don't generate much if any profit. And Amazon has a bewildering lineup of these things. They can easily cut that lineup in half.

The value to amazon is in the user data, selling other smart devices (security, 'smart' appliances) and potential to Sell Stuff By Voice. But I don't think demand for those products is growing very robustly except with geekier folks. (Smart TVs are the exception: it's impossible to by a TV that isn't 'smart', whether you like it or not. It's definitely more convenient to search for content via voice, and in some cases, to launch playback of something, but that doesn't need to be very smart.)

I'm a geek myself but don't have much use for 'intelligent assistants' or 'smart home' devices . We went through a phase talking with Echos but the novelty wore off. I never ordered anything from Amazon with a voice command, or had any desire to put one in every room of the house.

We've replaced them with HomePods, but barely talk to them, and have exactly one smart light switch (set up as a timer; I've never asked Siri to turn it on or off).

But AI/ML is a thing worth investing in for its own sake, and has a broad range of potential applications. I don't see Amazon laying off a bunch of their engineers.

[tomsem]

Originally Posted by JSWolf

Would this also include Amazon Basics?

They are reportedly cutting back on Amazon Basics products, but that's nothing to do with Alexa division. It's probably not profitable enough, and it undercuts some of their third party sellers, and invites lawsuits and bad press.

[ZodWallop]

Originally Posted by DiapDealer

Wouldn't the Amazon’s devices unit include all Kindle readers, tablets, Firesticks/cubes, Echo, Ring, glasses, earbuds, etc... ?

I would assume the Kindle readers do make money. I'm basing this guess on the Kindle having direct competition from much smaller players whose devices are similarly priced. Unlike the Fire tablets, which are known for being good deals, Kindles cost the same as everyone else and have the additional $20 to get rid of ads (or they have the ads).

Jeff didn't go into the breakdown of Kindle profits on our last phone chat. But if Amazon with all its advantages isn't making at least some profit on its Kindles, someone should be fired.

[JSWolf]

Originally Posted by ZodWallop

I would assume the Kindle readers do make money. I'm basing this guess on the Kindle having direct competition from much smaller players whose devices are similarly priced. Unlike the Fire tablets, which are known for being good deals, Kindles cost the same as everyone else and have the additional $20 to get rid of ads (or they have the ads).

Jeff didn't go into the breakdown of Kindle profits on our last phone chat. But if Amazon with all its advantages isn't making at least some profit on its Kindles, someone should be fired.

Good idea. Fire the Kindle staff and get new staff that can make decent Kindle firmware and Kindle apps.

[DiapDealer]

Originally Posted by ZodWallop

I would assume the Kindle readers do make money. I'm basing this guess on the Kindle having direct competition from much smaller players whose devices are similarly priced. Unlike the Fire tablets, which are known for being good deals, Kindles cost the same as everyone else and have the additional $20 to get rid of ads (or they have the ads).

Jeff didn't go into the breakdown of Kindle profits on our last phone chat. But if Amazon with all its advantages isn't making at least some profit on its Kindles, someone should be fired.

I'm not questioning whether one aspect/device-line is profitable or not. Nor do I care. I'm trying to determine what all falls under the "Amazon’s devices unit" (of which the Alexa division is a part) mentioned in the article quoted in the OP.

[JSWolf]

Originally Posted by DiapDealer

I'm not questioning whether one aspect/device-line is profitable or not. Nor do I care. I'm trying to determine what all falls under the "Amazon’s devices unit" (of which the Alexa division is a part) mentioned in the article quoted in the OP.

My guess is Amazon Basics, Alexa, Kindle, Fire, Firestick, and Eero.

[tomsem]

Originally Posted by JSWolf

My guess is Amazon Basics, Alexa, Kindle, Fire, Firestick, and Eero.

Amazon Basics is a brand for commodity items (batteries, toilet paper, cables, bed sheets, monitor mounts, office furniture, you name it). It is not in Devices group.

Kevin Keith is VP of Amazon Devices. He's been interviewed a couple of times on The Kindle Chronicles, most recently:

http://thekindlechronicles.com/tkc-698-kevin-keith

I think Len will be interviewing him again with the next installment, Amazon invited him to visit Seattle office this week to celebrate TKC 700.

[ZodWallop]

Originally Posted by DiapDealer

I'm not questioning whether one aspect/device-line is profitable or not. Nor do I care. I'm trying to determine what all falls under the "Amazon’s devices unit" (of which the Alexa division is a part) mentioned in the article quoted in the OP.

I wasn't at all disagreeing with your comment. I'm sure it is likely correct. It just made me start thinking about whether Kindle devices themselves were a loss leader or not. I would guess they are not.

[ZodWallop]

Originally Posted by JSWolf

My guess is Amazon Basics, Alexa, Kindle, Fire, Firestick, and Eero.

I don't think Amazon Basics is an Amazon device.

[haertig]

After years of "No way would I put an Amazon listening device into my home!", I decided "Why not? We don't talk about anything sensitive." It's not like many people are verbally rattling off their social security numbers, bank account numbers, and passwords on a routine basis. My initial resistance came from decades of work in the computer industry, some of those in network and server security.

I added several Alexa devices (Echo Dots) around the house and put them all on a separate VLAN so any potential hackers would not be able to get to our computers on the primary LAN. It is very convenient when cooking to say "Alexa, set a steak timer for 7 minutes." Then "Alexa, set a corn timer for 5 minutes." Then "Alexa, what temperature do you bake salmon at?" And then at night, "Alexa, turn off downstairs lights." "Alexa, set an alarm for 8am." And when I run out of something in the kitchen, "Alexa, tell Our Groceries to add milk." and have that show up on my phone while I'm in the grocery store.

So I went from "Never, not in my house!" to "Seven Echo Dots? I think that's enough for now. But I have spares if one goes bad." If you wait for Amazon's frequent sales, an Echo Dot is like $10 or less.

Bottom line: There are plenty of easier and more productive ways to steal people's personal information than listening in on random Alexa devices hoping someone will suddenly vocalize their name and social security number for some unknown reason.

Smug people will say, "I'm more secure than to have that stuff in my house." But just ask them, "But do you have an internet connection into your house?" Then watch them hem and haw. Most likely, they won't even know enough about security to realize they should be hemming and hawing in the first place. If you really want security, you've got to disconnect the internet. Period. But that's a bridge too far for most people, including some that claim they are security conscious. "Well, other than that, I am secure." Right.

[Uncle Robin]

Originally Posted by haertig

Smug people will say, "I'm more secure than to have that stuff in my house." But just ask them, "But do you have an internet connection into your house?" Then watch them hem and haw. Most likely, they won't even know enough about security to realize they should be hemming and hawing in the first place. If you really want security, you've got to disconnect the internet. Period. But that's a bridge too far for most people, including some that claim they are security conscious. "Well, other than that, I am secure." Right.

To claim that having any listening device (admitted by its makers to be intended for data collection) is no less secure than having any internet connection at all, is a step (or 7) too far. I'm no Scheier, but I do know that it is possible to have a useful internet connection and maintain a tolerable level of security, with minimal handoff of personal data. If others make other choices, that's fine for them, but to claim that there is no essential difference smacks of defensiveness. It is simply not true.