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> In 2018, Echo and Alexa lost about $5 billion, said a person with knowledge of the finances. When Amazon introduced new devices this fall in an annual event,

> In 2018, Echo and Alexa lost about $5 billion, said a person with knowledge of the finances. When Amazon introduced new devices this fall in an annual event, it was notably more restrained than past years when it had featured zany products like a sticky note printer and $1,000 home robot. $5B loss from one business line is a lot. Maybe this manner of investment inspired Zuck on the metaverse.

sokoloff 4y ago
$5B is around 1% of their (current) trailing 4 quarter revenue, which I would say is "not outrageous" if voice/home assistants is an area of growth and investment for Amazon. Why would a 2022 article be citing a 2018 loss figure for a almost surely (if my house is any indication) fast-growing segment?
- fshbbdssbbgdd 4y ago
  Amazon doesn’t release info about the Alexa category in their earnings, so any reporting can only rely on whatever figure has been leaked.
  - sokoloff 4y ago
    That seems like reporting on Meta's 2022 losses in virtual reality in late 2026, which would seem absurd, even if that's the best/only information they have at that time. (At some point, you have to admit "we don't have any relevant information" rather than report on "the least irrelevant information we can find".)
    - fshbbdssbbgdd 4y ago
      The story does note how old the figure is, so readers can take it with a grain of salt as appropriate. You could think of reporting on selective leaks like this as kind of a needling for Amazon to release more up-to-date info.
- green-eclipse 4y ago
  Amazon's hallmark in the past has been investing big into businesses without immediate profits. Amazon gets massive revenue but has nowhere near the margins of an Apple, or Google. As you know, a net loss and revenue are not apples to apples. For full year 2018, Amazon had net income of $10B on $232B of revenue. All of which is to say that a $5B loss is a very material number. They obviously thought it would be a big profit driver in the future, which it has not turned out to be yet.
mabbo 4y ago
I just don't see the path to profitability for Alexa. Like, sure, it's neat, but how does it make any money? Do they sell the devices at a profit? Does usage of the devices lead to increased sales on Amazon.com? Are those sales that wouldn't have taken place on the app/website otherwise?
- kevmo 4y ago
  Having a microphone/speaker in people's houses seems like a great way to collect a ton of data & guide their behavior.
  - lotsofpulp 4y ago
    Is it collecting that data when not spoken to?
    - deleted 4y ago
      [deleted]
    - Godel_unicode 4y ago
      No.
  - 0cf8612b2e1e 4y ago
    What behavior do they hope to collect that is not a huge privacy liability with the effort? They already know where millions of people spend their money (not say they will buy, but actually follow through).
  - mabbo 4y ago
    No security researcher has ever found proof that they are "always on" and recording everything people say. If they were, it would be front-page news and Amazon would have government investigations. The devices listen for their wake word before ever transmitting data to the cloud. (This is also because the sheer amount of bandwidth needed for always-on would be un-economical even for Amazon).
0cf8612b2e1e 4y ago
How is that much loss possible? Not a hardware engineer, but from the exterior it feels like there is nothing exotic about the design which would warrant extravagant development costs. Have they been funneling billions of RD into the software side, or are the units comically underpriced and have a BoM in the hundreds?
- colinmhayes 4y ago
  They’re probably selling every unit at a loss. A big part of the Amazon smart home stuff also has to be the data it collects and the way it integrates with ordering off the retail site which might not have been counted here.
- arcturus17 4y ago
  My intuition is that it's a) very high R&D costs coupled with b) being partly a hardware play, where unlike software, marginal cost of distribution does not tend to zero and where it's therefore much easier to lose money per unit sold.
- horsawlarway 4y ago
  My wager is that the devices are sold as a loss leader. Then on top the software development is fairly novel - so they're probably spending quite a bit on development efforts related to the devices. They're eating the costs for running the backend processing for all of these devices (they're sold as a one time fee, despite requiring services provided by Amazon servers). Finally - they were promoting the ever loving shit out of the development tooling to app developers for a long time with a lot of seminars, development guides, free services on aws, etc. --- My strong guess is they wanted them work out the same way Kindles have - loss leaders that more than make up for it by securing digital goods purchases. But personally - I spend lots of money on amazon for books for my Kindle, and I spend basically nothing related to Alexa (there's literally just nothing I want to buy through it). Lately my Alexa has started inserting promotional content into the standard voice responses (bs like "Alexa what time is it" returns the time, and then a "and it's a good time to watch the new Rings of Power tv show? should I tell you about it?"). They're going to go into the trash shortly at this rate. I'll switch to a self hosted replacement like mycroft or something.
softwaredoug 4y ago
I never got the value of voice devices. In my experience you learn how to make them do 1-2 things. You learn a few patterns. But beyond that, even if they work 95% of the time, that 1 in 20 is annoying enough to make me not want to use it and just push a few buttons. Maybe case in point is using voice in the car. It should be the best, most obvious application. Yet aside from maybe texting, people want things like Apple CarPlay - a big touchscreen - not voice commands.
- kypro 4y ago
  Combine this with the privacy concerns and that's why I've never brought one personally. I know a lot of people who have them but rarely ever use them. The only good use case I've seen is if you're having a conversation / debate with someone you can use them as a real-time fact checker.
- cmsj 4y ago
  CarPlay and Siri is a pretty compelling pairing though. Looking/touching is dangerous while driving, so that is minimised by also being able to talk to the robot.
  - ghaff 4y ago
    It would be nice were that actually the case. However, in practice, I tend to find that doing most things just using voice with my hands on the wheel and eyes on the road ends up being a really frustrating experience. This isn't a particular knock on Siri specifically. I'm pretty sure I'd find Google or Alexa similarly annoying in the same context. As someone says up-thread, Alexa at home is fine for a few formulaic things that I know the incantation for and pretty useless for everything else.
    - mrtranscendence 4y ago
      I'm not a big user of Siri, but I've had better luck than you describe. Siri will reliably play songs and podcasts I request; read out text messages; transcribe my response to text messages; and find directions to places. This is about as much as I really want.
nblgbg 4y ago
I worked for Alexa before. If I remember correctly there are only 4 use cases of it like weather, smart devices, music and timers/alarms. There used to be 10k employees at that time of which 3k were working in music alone. There was definitely a bloat at that time. The third party ecosystem never caught up and there is no killer app for Alexa other than those 4 use cases. The API (slots/intents) is limited and hard to create any useful interaction with it. My gut feeling is many divisions will be affected in Alexa.
- ghaff 4y ago
  That describes me to a T. It's a convenient alarm in my bedroom and sometimes timer in the kitchen. Good for a cursory weather report if I don't need all the details. Sometimes play some music before going to sleep. Use it to turn my bedroom light on and off. That's about it.

sokoloff 4y ago

$5B is around 1% of their (current) trailing 4 quarter revenue, which I would say is "not outrageous" if voice/home assistants is an area of growth and investment for Amazon. Why would a 2022 article be citing a 2018 loss figure for a almost surely (if my house is any indication) fast-growing segment?

fshbbdssbbgdd 4y ago
Amazon doesn’t release info about the Alexa category in their earnings, so any reporting can only rely on whatever figure has been leaked.
- sokoloff 4y ago
  That seems like reporting on Meta's 2022 losses in virtual reality in late 2026, which would seem absurd, even if that's the best/only information they have at that time. (At some point, you have to admit "we don't have any relevant information" rather than report on "the least irrelevant information we can find".)
  - fshbbdssbbgdd 4y ago
    The story does note how old the figure is, so readers can take it with a grain of salt as appropriate. You could think of reporting on selective leaks like this as kind of a needling for Amazon to release more up-to-date info.
green-eclipse 4y ago
Amazon's hallmark in the past has been investing big into businesses without immediate profits. Amazon gets massive revenue but has nowhere near the margins of an Apple, or Google. As you know, a net loss and revenue are not apples to apples. For full year 2018, Amazon had net income of $10B on $232B of revenue. All of which is to say that a $5B loss is a very material number. They obviously thought it would be a big profit driver in the future, which it has not turned out to be yet.

mabbo 4y ago

I just don't see the path to profitability for Alexa. Like, sure, it's neat, but how does it make any money? Do they sell the devices at a profit? Does usage of the devices lead to increased sales on Amazon.com? Are those sales that wouldn't have taken place on the app/website otherwise?

kevmo 4y ago
Having a microphone/speaker in people's houses seems like a great way to collect a ton of data & guide their behavior.
- lotsofpulp 4y ago
  Is it collecting that data when not spoken to?
  - deleted 4y ago
    [deleted]
  - Godel_unicode 4y ago
    No.
- 0cf8612b2e1e 4y ago
  What behavior do they hope to collect that is not a huge privacy liability with the effort? They already know where millions of people spend their money (not say they will buy, but actually follow through).
- mabbo 4y ago
  No security researcher has ever found proof that they are "always on" and recording everything people say. If they were, it would be front-page news and Amazon would have government investigations. The devices listen for their wake word before ever transmitting data to the cloud. (This is also because the sheer amount of bandwidth needed for always-on would be un-economical even for Amazon).

0cf8612b2e1e 4y ago

How is that much loss possible? Not a hardware engineer, but from the exterior it feels like there is nothing exotic about the design which would warrant extravagant development costs. Have they been funneling billions of RD into the software side, or are the units comically underpriced and have a BoM in the hundreds?

colinmhayes 4y ago
They’re probably selling every unit at a loss. A big part of the Amazon smart home stuff also has to be the data it collects and the way it integrates with ordering off the retail site which might not have been counted here.
arcturus17 4y ago
My intuition is that it's a) very high R&D costs coupled with b) being partly a hardware play, where unlike software, marginal cost of distribution does not tend to zero and where it's therefore much easier to lose money per unit sold.
horsawlarway 4y ago
My wager is that the devices are sold as a loss leader. Then on top the software development is fairly novel - so they're probably spending quite a bit on development efforts related to the devices. They're eating the costs for running the backend processing for all of these devices (they're sold as a one time fee, despite requiring services provided by Amazon servers). Finally - they were promoting the ever loving shit out of the development tooling to app developers for a long time with a lot of seminars, development guides, free services on aws, etc. --- My strong guess is they wanted them work out the same way Kindles have - loss leaders that more than make up for it by securing digital goods purchases. But personally - I spend lots of money on amazon for books for my Kindle, and I spend basically nothing related to Alexa (there's literally just nothing I want to buy through it). Lately my Alexa has started inserting promotional content into the standard voice responses (bs like "Alexa what time is it" returns the time, and then a "and it's a good time to watch the new Rings of Power tv show? should I tell you about it?"). They're going to go into the trash shortly at this rate. I'll switch to a self hosted replacement like mycroft or something.

softwaredoug 4y ago

I never got the value of voice devices. In my experience you learn how to make them do 1-2 things. You learn a few patterns. But beyond that, even if they work 95% of the time, that 1 in 20 is annoying enough to make me not want to use it and just push a few buttons. Maybe case in point is using voice in the car. It should be the best, most obvious application. Yet aside from maybe texting, people want things like Apple CarPlay - a big touchscreen - not voice commands.

kypro 4y ago
Combine this with the privacy concerns and that's why I've never brought one personally. I know a lot of people who have them but rarely ever use them. The only good use case I've seen is if you're having a conversation / debate with someone you can use them as a real-time fact checker.
cmsj 4y ago
CarPlay and Siri is a pretty compelling pairing though. Looking/touching is dangerous while driving, so that is minimised by also being able to talk to the robot.
- ghaff 4y ago
  It would be nice were that actually the case. However, in practice, I tend to find that doing most things just using voice with my hands on the wheel and eyes on the road ends up being a really frustrating experience. This isn't a particular knock on Siri specifically. I'm pretty sure I'd find Google or Alexa similarly annoying in the same context. As someone says up-thread, Alexa at home is fine for a few formulaic things that I know the incantation for and pretty useless for everything else.
  - mrtranscendence 4y ago
    I'm not a big user of Siri, but I've had better luck than you describe. Siri will reliably play songs and podcasts I request; read out text messages; transcribe my response to text messages; and find directions to places. This is about as much as I really want.

nblgbg 4y ago

I worked for Alexa before. If I remember correctly there are only 4 use cases of it like weather, smart devices, music and timers/alarms. There used to be 10k employees at that time of which 3k were working in music alone. There was definitely a bloat at that time. The third party ecosystem never caught up and there is no killer app for Alexa other than those 4 use cases. The API (slots/intents) is limited and hard to create any useful interaction with it. My gut feeling is many divisions will be affected in Alexa.

ghaff 4y ago
That describes me to a T. It's a convenient alarm in my bedroom and sometimes timer in the kitchen. Good for a cursory weather report if I don't need all the details. Sometimes play some music before going to sleep. Use it to turn my bedroom light on and off. That's about it.