Alexa Faces Uphill Battle to Hold User Interest as Smart Speaker Sales Slow (Updated)
Updated with comments from Amazon throughout.
The greatest obstacles for Amazon’s ambitious Alexa plans are boredom with the voice assistant and a precipitous drop in smart speaker sales, according to internal Amazon memos first reported by Bloomberg Businessweek. The collection of 2018 to 2021 documents point to years when only 85% of new Alexa users are still interacting with the voice assistant after a week even as the company reported last year that the smart speaker market’s growth has shrunk to 1.2% annually and will likely stay there for several years. Amazon vehemently pushed back against the claims of the Bloomberg report. The company said that the vast majority of customers who register their devices are active a month later and beyond and that they’re as optimistic about its future as ever.
“The assertion that Alexa growth is slowing is not accurate. The fact is that Alexa continues to grow—we see increases in customer usage, and Alexa is used in more households around the world than ever before,” Amazon spokesperson Kinley Pearsall told Voicebot in an email. “Tens of millions of customers use Alexa every day, and we are as optimistic about Alexa’s future today as we have ever been.”
The bits of the documents shared in the report offer a stark contrast to the rosy picture Amazon usually paints of Alexa’s place in people’s lives. Even if users keep Alexa devices around for more than a week, that doesn’t mean they will engage with its full capabilities. A 2019 Amazon memo described how new Alexa users have already found half of all the Alexa features they will ever use within three hours, although Amazon responded that it was from 2016 and not accurate anymore.
Amazon spends a lot of money on Alexa, with 2021 fixed-cost projections of $4.2 billion and more than 10,000 employees working on something related to the voice assistant. The company’s hopes for Alexa meant that individual Echo devices have long been sold at a loss. A 2018 projection suggested $5 lost for each device in 2021, improving to just $2 of profit for a device in 2028. The point was to get Alexa into as many homes as possible and make money by leveraging Alexa as a gateway to other Amazon services.
That Amazon found a quarter of U.S. households have at least one Alexa device doesn’t mean much if they aren’t used and they won’t buy any more. As Voicebot has found in repeated surveys, setting timers, playing music, or answering basic questions are by far the most popular ways to use voice assistants. Amazon noted these are popular, but not the only popular features, adding that communications smart home controls, shopping, streaming video, and Alexa Routines are also frequently used. Amazon’s documents also acknowledge the ongoing privacy concerns that make people suspicious of voice assistants and smart home devices as a major impediment to more growth.
Ambition Over Cost
Negative numbers and projections don’t mean Amazon will write off Alexa and Alexa-enabled devices. Plans for multi-camera smart devices packed with better sensors are included in the more pessimistic projections of slowed smart speaker growth. The rapid-fire release and continual updates to Alexa devices and features just in the last few years clarifies just how much Amazon believes in Alexa. Even an abridged list would have to encompass motion and sound activation, automotive devices and software platforms for drivers, headphones and smart glasses for pedestrians, bigger smart displays and smart TVs that may as well be called smart displays, not to mention hiring stars of Hollywood, Bollywood, and the North Pole to be alternate Alexa voices.
Whether or not those are enough to get people to use Alexa more is harder to judge. Amazon is trying simple ideas like suggestions for things to try whenever a user talks to Alexa, adding suggestions to widgets on Alexa device screens, and audio app advertising tests. These may make a difference or just annoy users who don’t want to extend their interaction, but the company is optimistic nonetheless. Amazon responded to Bloomberg by contesting some of the numbers as wrong or outdated and claimed that there’s continued growth in sales of Alexa devices a rise in usage as well, giving reason to be bullish about Alexa’s future. That may be a global perspective, though, as British and German smart speaker owners use them far more than those in the U.S. and Amazon had the global lead in smart speaker sales as of last year, according to Voicebot’s data.