Amazon-Branded Device Business Losses Estimated in the Billions of Dollars

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A detailed report in The Wall Street Journal last week says that Amazon.com lost a massive amount of money in the Amazon-branded device business it developed over the years since it launched the first Amazon Echo in 2014. [ Subscription required to read The Wall Street Journal article on their website. If you don’t subscribe, refer to archives such as archive.ph for full text. ]

Dana Mattioli of the WSJ said, “Between 2017 and 2021, Amazon had more than $25 billion in losses from its devices business, according to the documents. The losses for the years before and after that period couldn’t be determined.”

The article also said:

When Amazon launched the Echo smart home devices with its Alexa voice assistant in 2014, it pulled a page from shaving giant Gillette’s classic playbook: sell the razors for a pittance in the hope of making heaps of money on purchases of the refill blades.”

The blades in this case are the additional e-commerce sales that Amazon hoped it would generate from “voice commerce.” This is leveraging the existence of Echos in millions of homes to provide a friction free way of ordering or re-ordering products from Amazon.

Echos Sold At or Below Cost to Dominate Worldwide Market

Amazon priced Echo devices at or below manufacturing and distribution cost, in order to dominate the smart speaker space. As a result of this pricing and relentless aggressive marketing, Amazon has sold over 500 million Alexa-enabled devices worldwide.

The Amazon Echo is one of the products in the Amazon-branded device businesses
Amazon Echo (Photo: brewbooks licensed under CC-BY-SA-2.0)

Alexa-based Home Automation has been a Secondary or Tertiary Feature

In response to this article, an insightful commenter on Hacker News wrote:

The core issue is that Amazon envisioned Alexa as a product that would help it increase sales. Smart home features were always an afterthought. How convenient would it be if people could shout ‘Alexa order me Tide Pods’ from wherever they were in their home and the order got magically processed? That demo definitely got applause from a boardroom full of execs. The problem is that consumers don’t behave like that….

If they want to salvage Alexa, they need to forget shopping and start doubling down on the smart home and assistant experience. The tech is still pretty much where it was in 2014. Alexa can set timers and tell me the weather, and…that’s basically it. Make it a value add in my life and I wouldn’t mind paying a subscription fee for it.

So– Does Operation Gadget Love Siri?

Operation Gadget tries to hold Siri and Alexa to the same standard. Neither is a perfect voice assistant.

The question is, what are each of these voice assistants designed to do?

This article illustrates that, up to now, Amazon has designed Alexa to support their e-commerce business. It isn’t designed to be a great voice assistant. It is certainly not designed as a front end to a Large Language Model. And, as many people will tell you, Alexa wasn’t designed to be the hub for smart home automation.

Rightly or wrongly, Apple has designed Siri for user experience consistency across a wide variety of devices. This means that you have a voice assistant which appears to be the same across devices as different as:

  • AppleTV 4K, HomePod, HomePod mini, Mac mini, iMac, and other desktop Macintoshes, devices with and without screens which are physically plugged into a power outlet in a specific room in your home,
  • iPhone, iPad, Apple Watch, MacBook, and Vision Pro, devices with screens which you carry with you, but often do not know exactly where they are within your home.
  • Apple AirPods, devices without screens which you carry with you and generally do not know exactly where they are.

We are in the process of producing articles and video showing why these Siri experiences are often subtly and frustratingly different. In some cases, this is by design or necessity.

Adding Apple Intelligence in iOS 18, MacOS Sequoia, and the next versions of TVos, WatchOS, and VisionOS will help in some respects, but will not solve all of the issues for which people criticize Siri. This is likely to be the case until Apple stops emphasizing user experience consistence to the extent that it does today.

Operation Gadget Recommends Some Amazon.com-Designed Products, But Not Echos

Operation Gadget recommends some smart home products by Amazon.com but not others. We like eero Mesh WiFi networking products very much, see A Mesh WiFi Network is Important to Apple Home Success. But we have not recommended Amazon Echo devices as discussed in Why Home Automation in the Apple Ecosystem.

The issue with the Echo devices from an Apple user’s perspective is, why should you have two different voice assistants to interact with smart home devices?

We all have friends and relatives who adopted Amazon Echo before Apple came out with a HomePod. Many were attracted to Echo and Alexa by the novelty of them. Some adopted home automation because Amazon built integrations with third parties rapidly.

But rapid integration sometimes turned out to be rushed. Not enough thought was given to end-user privacy or security. This included some businesses they created internally, like Echo, and businesses they acquired and integrated, like Ring Video Doorbells (See Were Ring Customers Victimized by a Ransomware Gang?).

Older Adults Often Given Echos and Smart Outlets as Gifts

Some people give Echo devices to older relatives because Echos are the least-cost way of adding voice-activated smart outlets to a home. While this can be a real time and effort saver for the elderly, if the older person is also an iPhone or iPad user, wouldn’t they be better off using only one voice assistant?

HomePod mini is Better at Home Automation than Echo When UX Consistency, Privacy, and Security are Considered

Operation Gadget recommends building a smart home with several factors in mind that are sometimes afterthoughts:

  • User Experience Consistency
  • User Privacy
  • Network Security

HomePod minis are only a bit more expensive than Amazon Echos. But HomePod minis are arguably better smart speakers than Echos when these factors are considered.


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