Amazon bet that smart devices like Alexa would bring in major revenue, prompting the behemoth to invest major cash in them. But it turns out that wager cost the company billions, the Wall Street Journal reports, and they're now attempting to turn the tide on those losses. The logic starts with the company's willingness to sell some products at a loss. "Hundreds of millions of Amazon devices are used by customers around the world, and to us, there is no greater measure of success," a rep says. That measure also refers to a longstanding Amazon tactic—as an online shopping giant, the company can eat losses that would tank smaller players. Cleo notes that this tactic helped shape the future of e-commerce once Amazon hit the scene, and define the online shopping experience, ushering in the Amazon effect.
Devices like Echos, video doorbells, and Fire TV Sticks tend to cost more to manufacture and sell than their list prices. But the company envisioned profits in the downstream impact of an Amazon ecosystem, with customers constantly asking Alexa to purchase items from Amazon. Instead, people used free features, like alarm clocks and weather reports. "We worried we've hired 10,000 people and we've built a smart timer," a former senior employee tells the Journal. Between 2017 and 2021, the company reportedly lost $25 billion on their devices. But an abrupt turn in swallowing such losses shows a shift in how much top brass are willing to lose.
The Journal says CEO Andy Jassy is showing less tolerance toward a long-game loss, and will introduce changes like tier pricing to make up the difference. Former CEO Jeff Bezos teased that changes were coming, and they'd be worth it. "Alexa is about to get a lot smarter," he said on a podcast. Per the Journal, employees are under pressure to turn around new features that justify adding a price tag to Alexa use. "The technology isn't there, but they have a deadline," an anonymous team member says. (One terrible Amazon review ravaged a small business.)
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