“We worried we’ve hired 10,000 people and we’ve built a smart timer.”
Alexa, Make Money
Launched in 2014, Amazon initially envisioned its Alexa, the voice assistant that comes with its Echo smart home devices, as a means to sell more products from its marketplace.
But as the Wall Street Journal reports, actual consumers have mostly ended up using it to do simple tasks like check the time or set alarms — and that’s freaking out the execs who thought it was going to make Amazon oodles of money.
“We worried we’ve hired 10,000 people and we’ve built a smart timer,” a former senior employee told the newspaper.
Indeed, as internal documents viewed by the WSJ show, Amazon has squandered tens of billions of dollars on its home devices, a pet project of founder Jeff Bezos that, along with Echo, includes Kindles, Fire TV sticks, and the company’s Ring video doorbells.
From 2017 until 2021 alone, the company lost more than $25 billion on those devices — and it’s unclear how much it lost before and after that, too.
Just Keep Selling
When the WSJ contacted Amazon, its official representatives sang a different tune.
“Hundreds of millions of Amazon devices are used by customers around the world,” the spokesperson said, “and to us, there is no greater measure of success.”
But considering that the company is now looking to fix an outdated accounting philosophy used to justify its spending on these smart devices, that statement might contain just a bit of spin.
Known as “downstream impact” or DSI, the concept dates back to 2011 and was championed by Bezos, and prescribes value to a product based on how customers spend at Amazon after they purchase it.
With Kindle e-readers, which often involve users purchasing books within the device itself, DSI makes sense. The same logic was, upon its launch, supposed to apply to Echo as well, but as the past decade has shown, people are more interested in using Alexa as a virtual assistant rather than as an assistant shopper.
Nevertheless, the devices team swelled to more than 15,000 people at one point — even as Echo continued to hemorrhage money.
“Basically DSI was the golden thing that kept us all afloat all these years,” a former Amazon employee who worked on the Echo team told the newspaper.
With such a massive loss of margin, Amazon CEO Andy Jassy is, per the WSJ‘s sources, trying to move away from DSI as a justification to keep losing money hand over fist on the glorified alarm clock — but as the company continues to try to build a better Echo, it remains to be seen whether or not it will make any money.
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