Amazon Lost $25 Billion on Alexa-Powered Devices

Amazon lost more than $25 billion in its devices division between 2017 and 2021. The loss came as part of a failed commercial strategy by founder and former CEO Jeff Bezos.

The Wall Street Journal reported Bezos’ approach included selling devices at a low cost to get customers to pay for additional Amazon services such as security or to shop online using the Alexa voice assistant. The news site compared the business model to Gillette selling razor handles at a low price to make money off the purchase of refill blades. But instead of purchasing more services, customers were more inclined to use Echo devices for free apps that set alarms or provide weather updates.

“We worried we’ve hired 10,000 people and we’ve built a smart timer,” stated a former senior employee. The story explained Amazon uses a downstream impact model that assigns a financial value to a service or product based on how customers spend within its ecosystem after they purchase a device. The news site’s sources stated the downstream impact model didn’t work with the sale of Echo devices.

After replacing Bezos as CEO three years ago, Andy Jassy conducted a profitability review of the company’s business divisions including the device division. His teams focused on the Alexa voice assistant and Echo device and he tasked them to find ways to monetize the device and its technology. Amazon could launch a paid tariff for Alexa this month as part of a planned revamp for the voice assistant that could also include AI features.

Amazon representative said its devices and services organization has established numerous profitable businesses for Amazon and is well-positioned to continue doing so going forward. The spokesperson went on to hint that the loss leader retail strategy is one that Amazon supports. “As a company, we measure and review our businesses through different lenses. One such lens is how our various businesses can help each other grow,” the spokesperson said.