We don’t talk about it much anymore because of the HomePod, but there was a time when Amazon was widely praised for its Echo devices and Apple was chastised for not competing in the burgeoning smart speaker market. You try to tell kids today that smart speakers were a market apart from AI, and they won’t believe you. Pundits declared Amazon the winner and Apple the loser because Amazon sold them on the cheap and moved some units.
Ironically, it moved far fewer Echo devices than Apple sold Watches at the same time. In the fourth quarter of 2016, all smart speaker manufacturers sold about as many units as Apple sold Watches, yet Alexa was supposedly a big winner, while the Apple Watch was famously a flop.
Six years later, things were going super well for Amazon’s Alexa division. Or not, according to Ars Technica: Amazon Alexa is a ‘colossal failure,’ on pace to lose $10 billion this year.
Let’s just look at these past headlines again to drive this point home.
2017: “Apple ‘Losing Badly’ In Smart-Home Market, Needs Answer To Amazon Echo”
2022: “Amazon Alexa is a ‘colossal failure,’ on pace to lose $10 billion this year”
Losing badly… to a colossal failure.
How did Amazon get in this situation?
The report says that while the Alexa-powered Echo line is among the “best-selling items on Amazon, most of the devices sold at cost.”
Despite being the big loser here (somehow), is there a product Apple sells at cost? People have speculated from time to time that there have been, but it’s definitely not what you’d call a tentpole strategy of the company. Huge margins are more of an Apple tentpole strategy.
But, wait! Amazon could be set to make the Echo line of products profitable… with this one weird trick.
[Image of a hand turning up a dial that says “Ads”]: People regret buying Amazon smart displays after being bombarded with ads.
What?! People are not enjoying Amazon’s personalized ad experience? That can’t be right. People love ads that are tailored to them through various invasive methods of monitoring, only a few of which involve actually inserting probes into their bodies.
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And some people even like the probes. There’s a whole Reddit.
Maybe it’s not so much the ads themselves, which are surely for fine products you looked up once on a whim or actually already bought several of, and Amazon is hoping you’re addicted to. The company loves to show you an ad for a thing you just bought and are unlikely to buy again in the near future, anything from emergency jump starters to home kidney stone relief kits (don’t get them mixed up).
Anyway, how many ads could there be? It can’t be that bad, can it?
Actually, fun fact: it can! The Verge seems to indicate that you sometimes get one ad for every two of your photos when running a slideshow.
The ad reappeared two photos later, and then again. And again.
Is that a lot? That seems like a lot.
Amazon declined to comment on whether it has increased Echo Show ad loads.
[Hand turns dial up again.]
Despite losing a ton of money and laying off an army of people, the company is still releasing new Echo hardware and Alexa software. In fact, it did so just a couple of weeks ago, unveiling two new smart displays running Alexa+ (lol, pluses are so 2019), its new AI that only sometimes lies to you.
Despite the AI gold rush, it remains unclear exactly how companies are going to make money from AI. Certainly, individuals are making a tremendous amount of money out of it. The difference between now and the previous times Apple has been told it’s behind on something is that Apple seems to believe it this time. That might seem warranted once someone makes some real money off it, rather than just shuffling it around between the players.
