Amazon has been losing money on Echo smart speakers, a reality that has been an open secret throughout Alexa's existence. This situation stems from a loss leader strategy that only a company of Amazon's scale can sustain for a decade.

Selling hardware at a loss can be a smart move, similar to the printer and razor markets, where companies offset losses through recurring sales of ink cartridges and blades.

From a saturation perspective, Amazon's approach has been successful. Earlier this year, founder Jeff Bezos claimed that Alexa is now present in 100 million homes across 400 million devices.

However, the financial realities tell a different story. A recent report from The Wall Street Journal revealed that Amazon's devices division lost a staggering $25 billion from 2017 to 2021, with the Alexa division reportedly losing $10 billion in 2022 alone.

At some point, a loss leader becomes just a loss. This harsh reality hit hard at the end of 2023, resulting in the layoffs of several hundred employees from the Alexa unit. Eleven-digit annual losses, combined with a challenging macroeconomic outlook, create an untenable situation, even for a company with over $600 billion in annual revenue.

Alexa isn't the only smart assistant that has faced challenges in recent years. Alongside others like Bixby and Cortana, which have been completely phased out, consumer enthusiasm for Google Assistant and Siri has also diminished.

However, both Google and Apple have recently indicated they're not ready to abandon their smart assistants. Siri was highlighted at WWDC in June as Apple reinvigorated the brand through its new Apple Intelligence initiative. Similarly, Google confirmed this week that Assistant will receive a boost powered by Gemini in the home environment.

A Bloomberg report from 2021 noted that despite Alexa's popularity, most queries revolve around three main tasks: playing music, controlling lights, and setting timers.

A former senior Amazon employee candidly expressed concerns to the WSJ: “We worried we’ve hired 10,000 people and we’ve built a smart timer.” This critique encapsulates much of the published criticism directed at Alexa over the past decade.

While Amazon continues to release Echo devices, including a recently announced upgraded Spot, the pace has slowed. There is undoubtedly a lot of introspection occurring within the company. Like Google and Apple, Amazon views generative AI as a potential lifeline for Alexa.

The “10,000-person timer problem” arises from devices not meeting customer expectations. Amazon has been encouraging third-party developers to create skills to enhance Alexa's usefulness and has also worked to improve the assistant’s conversational abilities over the years.

In this context, generative AI could be transformative. Platforms like ChatGPT have showcased remarkable natural language conversation skills. Late last year, Amazon provided a preview of Alexa's future powered by generative AI.

“We’ve always viewed Alexa as an evolving service, continuously improving since its introduction in 2014,” the company stated. “Our long-standing mission has been to make conversations with Alexa as natural as talking to another person, and with the rapid advancements in generative AI, our vision is now within reach.”

November will mark a decade since Alexa and Echo were introduced, making it an ideal time to unveil what the next ten years might hold. Whether the assistant will thrive for another decade will depend, in part, on how the next few months unfold.