Some unique strategies that are associated with Amazon include the use of drones to deliver products, the one click buying option. But we all know that things don’t always go as smoothly as two-day shipping for all the companies. Let me take Alexa, the voice assistant developed by Amazon, for case in point. However, for Amazon, Alexa has been a costly endeavor: Amazon lost $25 billion of its revenue in its devices business between 2017 and 2021. Now, Amazon is reportedly considering a solution that might make some customers scratch their heads — a subscription service for Alexa.
Why the Big Loss?
First, let’s know why Amazon sits in the red zone? Amazon offers its smart IoT devices such as Amazon Echo speakers and Amazon Fire TV sticks at very minimal profit margins. The concept was that these devices would make consumers purchase more products in Amazon’s ecosystem so that they would not leave its marketplace. However, the strategy has not worked as planned to some extent.
The Subscription Plan
Recently, the Wall Street Journal reported that Amazon wants to launch a new offering based on Alexa as a paid upgrade. People have speculated that it could go for as low as $5 or as high as $10 per month. This new Alexa is expected to go head to head with Open AI’s ChatGPT, Apple’s Siri or Google Gemini as it comes with enhanced and more sophisticated functionality.
Picture saying to Alexa, “What should I cook for tonight?” while Alexa could order the groceries for delivery as well as display a recipe on the Echo Show. This is the kind of next-level assistance Amazon envisions when it comes to creating a paid service around Alexa.
Is the Tech Ready?
Notably, there are some critics within this giant firm, especially in relation to this move. One of the engineers working for Alexa said that it might still be in its early stages where the idea is blossoming. I reckon it is similar to marketing a cake before it’s fully prepared in the oven. If the subscription service remains a non-event the firm’s Alexa division which is already struggling financially could incur more losses.
That brings us to the question: What’s in It for Amazon?
Amazon’s game plan here is clear: Apple and its competitors have to begin regaining the money which was cut on their devices. If only 10 percent of Alexa users sign up to the subscription, it would rake in good earnings up to $1.2 billion annually if it can be offered at a cost of $10 per month. It’s a lot of dough, even if one is talking about the Amazon share price.
User Reactions
Of course, not everyone is happy paying for something that has been available to the public for free before. This can make some users feel bad as if they are being charged again for something that is already included in a burrito. Some people, on the other hand, might find the features it comes with, as well as the extra convenience, worth the money spent.
The Bigger Picture
This is a move that forms part of Amazon’s diversification process as it seeks to diversify sources of revenue apart from e-commerce. For instance, recently, Amazon began featuring ads in Prime Video, which did not meet a lot of appreciation. Thus, considering the great interest in AI and voice assistants, as well as the necessity to make up for the accumulated money losses, Amazon decided to introduce a paid version of Alexa.
The Future of Alexa
Amazon’s new Alexa is designed to offer a better user experience to those who are willing to spend money to use it. Just picture arriving at work in the morning and having a new pot of coffee brewed for you because you told Alexa to do so. Or to be able to do many things using one voice command for instance to write an email, send an email and order food.
