Alexa, is the voice assistant industry doomed?

A recent report that Amazon’s Alexa division is set to lose US$10 billion this year raises questions about the future of the entire voice assistant industry.

« I think there’s a next-gen battle for voice assistance that’s going to take very, very deep pockets to survive, » said Andy Wu, assistant professor of business administration in the strategy unit at the University. Harvard Business School.

AI-driven voice assistant software responds to verbal commands through enabled devices; this can include asking them to play music, look up general information, set timers, or place orders in a restaurant.

According to market research firm eMarketer, about 24.2% of the total US population will use Google Assistant this year, 23% will use Apple’s Siri and 21% will use Alexa.

But as Harry Guinness, writing for Popular Science, points out, what’s remarkable is that Siri and Google Assistant come pre-installed on smartphones, while Alexa is mostly available on dedicated smart speakers.

« To get along in modern society, you kind of need a smartphone, but no one needs a smart speaker, » he wrote.

According to a 2021 report, smart speaker ownership hit an all-time high last year, with nearly 50% of internet users in the United States owning at least one smart speaker.

Still, the Amazon division responsible for Alexa, Echo devices that Alexa runs on, and Prime Video streaming, posted an operating loss of more than US$3 billion in the first quarter of this year, according to a report by Business. Insider.

The majority of that loss was attributed to Alexa, according to the report, adding that the same division is on course to lose more than US$10 billion in 2022.

Meanwhile, Google Assistant and Apple’s Siri would also struggle to fully monetize these services.

While devices – at least in the case of Amazon’s Alexa Echo – would be sold at cost, on-device services don’t translate to profit. As Business Insider reported, Alexa may have had a billion interactions a week, but most of those conversations were trivial commands to play music or ask about the weather.

All of this has some analysts wondering: Are all voice assistants doomed?

“We have to ask ourselves: Is time running out for Big Tech voice assistants? Everyone seems to be struggling with them,” wrote Ron Amadeo, editor of science-tech website Ars Technica.

No clear monetization model

According to Wu, it is not surprising that these companies suffer such large losses on voice assistants.

« The investment in AI technology is extremely expensive, and the server space required to process all of this is enormous.…Even at the level of the device itself, they definitely suffer a loss on the BOM for a long time . , » he said.

« And so in the short term, there’s not a very clear monetization model. »

These companies are investing so much money, Wu said, because they see voice assistant technology as the next evolution of computer interface, just like the mouse or the touchscreen.

« We’ve seen that they’re already ready to take some big losses. But what we don’t know yet is whether or not voice assistant technology is what we would call a ‘winner takes it’ market. more.’ Or is there going to be a more fragmented market?” he said.

Microsoft, with its Cortana voice assistant technology, has already given up, Wu said, as have other companies.

That means the market may not be big enough to support more than one major player, he said. But between Google and Amazon, Wu says he sees Google continuing the fight.

« I think there’s a more central connection between AI technology and Google’s overall investments in AI. I think Google would want to move forward regardless, to the extent where voice is the next generation of computer interface that will completely disrupt their traditional text search business. »

According to experts, what continues to be a major obstacle is consumer knowledge; consumers are not fully aware of the capabilities of their devices.

Alexa, for example, has thousands of connected apps – or what Amazon calls « skills » – that can be used to do things like order food, walk you through a recipe, or, in a connected home , even turn on the washing machine.

« Most people don’t know the vast majority of these skills – and it’s actually a marketing or advertising issue in that there’s no convenient way for people to learn about the apps, » Wu said.

More marketing needed

Navid Bahmani, assistant professor of marketing at Rowan University in Glassboro, NJ, agreed that the biggest challenge facing voice technology — and the companies that support it — is consumer adoption.

“They need to do a lot more marketing on the device and its capabilities,” he said. « [There’s a] wide variety of different things that consumers can’t do because they just don’t know. »

Consumers are often aware of the basic features that come out of the box, he said, but they haven’t been fully informed of all the different companies offering apps that extend device capabilities.

« It’s the equivalent of buying a smartphone and not knowing there’s an app store, » he said.

Still, Bahmani is optimistic about the industry’s future.

“My opinion is no, the industry is going nowhere,” he said. « If anything, it’s very early in its stages. It’s going to grow. »