Amazon Reportedly Looking to Cut Costs for Alexa Division Following Decline in Profitability

According to The Wall Street Journal, Amazon CEO Andy Jassy is reportedly leading a comprehensive examination of the company’s operations to minimize costs. As part of this investigation, the digital assistant Alexa is scrutinized.

Although Alexa has grown to play a significant role in Amazon’s devices and innovative home strategies, papers obtained by the WSJ show that the company’s whole devices section has sometimes had operational losses of over $5 billion. According to the WSJ, Amazon is evaluating whether it ought to “concentrate on attempting to add new features to Alexa” as part of the assessment. It’s unclear what that implies, but it seems the business is considering reducing its spending on a product that generates little revenue.

The business expressed support for Alexa in a statement, although it made no mention of potential changes:

In less than a decade, [Alexa has] turned into an AI service that millions of customers interact with billions of times each week in different languages and cultures around the world

Even in the last year, Alexa interactions have increased by more than 30 percent. We’re as optimistic about Alexa’s future today as we’ve ever been, and it remains an important business and area of investment for Amazon.”

-Amazon spokesperson Brad Glasser

As with other major digital firms, Amazon is trying to cut costs in an uncertain macroeconomic landscape. Despite its second Prime-focused sales event in October, the business is already anticipating slower growth this Christmas season, and officials said in the most recent Q3 earnings report that Amazon is “encouraged” by its efforts to cut costs in its fulfillment network.

Until July 2021, Jeff Bezos, the founder, and CEO of Amazon, considered Alexa a bit of a pet project. Despite Alexa’s persistent unpopularity, he kept investing money into its development, according to individuals familiar with the situation who spoke to the WSJ. However, an Amazon representative told the WSJ that over the previous year, customer interactions with Alexa have increased by more than 30%.

It will be interesting to see how the consumers will react and how the division’s reputation will be affected due to the cost reductions.