At Bloomberg, Priya Anand writes:
Each holiday season since 2015, Amazon.com has counted on selling a lot of its Alexa voice-controlled smart speakers. For almost as long, it has known that the devices have had trouble holding customers’ attention even into January.According to internal data, there have been years when 15 to 25 percent of new Alexa users were no longer active in their second week with the device.Only two-thirds of Echo owners use their device every week. That figure drops to around a half for the number of Echo Dot owners who use their device every week.
Smart speaker growth phase is over
While Amazon smart speaker sales have been strong in recent years, the same internal data suggest the growth phase is over. Amazon estimates speaker sales will grow at 1.2 percent over the next few years.
There are two reasons smart speakers have not been the smash hit product that companies like Amazon expected.
First, people worry about their privacy with always-on speakers listening to every conversation.
This is not a vague, unfounded suspicion. Stories have emerged of Amazon employees listening to private conversations between people close to smart speakers.
Amazon’s high profile missteps in this area that confirm people’s fears.
Meanwhile it feels creepy to have a computer eavesdrop on a conversation only to suggest a range of Amazon products based on what was said.
Surveillance capitalism is less welcome than Amazon assumes.
Less useful than buyers expect
The second reason people turn away from smart speakers is they aren’t as useful as the companies pushing the technology would have you think.
Everyone who has dabbled with smart speakers1 will have noticed devices wrongly interpreting speech as commands. The technology is clever, but it is far from foolproof.
Moreover, people don’t do much with their smart speakers. Many play music and do nothing else. Amazon’s Echo speakers are not always the best devices for doing that. They can be unreliable, your experience may be different.
Others might set a timer while they boil eggs or tell the speaker to turn on the lights.
Yes, it is early days. And yes, other smart speaker brands follow different paths.
Take, say, Apple’s HomePod Mini. It is not likely to suggest grocery purchases because it overheard you rowing with your significant other.
Part of the problem is the smart speaker hardware format. Computers, phones and tablets come with screens and input methods, including keyboards and touch, that let you explore possibilities.
Exploration is a tiresome process with a smart speaker.
Did you know?
Amazon tried getting Alexa to suggest functions to owners: “Did you know you can do this with Alexa?”
For many users the initial reaction was “how do I turn the suggestions off?”
There are cases where these constant, nagging suggestions have caused users to unplug the device.
Big plans for Alexa
Amazon had big plans for Alexa. It still does. Or would do if customers would only do what they are told.
Smart speakers are at the stealth end of surveillance capitalism. They record what people say, collect information, build more complex profiles, then channel lucrative sales leads back to Amazon to help the company sell more and more products.
Or as the company might express that: Alexa helps deepen relationships with customers.
More than a speaker
Alexa is about more than smart speakers. It comes pre-installed on other devices. Many new headphones and earbuds come with technology to enable Alexa or its rival voice systems.
At Stacy on IoT, Kevin C. Tofel reports Amazon planned to flood the market with low-cost speakers at a loss, then make money when people use the device to buy from the company.
That’s an established business model. Amazon is rich enough to lose a bundle on seeding speakers that never stay in use long enough to channel shoppers to its online checkouts.
The fact that when that happens, Alexa then nags the customer to leave a review on the Amazon website will accelerate Echo speaker unplugging.
Who wins most from Alexa?
Like the suggestions mentioned earlier, this is all about benefiting Amazon, not the customer.
We know Amazon’s model works, but it puts sales at the centre of its operations, not customer needs.
Over time this gets tiresome.
A different business model
In contrast Apple operates a different business model. For a start, it doesn’t lose money every time someone buys a speaker.
Apple’s goal is to sell hardware and wrap you further into its walled garden where you can buy lucrative value-added services.
Amazon has the resources and motivation to fix these smart speaker problems, yet it is hard to know where it can go in the short term. It finds abusing that business model is far too tempting and that tests customers’ patience with the technology.
Alexa is one part of Amazon’s assault on privacy. The company’s Ring home surveillance system and the Halo wearable band are as intrusive. They are the thin end of the wedge. Amazon plans to sell drones and autonomous surveillance robots.
These tools would be bad enough if their sole purpose was to build a fuller profile and sell you Amazon products and services.
Yet Amazon is sloppy about security. That should not come as a surprise. The company doesn’t value privacy, hence it doesn’t waste resources on protecting something it considers worthless.
Criminals regularly break into Amazon Ring cameras. It would be prudent to consider the possibility the other surveillance products are either compromised or soon will be.
Amazon works hard to lobby against privacy legislation around the world. It has vast resources to pour into this campaign.
All of which goes to explain why Amazon persists with Alexa and its Echo smart speakers despite losing money on sales and customers turning away from the technology.
*Normally a blog post like this attracts plenty of “I’m happy with…” comments from readers. Feel free to add yours. *
- The same logic applies to phone or PC-based versions of the technology. That would be Apple’s Siri or Google Assistant. Microsoft no longer pushes Cortana but that now turns up in the company’s enterprise products and services. ↩︎