Amazon is aiming to make its embattled Alexa division profitable with a brand new plan that may offer customers an AI-powered version of its voice assistant for $5 to $10 a month. The improved offering, called “Remarkable Alexa,” will give customers a more personalized experience and have the opportunity to perform more complex tasks than free versions of Alexa, including writing emails, ordering food and even making coffee after the morning alarm (at the least when connected to a sensible device). Reuters First reported.
Much depends upon the success of Remarkable Alexa. The Alexa division has struggled with profitability for years and is reportedly losing 5 billion US dollars in 2022 alone. Two rounds of layoffs in late 2022 and 2023 helped stop the bleeding, but the newest AI push must translate into revenue quickly. Unnamed Amazon employees emphasized this decision, saying Reuters that management identified 2024 as a must-win 12 months for Alexa.
“If Amazon does not launch a paid version, we believe Amazon may further cut its investment in Alexa to reduce losses,” Bank of America analysts led by Justin Post also warned in a note on Monday.
Amazon didn’t immediately reply to a request for comment.
Post and his team did a rough calculation to learn the way much revenue Amazon’s AI-powered voice assistant could generate with the reported prices.
They found that while many Alexa devices are out of service, if only one in five devices is lively with a single user, that might be 100 million lively users. And if 10% of those users are willing to pay $5 per 30 days for Alexa, that might generate $600 million in revenue for Amazon per 12 months. At $10 per 30 days, that number doubles to $1.2 billion.
This implies that Amazon can expect between $600 million and $1.2 billion in additional revenue from an AI-powered Alexa, even with limited use. However, Post noted that these estimates are conservative for good reason.
There are numerous free alternatives to Remarkable Alexa, including ChatGPT, Google Assistant, Apple’s Siri and even the regular, free version of Alexa, which could turn customers off. “We believe Alexa’s capabilities need to improve to remain competitive with competitors’ AI advances,” Post wrote.
The analyst also expressed the assumption that “AI features could be more useful on a PC/phone than on a voice device such as a home speaker.”
Still, Post and his team remain optimistic about Amazon overall, arguing that plans for an AI-powered Alexa offering show that the corporate is “committed to improving the economics of Alexa.”
Other changes at Amazon, including recent fees for ad-free Prime Video and adjusted fees for grocery deliveries, also indicate a “continued focus on profitability,” in accordance with BofA, which should profit share prices. Growth in Amazon’s promoting business must also boost profitability, said Post, who gives Amazon shares a “buy” rating and a 12-month price goal of $210.
By 1:00 p.m. ET on Monday, the stock fell 0.98% to $187.51.
