Amazon Echo - Piling on with Usage Data
Amazon investors and followers wonder why, exactly, Amazon is in the consumer electronics device business. The story seems to be everywhere, with supporting financial data. The Wall Street Journal reported that Amazon absolutely does not make a profit in their device businesses. In fact, Amazon lost $25 billion on its hardware products from 2017-2021, the only years for which it could find financial information. Amazon relies on aggressive retail pricing to build an installed base of customers and then an ambiguous measure of “downstream impact” to justify the investment in product development.
Some Amazon device lines make sense. Kindle e-Readers offer a successful “razor and razor blades” model, where Kindle e-Reader owners become Amazon e-book buyers. Ring and Blink security cameras and systems seem to be succeeding in selling storage and monitoring subscriptions. Kindle Fire tablets and Eero WiFi routers are question marks, with no clear “downstream impact”, but presumably limited investment, too.
Echo smart speakers are far and away the biggest investment and presumably the biggest problem. In addition to designing and engineering an extraordinarily broad range of novel devices, Echo devices operate on Amazon’s Alexa platform. That’s another endless technical challenge, where anything is possible if you dedicate enough engineers. Data from our semi-annual survey of smart speaker owners shows that Echo owners use Echo and Alexa widely, for a range of purposes. It’s just that none of these uses leads directly to revenue or measurable, profitable “downstream impact”.
We ask Amazon customers that own one or more Echo products how they use them. Over two-thirds of Echo owners report using their device at least weekly to listen to music, or to ask questions (e.g. “what is the weather forecast?”). More than half set reminders and alarms weekly or more frequently. Less than half use an Echo to control other smart home devices at least weekly (Chart 1). Notably missing from the list of primary uses is shopping.