It’s no longer surprising when Amazon does something well. Books, e-commerce, logistics, payments, hardware, data storage, advertising. Amazon does all of this, and does it very well.
Yet even Amazon is surprised by the success of Alexa, its voice-enabled personal assistant.
“We are very happy with the results of Alexa,” Amazon chief financial officer Brian Olsavsky told investors Feb. 1, after the company reported 2017 fourth-quarter and full-year results. “It’s a very positive surprise for us.”
Alexa, Olsavsky continued, has had “record device sales with very high levels of customer engagement.” People are using Alexa’s voice-activated capabilities more to shop, to listen to music (“3x higher this holiday season”), and to stream video on Amazon’s Fire TV (“up 9x year-over-year”). Companies are increasingly integrating Alexa “skills” into their products, which Olsavsky said is “helping to accelerate the adoption of Alexa with customers.”
“So that’s what we mean when we said far exceeding our expectation,” he concluded. “Those are the things that I would point to. And that is an area again where we’ll continue to invest heavily, and as you say, double down on that.”
If the first big thing in personal devices was computers, and after that phones, then the next market to win is voice-enabled virtual assistants and homes. For this, Amazon introduced Alexa (and its sleeper hit, the Amazon Echo), Google is developing Google Home, and Microsoft is building Microsoft Cortana. So far, Amazon has dominated the category, with its market share of smart homes estimated at between 70% and 76%.
Amazon pushed Alexa hard in 2017. After it bought Whole Foods in June, many grocery shoppers were greeted with tables of “farm fresh” Echos in their stores. In September, the company unveiled a line of new Echo devices and said it had more than 5,000 people working on Alexa. For both Black Friday and Prime Day, Amazon gave Alexa shoppers early access to some of its “best deals.” So far this year, Amazon has announced Alexa is coming to your Toyota.
Why? In addition to Alexa potentially becoming the key to your life and home, Alexa users have already proved extremely valuable consumers. According to data from Consumer Intelligence Research Partners (CIRP), which regularly surveys Americans about their Amazon usage, the average person with an Amazon Echo spent roughly $1,700 a year on Amazon as of Sept. 30, 2017. That compared to $1,300 for the average subscriber to Prime, Amazon’s $99-a-year membership program, and $1,000 for all US Amazon customers. CIRP estimates that about 90% of Echo owners are also Prime members.
It should come as no surprise, then, that where Alexa is concerned, Amazon is doubling down.