Not necessarily because the cost increases through increased use by the customer. The idea was to sell hardware at close to cost and then monetize the customer. The likely assumption was that Alexa users would buy more similar to how Prime customers buy more. Ideally, Alexa customers were supposed to use services like "subscribe and save" and then randomly tell Alexa to order more toilet paper or laundry detergent. Amazon wanted all the household stuff on recurring subscriptions. It would have been great. Increased revenue, better ability to bundle shipments together to cut costs, customers who don't even look at prices anymore. Instead, they sell a device for which they incur an operating cost while producing little to zero increased revenue and subscriptions.
Right, I read the Ars Technica article, I get the original idea. It turns out that monetization strategy doesn't work and the Alexa business unit is losing billions of dollars.
I'm saying, new business idea: give up on the old strategy of Alexa driving induced profit in other business units, instead charge more than the breakeven cost of building devices and running the service. This will likely be substantially more, and fewer Alexas will be sold. But the users that do actually get a lot of value from the device and service they are using will pay more for it.
The product/market fit to test is: How many customers would pay more for a device that's not trying to sell you things? Can you get a solid (but smaller) business just by charging more for the device? What features would you add to persuade the marginal user to pay more? Offline mode for privacy-conscious users? Lean in to home automation features? What about a true AI-powered personal assistant? What about per-user language training with a local model that gets refined by your voice samples, with that data not shared back to the cloud? Etc.
Simple startup-style product iteration stuff here. You had a customer hypothesis and a growth model, and it was proven unviable. So can you pivot to find a viable business?
