There has been a lot of buzz in the media lately concerning the fact that few owners of Amazon Echo use Alexa, the digital assistant behind it, for shopping. Statistics don’t lie. After about 50 million Echo units sold only 2% of all customers use Alexa to buy things from Amazon. This has been a surprise for many, since shopping was probably the main driver behind the launch of the device in late 2015.
The question is then, whether Amazon CEO Jeff Bezos or the market should consider Alexa a commercial failure, like the Fire Series of smartphones was, and will let it languish until it dies. And if it does, what would be the impact of it for customers, investors and the future of digital assistants for consumer use?
First of all, two percent is an irrelevant number, or is it?
Let’s put data into context. In year 2000, during the pinnacle of the previous dot.com mania, e-commerce stood for a meager one percent of shopping in USA. Even today, eighteen years later, e-commerce represents just around 11 percent of all retail there. However, Amazon is the biggest fish in the pond, highjacking almost 50 percent of the e-commerce market and over 70 percent of its growth.
This means that if we consider shopping through Alexa a subsegment of e-commerce, a 2 percent figure in such a short period doesn’t seem bad at all. This is specially true when we take into account that Amazon didn’t launch Alexa globally until last december. Many countries like Spain and Italy haven’t seen its launch yet.
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Changing user behavior takes time. Industry analysts, innovators and investors should focus on growth figures, not absolute static numbers. They should follow them carefully, specially when compared to the sales of Google Home. The internet economy knows no mercy, and the market leader in any segment usually captures a disproportionate share of profits. Amazon is therefore forced to still invest in Alexa and Alexa-enabled devices no matter what.
Amazon needs your data collected by Alexa in order to make the purchase experience effective and seamless, create good content for Amazon Video and secure its position as the new digital advertising rising star.
Jeff Bezos has another reason for sticking to Alexa: Your data. Amazon needs to know as much as possible about you in order to make the purchase experience increasingly effective and seamless. It needs your data to decide which new products launch for its own Amazon branded line of staples. It also needs your data to secure the success of its own content on Amazon Video. Amazon is thus partnering with all sorts of other manufacturers and even cars makers and hotels as distribution channels for Alexa and future revenue streams for the partners involved. As long as people use Alexa for anything useful, it will help Amazon increase its revenues.
You can watch a video of Alexa for hotels in action here.
Finally, your data are useful for Amazon in another context too. You may think that the Amazon website is just a gigantic e-commerce machine, but it is not. The hundreds of millions of eyeballs that visit Amazon.com every day are an opportunity for advertising impossible to resist. Amazon has therefore quietly transformed itself in a formidable digital advertising player, just behind Google and Facebook. By 2021, analysts predict that revenues from advertising will surpass those from Amazon Web Services. Any device powered by Alexa is indeed a precious source of information for the giant
Alexa is here to stay. The reader can be sure that Jeff Bezos and Amazon well do all in their power to make it a success and win over Google Home. The key metrics to follow are units sold, adoption growth and new distribution channels in partnership with leading manufacturers.
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