Back in 2018 when Apple launched the first HomePod all the tech journalists were quick to label it a failure. Right after they lambasted Siri’s performance they would typically heap glowing praise on Amazon’s Echo and how it was quickly marching across America.
Now it is true that the original HomePod never did sell in very large numbers and it’s also true that Siri’s performance left much to be desired. But even back then, Apple had a business plan to make profit from the HomePod. Apple always has a roadmap to profitability.
And even back in 2017, I was the lone contrarian in the blogosphere that said that Amazon’s Echo was a money losing proposition which was destined for failure. I have an extensive background in estimating hardware product costs and forecasting the financial gross margins. It wasn’t much of a stretch for me to start putting together some estimated material costs and the corresponding labor and overhead. I came to the conclusion that Amazon was losing a significant amount of money on each Echo shipped. It was only a matter of time before Amazon started to retreat if they couldn’t monetize the product in some other form.
Here is an excerpt from what I wrote way back in October of 2017:
I have to wonder how many people Amazon has devoted to the Echo business. There’s design, manufacturing, customer service; in addition to those, the programming portion alone must be huge. The cash drain that this must impose on Amazon would be highly significant. And for what payoff?
The Echo is the kind of diversion that CEOs are allowed to have when profits are not a concern, meaning that the company is already very profitable or investors are patient because they see the long-term picture. But sooner or later, an involved board of directors is going to want to connect the dots on how the Echo is contributing towards Amazon reaching its financial goals. – Perezonomics 10/21/2017
Lo and behold, for the first time I’m starting to see some reporting which confirm what I’ve been saying all along. Amazon’s Alexa project is a big fat money-loser and they don’t know where to go from here. I was also proven right by predicting that both Apple and Google would pass Amazon with their installed base of units. Back in 2017 it was kind of crazy to say that. But to me it seemed obvious.
Here is an excerpt from 9to5Google:
In another report, Business Insider says most Alexa commands are trivial, like asking about the weather or playing music. Despite “getting a billion interactions per week,” they can’t be monetized by Amazon. Meanwhile, third parties weren’t able to “generate engagement” with other voice apps/experiences, which mimics the craze and fall of “chatbots.” This year, an employee familiar with the hardware team said the company is on pace to lose around $10 billion on Alexa and other devices. Meanwhile, Insider Intelligence market research says that “Assistant currently leads with 81.5 million users, followed by Apple Siri’s 77.6 million” in the US, while Alexa is “third largest with 71.6 million.” One key consideration is that Apple and Google have a much broader phone user base that’s not limited to smart home devices. –Abner Li, 9to5Google 11/19/2021
So yeah, I’m taking another victory lap over the clueless tech press. How sweet it is to say “I TOLD YOU SO”.
And even back in 2017, I was the lone contrarian in the blogosphere that said that Amazon’s Echo was a money losing proposition which was destined for failure. I have an extensive background in estimating hardware product costs and forecasting the financial gross margins. It wasn’t much of a stretch for me to start putting together some estimated material costs and the corresponding labor and overhead. I came to the conclusion that Amazon was losing a significant amount of money on each Echo shipped. It was only a matter of time before Amazon started to retreat if they couldn’t monetize the product in some other form.
Here is an excerpt from what I wrote way back in October of 2017:
I have to wonder how many people Amazon has devoted to the Echo business. There’s design, manufacturing, customer service; in addition to those, the programming portion alone must be huge. The cash drain that this must impose on Amazon would be highly significant. And for what payoff?
The Echo is the kind of diversion that CEOs are allowed to have when profits are not a concern, meaning that the company is already very profitable or investors are patient because they see the long-term picture. But sooner or later, an involved board of directors is going to want to connect the dots on how the Echo is contributing towards Amazon reaching its financial goals. – Perezonomics 10/21/2017
Lo and behold, for the first time I’m starting to see some reporting which confirm what I’ve been saying all along. Amazon’s Alexa project is a big fat money-loser and they don’t know where to go from here. I was also proven right by predicting that both Apple and Google would pass Amazon with their installed base of units. Back in 2017 it was kind of crazy to say that. But to me it seemed obvious.
Here is an excerpt from 9to5Google:
In another report, Business Insider says most Alexa commands are trivial, like asking about the weather or playing music. Despite “getting a billion interactions per week,” they can’t be monetized by Amazon. Meanwhile, third parties weren’t able to “generate engagement” with other voice apps/experiences, which mimics the craze and fall of “chatbots.” This year, an employee familiar with the hardware team said the company is on pace to lose around $10 billion on Alexa and other devices. Meanwhile, Insider Intelligence market research says that “Assistant currently leads with 81.5 million users, followed by Apple Siri’s 77.6 million” in the US, while Alexa is “third largest with 71.6 million.” One key consideration is that Apple and Google have a much broader phone user base that’s not limited to smart home devices. –Abner Li, 9to5Google 11/19/2021
So yeah, I’m taking another victory lap over the clueless tech press. How sweet it is to say “I TOLD YOU SO”.
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