Is Jeff Bezos-Era ‘Downstream Impact’ Losing Its Charm? Amazon CEO Andy Jassy Reportedly Rethinking Alexa Devices Business Model, Resulting in Billions in Losses – Alphabet (NASDAQ:GOOG), Amazon.com (NASDAQ:AMZN)

Amazon.com Inc.‘S AMZN the strategy of selling Echo devices at low prices in hopes of generating profits elsewhere in the company backfired. The company suffered billions in losses as a result.

What happened: Amazon Echo devices, which feature the Alexa voice assistant, are popular with millions of customers. But the company’s plan to capitalize on the devices’ popularity by boosting sales on its e-commerce platform has fallen through, The Wall Street Journal reported Monday, citing internal documents and people familiar with the company.

Customers used Echo mostly for free apps, such as setting alarms and checking the weather. “We were worried about hiring 10,000 people and building a smart timer,” a former senior employee noted, according to the report.

Amazon’s devices division, which includes Echo, Kindle, Fire TV Stick, and video doorbells, suffered losses of more than $25 billion between 2017 and 2021, a major miscalculation made under the founder’s leadership Jeff Bezoswhich current CEO Andy Jassy According to the documents, work is underway to improve the situation.

As part of a plan to reverse those losses, Amazon is set to launch a paid tier of Alexa this month, but the move is being met with skepticism from some engineers working on the project.

An Amazon spokesperson said the devices division has built several profitable businesses and is well-positioned for continued success, adding: “Hundreds of millions of Amazon devices are used by customers around the world, and for us, there is no greater measure of success.”

See also: Mark Cuban says Trump re-election won’t affect bitcoin price, ‘Dogecoin killer’ Shiba Inu burn rate increases, and more: This Week in Cryptocurrencies

According to the report, Jassy is also re-evaluating a little-known Bezos-era metric called “downstream impact” at Amazon, which assigns a financial value to a product or service based on how customers spend money in the Amazon ecosystem after a purchase.

This metric, developed in 2011, has been used across Amazon’s business lines and has proven effective in some cases, such as the Kindle. However, it didn’t work as intended for devices like the Echo.

Why is this important?: Amazon’s troubles with its devices business come as the company is making significant changes to its Alexa service. In June, it was reported that Amazon was planning a major overhaul of its Alexa service, integrating conversational generative AI. The project, known internally as “Banyan,” was expected to introduce a two-tiered system, with a premium version potentially costing around $5 per month.

The Seattle-based company had planned to launch a more conversational version of Alexa later this year, potentially allowing it to better compete with new generative AI chatbots from companies like Alphabet Inc.‘S GOOG GOOGLE auxiliary GoogleAND OpenAI.

Additionally, Amazon’s original books business has seen a resurgence, generating $16.9 billion in gross sales in the first 10 months of 2022. This success contrasts with the financial struggles of its devices business, highlighting the mixed performance across Amazon’s various sectors.

Read more:

Photo via Shutterstock

This story was generated by Benzinga Neuro and edited by Kaustubh Bagalkote