How AI-powered voice assistant Alexa is driving Amazon’s revenue growth

How AI-powered voice assistant Alexa is driving Amazon’s revenue growth

Thursday February 08, 2018,

4 min Read

By 2020, Amazon is estimated to generate $10 billion in additional revenues from Alexa-enabled devices and apps. In 2017, it occupied over 70 percent of the smart speaker market.

Amazon’s AI-powered voice assistant Alexa is turning out to be a trump card for the retail-to-technology behemoth. In its just-released fourth quarter earnings, Amazon revealed that Alexa had “far exceeded expectations” in 2017, and contributed majorly to the firm’s 38 percent revenue growth.

While the Seattle-based giant did not give out Alexa sales figures, CEO Jeff Bezos announced that Amazon would “double down” on investments in it. Amazon sells multiple Alexa-enabled devices, most prominent of which is its line of Echo smart home speakers.

Alexa is also being embedded into various products developed by other companies. Amazon says this third-party adoption is driving Alexa’s growth.

Bezos said in the earnings call, “We've reached an important point where other companies and developers are accelerating the adoption of Alexa. There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and we're seeing strong response to our new far-field voice kit for manufacturers.”

Leading investment bank RBC Capital Markets estimates that Amazon will generate an additional $10 billion through sales of Alexa-enabled devices by 2020. Amazon claims to have sold many millions of Echo devices during the US holiday season — a prime period for e-commerce operators.

Amazon Echo Dot was the top-selling product across all categories on the platform. Interestingly, shoppers were using Echo Dot to order more Echo Dots.

In December, the Alexa app, which controls Echo, Echo Dot, Echo Show and Echo Sport, climbed on top of the Apple App Store. Amazon said that people were using Alexa to get cooking and cocktail recipes, play music and games, call their families, and shop of course.

Market sentiments

RBC’s annual Alexa survey revealed 40 percent of those who own Alexa devices shop more with Amazon. Alexa awareness levels had also grown to 89 percent in 2017. RBC noted, “We are more impressed with the traction of these devices and more convinced of their potential long-term term impact... You are removing friction, you’re creating more opportunities for Amazon to be there with its shopping cart.”

Amazon dominated the smart speaker market in 2017, capturing over 70 percent of it, according to eMarketer. Google Home was a distant second with a 24 percent share. While Google’s share will go up as it expands its smart speakers to more markets, Amazon’s Echo products are likely to lead in the “foreseeable future”.

Martín Utreras, VP of Forecasting at eMarketer, said, “Consumers are becoming increasingly comfortable with the technology, which is driving engagement. As prices decrease and functionality increases, consumers are finding more reasons to adopt these devices.”

Alexa in India

Amazon debuted Alexa reference kits for developers in India at the Amazon Web Services AI Conclave in Bengaluru in December. The kits help developers learn how voice technology can be used to connect cars, homes, appliances, offices, etc.

Prior to that, in October, Amazon rolled out Echo, Echo Dot and Echo Plus in India. It was the first time that Alexa devices were made available in Asia. Echo speakers can be ordered on an invite-basis on

Amazon made the deal extra sweet for Indians by clubbing a year’s subscription to Amazon Prime (that includes Prime shopping benefits, Prime Video and the soon-to-be-launched Prime Music) with Echo.

Tom Taylor, Senior VP of Amazon Alexa, said at the time of launch that Amazon would be assisting developers in India to create “localised Alexa experiences” for users. Alexa has also been empowered to understand the Indian accent, something Google took several years to bring to its voice search. It can also interpret Indian-sounding names of places, music and movie titles, and so on.

More recently, in January, Amazon released a new India-specific skill for Alexa, wherein it could broadcast PM Narendra Modi’s Mann Ki Baat audio programme. The skill was developed in association with state-owned news agency ANI. Echo users could not only hear new episodes of Mann Ki Baat, but also instruct Alexa to play past episodes.