Amazon Bets Big On GenAI and the Smart Home
In its annual product launch extravaganza, Amazon showed that it is serious about integrating generative AI into Alexa, even if a direct monetization model isn't clear. It is surrounding that LLM with new Echos, Fire TV sticks, kids tablets, Echo Frames glasses, and accessibility features. There are new Blink, Ring, and eero products, too.
Amazon is All-In on GenAI
Amazon has been a leader in AI, having pioneered the smart speaker and anthropomorphizing its AI assistant by calling it “Alexa,” and giving it a cheery, helpful personality. This personality was entirely programmed – every response, every poem, and every song Alexa can sing was written and entered into Alexa’s database by a team of writers and programmers in Seattle and Silicon Valley.
That is now changing.
The new Alexa LLM can converse naturally (“Alexa, lets’ chat,”) and can manage variation and complexity, especially for home automation. For example, saying, “Alexa, I’m cold” will result in Alexa turning up the heat. “Alexa make it look romantic in here” should result in warm mood lighting (assuming that you have color-changing smart bulbs). “Alexa, turn on the new light in the living room” will just work, without having to specify which smart lightbulb was recently added and give it a unique identifier. Multiple requests can be combined. You will also be able to set up routines without programming them in the Alexa app by saying things like, “every day at sunset lower the blinds.”
Other features include live call translation, a kids mode (“Explore with Alexa”) that layers on top of Amazon’s existing extensive vetted children’s content, and Alexa Emergency Assist, a paid safety service for seniors.
Amazon is also giving developers the ability to extend Alexa with LLM or use Alexa as a front end for other LLM solutions. Examples include conversational experiences with famous personalities like Einstein or Socrates (though I assume in English), music creation, and BMW in-car experiences.
Monetization (aka If You Give Alexa a Cookie)
Amazon first invested in Alexa as a beachhead in ambient computing after failing to convince anyone to buy an Amazon-centric smartphone (the fire Phone reportedly sold only 30,000 units). It worked, and Alexa is now enabled on hundreds of millions of devices, but it did not prove possible to monetize directly. Shopping via Alexa was a non-starter – voice is a poor interface for discovery, navigating options, or understanding product characteristics. Even as some Echos gained displays, consumers have preferred to shop on handheld devices.
However, Alexa does indirectly drive revenue at Amazon. Amazon has done a good job of integrating Alexa with its Fire TV, Amazon Music, and Ring home security products. The more you interact with Alexa, the more of Amazon’s digital services you are likely to encounter, and the more Amazon services you touch, the more likely you are to purchase or renew Amazon Prime …and Amazon Prime subscribers purchase a lot more products on Amazon. This has been described as a flywheel effect, but it’s more akin to the children’s book, “If You Give a Mouse a Cookie.” There’s a cause and there’s an effect, but the linkage between them can be convoluted.
This is a problem. Alexa costs Amazon money to provide, and Amazon isn't recouping that cost today directly (Alexa is free to use) or via premium hardware sales (Amazon's devices are famously sold for little or no profit). Once you introduce generative AI to the mix, even with Amazon’s AWS owner economics, Alexa starts getting very expensive.
So how might Amazon choose to monetize Alexa going forward? Consumers will undoubtedly balk at paying a fee for existing Alexa features on devices they've already purchased, especially for basic assistive AI tasks like setting timers and weather forecasts. However, if Amazon makes new generative AI capabilities contingent on an Amazon Prime subscription, that would be at least partial monetization. Alexa with generative AI could also help Amazon justify recent price increases on its Amazon Music service or be used to offset the introduction of ads to Amazon Prime Video to "create" an ad-free tier. None of these moves would be popular.
Another approach would be to find areas where generative AI delivers enough value for consumers to pay for it as part of service bundles. Examples might include Alexa home automation with Amazon home security monitoring; Alexa conversational AI with Amazon Kids+ curated content, and Alexa conversational AI with Amazon's services monitoring seniors at home or in managed care facilities. This would be easier for consumers to accept, but it would not generate nearly as much revenue.
New Hardware
Amazon has long tried to position the Echo Show as a home control hub, but it always served many purposes, and usually took up counter space. The new Echo Hub is a dedicated wall-mounted touchscreen with Alexa voice control that provides faster access to home controls. (It can still sit on the counter with an optional accessory.) Echo Hub supports every meaningful standard other than Z-Wave, including Zigbee, Matter, Thread, Bluetooth Low Energy, and Amazon’s own Sidewalk. It connects via WiFi or Ethernet with a PoE converter, and is designed to be installed by the user, not a custom installer. At $179, The Echo Hub also significantly undercuts the price of most dedicated touchscreen controllers.
In other exciting home hardware new, the eero Max 7 is Amazon’s first Wi-Fi 7-ready mesh router system. It’s a nice design win for Qualcomm, which makes the core chips inside. The feature set is extensive: in addition to advances that Wi-Fi 7 brings to speeds, backhaul, and device support, the eero Max 7 has four ethernet ports two 10Gbps, two 2.5Gbps), Matter support, Thread support, and ZigBee. If you’ve got a consumer IoT product in your home today or any time in the immediate future, this should support it. At $600 for a single unit it’s priced well out of reach of most consumers for now – especially if you need two ($1150) or three ($1700) to provide coverage. That said, Amazon’s pricing is actually lower than some competitors, and prices will undoubtedly come down over time.
Amazon is also displaying commitment to wearables, though the new Echo Frames are definitely lighter on capability than Meta’s camera-centric Ray-Ban Smart Glasses or anything with a display and a gesture-based interface. The promise here is that you will be able to have Alexa with generative AI in your ear at all times, but for that, you just need earbuds, not glasses.
On the TV side, Amazon’s new, top-of-the-line Fire TV Stick 4K Max (2nd gen) costs just $60. Despite the price, it not only includes 4K and Dolby Vision, it has Amazon’s ambient mode for displaying photos and artwork, turning your TV into a budget Samsung Frame. This is a real showcase for MediaTek. MediaTek’s processors dominate the living room, and if vendors invest in the software experience like Amazon has, nearly every TV and streaming media device that MediaTek powers can have these capabilities.
To go along with that TV, Amazon is finally offering a sound bar. Amazon isn’t doing anything particularly innovative here – the $120 Fire TV Soundbar is low hanging fruit designed to be an easy choice for people buying Fire TVs. It’s two channel and doesn’t have Fire TV capabilities built in, but it has Bluetooth, it’s made out of 18% recycled materials, and it’s about time that Amazon entered this category.
As usual, Amazon also launched a slew of other iterative products:
Fire TV Stick 4K (2nd gen) with WiFi 6 and a faster MediaTek processor for $50
Echo Show 8 with a faster MediaTek processor and spatial audio
Echo Pop Kids smart speaker in Marvel Avengers and Disney Princess designs
Fire HD 10 Kids is a 10” 1080p FireOS tablet with a faster MediaTek processor (noticing a trend?) at a slightly lower $189 price than last generation. Amazon is segmenting its tablets by age: the Fire HD 10 Kids is aimed at 3 – 7 year olds, comes with a year of (superb) Amazon Kids+ content, and can be kitted out in Disney livery.
Fire HD 10 Kids Pro is for professional children aged 6 – 12. It otherwise appears identical to the non-Pro version.
Ring Stick Up Cam Pro has radar-based 3D detection and can be powered by wall outlets, batteries, or solar.
Blink Sync Module Pro is a system hub that uses an Amazon proprietary wireless protocol (not Sidewalk) for extended wireless range for Blink Outdoor 4 beyond what Wi-Fi can typically reach.
Blink Outdoor 4 Floodlight Camera can use that hub to light up your property and capture images for up to two years on a battery. Or you can add the new Blink Outdoor 4 Battery Extension to extend that battery life to four years.
Techsponential has asked Amazon for multiple review units from among the new product launches and will update this report accordingly.
For Techsponential clients, a report is just a springboard to personalized discussions and strategic advice. To discuss the implications of this report on your business, product, or investment strategies, contact Techsponential at avi@techsponential.com.