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Amazon Is Struggling With Alexa User Retention & Engagement

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Amazon‘s digital assistant Alexa has an annoying habit of asking out-of-context follow-up questions after it has responded to your query. For example, if you ask Alexa about the current temperature, it would first provide you a response and then continue saying “By the way, did you know I could [do this, do that]”. This might be helpful at times, but mostly not. And if you’re a longtime user of an Alexa-powered device, you’ve probably noticed that the digital assistant is now nagging you with such follow-up questions more than before. This is because people are quickly losing interest in it, according to a new Bloomberg report.

The publication has obtained some internal documents from Amazon that reveal that the company is struggling with user retention and engagement on Alexa. According to the report, up to 25 percent of users stop using their new Alexa device within two weeks.

People are more likely to engage with devices that feature a display. 74 percent of users who have an Alexa device with a screen use it at least once a week. That number comes down to 66 percent for Echo users and 56 percent for Echo Dot users, both of which don’t sport a screen. The engagement rate doesn’t improve despite Amazon’s efforts to add new features to Alexa.

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Amazon Alexa device wise engagement

Lack of user engagement on Alexa is hurting Amazon

Amazon’s first Alexa device — the cylindrical Echo speaker — was a huge success. Well, device sales have never been a problem. According to the company’s estimates, around 25 percent of US households had at least one Alexa device in 2020. The number goes up to 27 percent for Amazon Prime customers.

The real problem is that people don’t find Alexa useful in the long run. Most users discover half of all the features they will ever use within three hours of activating the device. And in about two weeks, they have already lost interest in engaging with the digital assistant. They only use the device for basic tasks such as playing music or setting timers. While Alexa is capable of doing much more than that, users simply don’t find it that useful.

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This is hurting Amazon. The company hoped Alexa would bring users closer to its other services by offering quick access. The idea was to make money when people use the digital assistant to access its other services. For example, it can suggest birthday gifts or Christmas presents that you can buy from Amazon. However, that’s not happening. Be it due to privacy concerns or whatever else, people aren’t interested in finding what else Alexa can do apart from what they already use it for. Perhaps that’s why Alexa now nudges users with those follow-up questions to tell them more about its capabilities.

But the damage is already done. Amazon is losing big money on its Alexa devices due to a lack of user engagement. In 2021, the company estimates to spend a whopping $4.2 billion on Alexa. This could mean a loss of $5 per device, according to its 2018 projections. It hopes to turn that to a $2-per-unit profit in 2028 but has its task cut out.

Amazon refuses to concede that Alexa has stalled

Amazon expectedly refuses to concede that Alexa usage has stalled. A company spokesperson claimed that these statistics were either outdated or inaccurate. “The assertion that Alexa growth is slowing is not accurate,” Amazon spokesperson Kinley Pearsall said in an emailed statement to Bloomberg. “The fact is that Alexa continues to grow — we see increases in customer usage, and Alexa is used in more households around the world than ever before.”

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Perhaps the company is optimistic about Alexa. Despite the struggles, Amazon has big ambitions for its digital assistant. It plans to launch Alexa-powered devices with more cameras and sensors in the future. This will enable the device to “recognize different voices or determine which rooms users are in during each interaction.”

However, Amazon is also aware that the smart speaker market is past its growth phase. The retail giant doesn’t expect to grow it much over the next few years (estimated annual growth of 1.2 percent). It now remains to be seen whether the company manages to achieve its target of making Alexa a profitable business division by 2028.