Internal Amazon documents viewed by Bloomberg show that the firm’s Alexa digital assistant has a serious engagement problem. That is, while Alexa-powered smart speakers and other devices typically sell very well during the holidays, usage drops off very quickly soon thereafter.

According to the report, which is based on documents covering the prior 6 year period, 15 to 25 percent of new Alexa users are no longer active just two weeks after receiving an Alexa-powered device. Worse, sales of Alexa-powered devices stopped growing in a meaningful way last year, with growth stalling at 1.2 percent annually. Alexa had “passed its growth phase,” the documentation notes.

That said, Amazon still has big ambitions for Alexa, which it plans to extend to more camera- and sensor-laden devices in the years ahead. And somewhat surprisingly, Alexa-powered devices with screens still perform well from an engagement perspective: the documentation claims that smart displays are used at least once a week by 74 percent of users, compared to 56 to 66 percent for Amazon’s smart speakers.

Amazon disputes the report.

“The assertion that Alexa growth is slowing is not accurate,” an Amazon representative told 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.” Amazon further claims that 25 percent of U.S. households have at least one Alexa-powered device, while the figure for Amazon Prime households is 27 percent.

A few more facts emerged in this report: Amazon loses $5 per Alexa-powered device on average but hopes to make $2 per device by 2028. It spent $4.2 billion on Alexa this year, and more than 10,000 Amazon employees work on this technology.

Tagged with Amazon Alexa