Amazon plots AI revamp for unprofitable Alexa service and paid subscription

In a bid to compete with the surging popularity of AI chatbots from rivals like Google, Microsoft, and OpenAI, Amazon is preparing a radical overhaul of its voice assistant, Alexa. According to sources familiar with the project, the company is aiming for a complete transformation of the service, which has consistently operated at a loss since its launch a decade ago.

Project Banyan: "Remarkable Alexa" and a New Era for Voice Assistants

The initiative, known internally as "Project Banyan," signifies the most significant change to Alexa since its debut in 2014 alongside the Echo speaker line. Central to the revamp is the integration of conversational generative AI, a technology that allows the assistant to understand and respond to complex prompts and questions in a more human-like way.

Amazon has christened the updated assistant "Remarkable Alexa," Reuters sources revealed. CEO Andy Jassy, who has taken a personal interest in revitalising the service, has set an internal deadline of August for the newest version to be ready. In an April letter to shareholders, Jassy promised a "more intelligent and capable Alexa," hinting at the upcoming changes.

Paid Tiers and Potential Monthly Fees

Perhaps the most drastic change for users will be the introduction of paid tiers. While the current version of Alexa will remain free (internally referred to as "Classic Alexa"), Amazon is planning a premium tier with more powerful AI capabilities for users willing to pay a monthly fee. Sources indicate that Amazon has considered pricing this premium tier at either $5 or $10 per month.

The paid version is expected to offer a significantly enhanced experience, capable of handling intricate tasks like composing and sending emails, ordering food deliveries, and managing smart home devices with a single voice command. It will also eliminate the need for users to repeatedly use the "Alexa" wake word during conversations and provide greater personalization based on user preferences.

A "Must Win" Year for Alexa

The urgency behind Project Banyan stems from the immense pressure on Amazon to prove Alexa's viability and generate meaningful revenue. Sources revealed that senior management has labeled 2024 as a "must win" year for the service, which is considered a cornerstone of Amazon's brand identity.

"Some of the Amazon employees who have worked on the project say Banyan represents a “desperate attempt” to revitalise the service, which has never turned a profit, and was caught flatfooted amid the rise of competitive generative AI products over the past 18 months," one source revealed Reuters. "Those people said they have been told by senior management that this year is a critical one for the service to finally demonstrate it can generate meaningful sales for Amazon."

Challenges and Uncertainties

Despite these ambitious goals, Project Banyan has not been without its hurdles. Sources cite challenges in achieving consistent AI performance, including issues with "hallucinations" (generating false information). Additionally, employee morale within the Alexa division has reportedly suffered due to the pressure to deliver results.

It remains unclear whether consumers will be willing to pay for a service that has been available for free for years. Amazon also faces the challenge of demonstrating a clear value proposition for the paid tier that distinguishes it from the free version.

Amazon's Response

An Amazon spokesperson addressed the ongoing efforts to enhance Alexa, stating to Reuters, "We have already integrated generative AI into different components of Alexa, and are working hard on implementation at scale—in the over half a billion ambient, Alexa-enabled devices already in homes around the world—to enable even more proactive, personal, and trusted assistance for our customers."