When the Alexa smart speaker was introduced three years ago as Amazon Echo, consumers and product reviewers didn't know what to make of it.
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It makes a lot of sense now.
Amazon's (AMZN) device was initially used for common things like playing music, keeping lists and answering questions. It since has become a smart-home utility with numerous features that's now positioned to generate buckets of cash for the world's largest e-commerce company.
The name of the device has evolved from Echo to Alexa, the name given to the female voice for the artificially intelligent smart speaker. She responds to questions and requests and lives in the Amazon cloud. It has been one of the top-selling devices sold by Amazon over the past two years.
Alexa started out as one device but has since expanded to a line of several devices. They range from the low-end Echo Dot, priced at $49.99, to the high-end Echo Plus at $149.99. The smart-speaker field has turned out to be one of the hottest categories in consumer electronics.
Amazon doesn't reveal sales of its Echo product line. But in his 2017 letter to shareholders, Chief Executive Jeff Bezos said, "Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don't see positive surprises of this magnitude very often — expect us to double down."
Amazon said customers bought "tens of millions" of Echo devices last year. It also says the number of Alexa-enabled devices had tripled in the past year thanks to partnerships with a wide array of hardware providers.
'Alexa, Let's Buy Groceries'
Early this month Amazon announced that Alexa is now linked to the company's supermarket chain, Whole Foods Market, for the home delivery of groceries. Users can order groceries for delivery in the dozens of cities where Amazon offers its Prime Now food delivery services. To find out if the service is available, users can say "Alexa, shop Whole Foods."
If available, they can create a grocery shopping list as the days go by, such as saying "Alexa, add eggs and milk to my Whole Foods cart."
Once ready for grocery delivery, users can say "Alexa, checkout."
The shopping list is sent to the user's smartphone for review. A two-hour delivery time window can then be selected. Prime now members can also choose to pick up their groceries instead.
"Everyone in the family can use Alexa to add what they need," Amazon said in a statement. "No more waiting in line at the store and worrying if you are forgetting something."
Monetizing Amazon Echo
Amazon is looking to monetize Alexa in a variety of different fields. It offers its Amazon Music Unlimited service for Echo, and says it has tens of millions of paying customers.
Amazon also is partnering with hotel companies, allowing travelers to continue using Alexa while they are traveling. It's already set up so that users can buy goods available on Amazon's e-commerce website. It can also track their packages and get notices when they arrive.
"I think we're having a lot of success with devices and customers are enjoying those," said Dave Fildes, Amazon's director of investor relations, during the company's second-quarter conference call on July 26. He was responding to an analyst's question about the impact that Alexa is having on Amazon's retail business.
Brian Olsavsky, Amazon chief financial officer, on the conference call said the current goal is expanding the home assistant to places where it can be useful.
"We also are developing new machine learning tools to help developers more easily build Alexa skills," he said. "We feel like we're getting great traction there."
Amazon is spending millions on improving Alexa's list of applications, which it calls skills. About 45,000 skills are available.
Amazon's Market Dominance
Skill sets vary widely, including trivia games, guided meditation, news reports, stock-market action and weather reports. It can also connect to a wide variety of smart-home devices, such as controlling TV sets or lighting. The devices have the potential of being the central hub of a smart-home ecosystem.
"Amazon has poured considerable resources into improving Alexa's library of skills," wrote Cowen analyst John Blackledge in a recent report to clients.
Alexa is far ahead of its second place competitor, the Google Home device from Alphabet (GOOGL). Amazon entered the market about two years before Alphabet.
The research group Consumer Intelligence Research Partners says the Amazon device leads the smart speaker category, with 70% market share in the U.S. Google Home is second with 24% share.
Blackledge said about 23% of U.S. households with a broadband connection have an Echo.
Amazon is also expanding the line into France, India and Japan. It plans to expand into Mexico, Italy and Spain later this year.
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The post Amazon's Alexa Is Shifting From A Clever Gadget To A Money-Making Machine appeared first on Investor's Business Daily.
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