Amazon is turning to AI startup Anthropic rather than using its own artificial intelligence to power the online retailer's new Alexa when it is released in October, five people familiar with the matter told Reuters.
The Seattle-based company plans to charge $5 to $10 per month for its new “Remarkable” version of Alexa, which will use powerful generative AI to answer complex questions, while still offering the “classic” voice assistant for free. Reuters reported In June.
But one source said early versions of the new Alexa using in-house software struggled to come up with words, sometimes taking six or seven seconds to accept a prompt and respond.
Alexa's limitations have cost the company billions of dollars in losses. According to internal documents reviewed by the Journal,
So Amazon turned to Anthropic’s AI chatbot cloud because its performance was better, sources said.
Although Anthropic is not as large a company as rival OpenAI, which owns ChatGPT, Anthropic is a major force in the AI industry. The startup has raised nearly $8 billion – $7 billion in funding last year alone.
Amazon has poured resources into its smart devices for years, even though sales in this segment have been modest.
Employees hoped that customers would buy the device and make purchases from Amazon by talking to Alexa. In theory, device sales were not the profit-making part of the business – rather, future Amazon.com sales were the profit-making part.
But most customers have only used smart devices to answer questions, play music, and set timers.
A former Amazon employee previously said, “We were worried that we hired 10,000 people and we built a smart timer.” told the Wall Street Journal,
Amazon has sold more than 500 million Alexa devices by 2023. But the company has lost more than $25 billion from its device business between 2017 and 2021, the Journal reports.
So the pressure is on for Alexa devices to make money this year, especially from CEO Andy Jassy — who took the helm in 2021. Jassy focused on cutting costsAnd the smart device business is reportedly on the verge of closure.
“Amazon uses many different technologies to power Alexa,” an Amazon spokesperson told The Post. “When it comes to machine learning models, we start with models built by Amazon, but we have used and continue to use many different models, including Titan and future Amazon models, as well as models from partners, to create the best experience for customers.”
The company did not answer whether Anthropic's cloud is one of those models.
Amazon's Alexa team has primarily focused on competing in the AI sprint, sources told Reuters.
Employees said they doubt customers will pay $60 to $120 annually for a service that is currently free, especially as an addition to a Prime membership.
Premium Alexa will be able to respond to more complex prompts, such as giving customers shopping advice, ordering food deliveries or writing emails, sources said.
Amazon wants the device to be a helpful assistant that can remember things customers might forget — like setting a daily timer, sources said.
Sources said the release of the upgraded Alexa could be delayed if it doesn't meet certain criteria.
Bank of America analyst Justin Post estimated in June that there are about 100 million active Alexa users and about 10% of them may choose to buy a paid Alexa, generating annual sales of $600 million.
Amazon announced last September that it was investing $4 billion in Anthropic, giving customers early access to the startup’s technology.
It's unclear whether Amazon will give Anthropic additional investment to build Alexa using the cloud.
Google has invested at least $2 billion in Anthropic.
Amazon and Google are facing an anti-competition investigation in the UK, examining whether these partnerships hinder competition.
