Amazon is turning to artificial intelligence startup Anthropic to power the online retailer’s revamped Alexa when it launches in October — rather than using its own AI, five people familiar with the matter told Reuters matter.
The Seattle-based company plans to charge $5 to $10 a month for its new “Remarkable” version of Alexa, which will use powerful generative AI to answer complex questions while still providing the voice assistant ” Classic” for free, Reuters reported in June. .
But initial versions of the new Alexa using the in-house software simply struggled for words, sometimes taking six or seven seconds to acknowledge a request and respond, one of the sources said.
Alexa has cost the company billions of dollars because of its limitations, according to internal documents reviewed by The Journal.
So Amazon turned to Claude, Anthropic’s AI chatbot, after it performed better, the sources said.
Although 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 last year alone.
Amazon funneled resources into its smart devices for years, despite the division’s less-than-profitable sales.
Employees hoped customers would buy the devices and talk to Alexa to make purchases from Amazon. In theory, hardware sales weren’t the profitable part of the business—it was Amazon.com’s future sales.
But most customers just used their smart devices to answer questions, play music and set timers.
“We’re worried that we’ve hired 10,000 people and built a smart timer,” a former Amazon employee previously told The Wall Street Journal.
Amazon has sold more than 500 million Alexa devices as of 2023. But between 2017 and 2021, the company raked in more than $25 billion from its devices business, the Journal reported.
So the pressure is on for Alexa devices to make money this year, especially from CEO Andy Jassy — who takes over in 2021. Jassy has set his sights on cutting costs, and the smart device business is said to be on the block.
“Amazon uses many different technologies to power Alexa,” an Amazon spokesperson told The Post. “When it comes to machine learning models, we start with those built by Amazon, but we have used, and will continue to use, a number of different models – including Titan and Amazon’s upcoming models, as well as those from partners – to build better experiences for customers.”
The company did not respond to whether Anthropic’s Claude is one of those models.
Amazon’s Alexa team is mainly focused on competing in the AI sprint, sources told Reuters.
Employees have said they are skeptical that customers will pay $60 to $120 a year for a service that is currently free, especially in addition to their Prime membership.
Alexa premium will be able to respond to more complex requests, such as giving customers shopping advice, ordering food delivery or composing emails, the sources said.
Amazon wants the device to become a handy assistant, capable of remembering things customers might forget — like setting a daily timer, the sources said.
The advanced release of Alexa could be delayed if it fails to meet certain benchmarks, the sources said.
Bank of America analyst Justin Post estimated in June that there are about 100 million active Alexa users, and about 10% of those may choose to buy Alexa for a fee, bringing in $600 million in annual sales.
Amazon announced last September that it was investing $4 billion in Anthropic, which would give customers early access to the startup’s technology.
It’s unclear whether Amazon would pay Anthropic an additional investment to build Alexa using Claude.
Google has invested at least $2 billion in Anthropic.
Amazon and Google are facing an antitrust investigation in the UK investigating whether the partnerships hinder competition.
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