How Amazon Just Turned Your Smart Speaker Into Its Next Big Opportunity
Key Points
There are over 600 million Alexa devices worldwide, a massive user base to harvest data, upsell, and advertise to.
Amazon's Alexa upgrade also paves the way for agentic commerce.
While Alexa is over a decade old, Amazon's smart speaker is only beginning to realize its potential.
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Smart speakers have become commonplace in your home. Amazon (NASDAQ: AMZN) was an early mover. The company launched its Alexa voice assistant in 2014 and has built a massive ecosystem with over 600 million Alexa devices worldwide.
About a year ago, Amazon revamped Alexa with artificial intelligence (AI), launching Alexa+, a smarter, more capable version. It may not be obvious yet, but the Alexa+ upgrade has just turned your smart speaker into a monetization engine unlike any other.
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Alexa can monetize you in a multitude of ways
Nobody likes it when a salesperson knocks on your door and interrupts your day. Ironically, your smart devices are a sales force that you've already invited into your home. Alexa collects data from voice interactions and commands with your devices. It learns about you so that it can further personalize itself to your preferences.
The Alexa+ update paves the way for agentic commerce, where Alexa can autonomously make purchases on your behalf. Retail is all about removing friction from purchases, and AI's ability to remove the thought and clicks from the buying process does precisely that.
If you use your smart speaker to run third-party apps, or Skills in Alexa speak, Amazon takes a share of the revenue developers earn. Does your smart speaker have a display? It's also generating ad revenue when Alexa shows you businesses on your home screen. A smarter Alexa is more engaging, and higher engagement means more monetization across the board.
The big picture on a smart speaker opportunity that's still in its early innings
Beyond revenue from device sales, Alexa further solidifies Amazon's Prime subscriber base. Amazon charges $19.99 per month for Alexa+ but makes it free with a Prime membership. Amazon's goal has long been to make a Prime membership a no-brainer for anyone who engages with its products and services.
There's a good chance Amazon will continue to sell many more Alexa devices over the coming years as hardware improves, making devices even more capable. Research from Market.US estimates that the global smart speaker market will hit roughly $26 billion this year, growing to over $105 billion by 2033.
As AI moves from an app like ChatGPT to a central part of the home, where agentic AI assistants freely converse and make shopping easier than ever or upsell consumers on things they wouldn't have considered otherwise, Amazon will be right there to capitalize on the opportunity.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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