Amazon is gradually becoming a platform that has an impact on nearly every activity in the world. In addition to the three pillars of the Amazon e-commerce site, Prime and AWS, there is also a fourth pillar in the ecosystem: Alexa, the fourth leading wave to lead Amazon in the digital era.

Recently, Amazon launched more than a dozen products, from the Echo Speaker, Echo Show, Echo Auto to the microwave. This event does not reflect that Amazon will focus on selling devices but more on promoting Alexa virtual assistants everywhere and at every time. Alexa will be along with you in critical daily activities, from the house you live in the car you own. This move has shown part of Amazon’s IoT flywheel, which connects to businesses such as Marketplace, Prime and especially AWS.

Figure 1. Devices that Alexa reached and has a potential to reach (not restricted to these devices) Source: AWS.

First, Alexa is leading the way, opening up a new voice interface (Voice User Interface) market area, which has grown rapidly in recent years. Alexa has been integrated on millions of Amazon devices, third-party manufacturers and is used as a software platform on other products, it is like an OS.

Figure 2. VUI era (Voice User Interface). Source: Amazon.

This “operating system” ecosystem is designed to develop a 3-side community: Developers can use the Alexa Skills Kit (ASK) as a set of self- Service APIs, tools, documentation and source code help users quickly and easily add new skills to Alexa. In addition, developers can now use skills from the Smart Home API, adding new skills to the ASK. Currently, there are over 3000 skills for developers.

Figure 3. Amazon Alexa. AWS Source.

For third-party equipment manufacturers, the Alexa Voice Service (AVS) supports integration with smart connected devices, which creates a rich voice eco-system. Alexa. Amazon recently introduced the Alexa Connect Kit, which makes it easy to connect the device to Alexa, helping third parties produce devices that integrate Alexa’s integrated smart devices.

For end users, Amazon is the market leader in smart speaker products (and potential to do so in other hardware devices). Alexa is becoming smarter because of the amount of data from the end-user voice data input and improvements in technology (such as the technology to avoid confusion wake up word, voice recognition technology long range, ability to understand natural language, application of techniques semi-supervised techniques, transfer learning techniques…)

Table 1. Alexa achievements.

Devices integrated with Alexa is one of the best-selling products of Amazon. Alexa is also integrated by hardware device manufacturers and developed third-party software developers. There are more than 30,000 skills (applications) for software developers; more than 4000 smart home appliances from 1,200 brands integrated with Alexa.

Alexa plays a central role in the Amazon ecosystem. First, Alexa opens up a large market that integrates well with Marketplace & Prime. Alexa helps enhance the customer experience by helping users to search through voice, creating a potential voice commerce platform. This experience is further enhanced by the scale of data like previously discussed. Amazon is keen to “lock” users into the ecosystem and bring Alexa closer to the everyday customer journey. The biggest goal is nothing less than boosting the traffic and revenue of the marketplace & Prime (Prime customers will use Alexa’s service). More traffic pulls more users, more vendors, thereby reducing infrastructure costs, reducing product prices. So the loop makes Amazon’s flywheel grow.

Secondly, this voice-based platform also opens the way for Amazon to tap into highly potential IoT market. With Echo and other devices, Amazon is leading the smart home market. Obviously, Amazon wants to reach all activities in life, so there are products such as Echo Auto-integrated Alexa on smart devices in the car.

Table 2. The potential of the Smarthome market

The smart home is a very potential market with market size projections of $53 billion in 2022, according to Zio Market Research. Amazon has been steadily strengthening its market by providing smart home products in the kitchen area (Echo Basics-Microwave Oven, Amazon Wall Clock, etc.), where you and your family relax (Echo Show, Echo Plus, Echo Sub, Echo Link, FireFox Recast). In addition, Amazon also wants to penetrate the activity as you drive (Echo Auto), in your garden (Ring Stick Up Cam).

IoT value chain includes devices, connections, big data, algorithms. Amazon positions itself as an IoT platform that connects each element of the value chain: building infrastructure, supporting other companies; Developers can design, build, and run IoT capabilities which helps optimizing business processes, in which Alexa will play a central role in connecting base on voice platform. Services from Alexa are integrated with AWS.

Figure 4. AWS IoT Platform. Source: Amazon.

With the tremendous amount of data from voice, it’s obvious that units need a place to store, while developers need tools for efficient optimization. So no wonder Amazon wants to connect Alexa with its AWS services! More IoT devices lead more data generated, driving the need for AWS storage solutions and more advanced toolset to analyze it.

Flywheel effect comes into play again: the expansion of Amazon hardware devices has increased the IoT services developed by third parties on the AWS platform. The increase in IoT equipment will increase the demand for services on AWS, thereby increasing scale, reducing AWS infrastructure costs, attracting more developers on the AWS, 3rd party hardware development in the ecosystem, creating momentum for AWS.

Figure 5. IoT platform on AWS and flywheel effect. Source: Collective.

In this flywheel, artificial intelligence plays in an important role, which is the capability empowering and improving Alexa day by day. These capabilities are voice recognition, search, etc. Amazon has no intention of bringing artificial intelligence to every aspect of life, competing with Google & Apple which are having the advantage over user data on the phone. Technologies such as machine learning will be the core to operate internally, even outsourcing for others (AI as a service) on AWS.

Figure 6. AWS Flywheel Effect and Alexa’s Role.

The role of data and training of data is extremely important in artificial intelligence!. Incorporating Alexa as an essential platform in life will create a huge amount of data for Amazon to analyze, helping Amazon optimize the user experience. Amazon has even brought this technology closer to life by launching its Amazon Go store, creating a valuable source of data to analyze customer behavior and customer insight Amazon will take advantage of the scale advantage and the flywheel principle: more data than the artificial intelligence system will become smarter, leading to more users, creating more data. AI will help reduce the cost of product development, contributing to the AWS flywheel growth. Creating Alexa integrated IoT platforms also requires processing and analysis capabilities. These capabilities are provided on AWS, generating potential sales for the AI array in particular and the entire AWS in general.

Table 3. Virtual assistant race & artificial intelligence

To make advantage of the virtual assistant race with Google, Apple. The two rivals also own smart speakers (Google Home & Apple Homepod) and are aggressive moves to catch up with Amazon in the smart speaker race. In terms of Google, Amazon is always keen on capturing user behavior anytime, anywhere, like Google has been successful with Android in the phone line. Competing with competitors in the era of artificial intelligence, data play an important role and create their race to expand the market, attracting talent. Amazon is no exception when it comes to expanding its data. Amazon generated in-depth insight into purchasing behavior through data, but what Amazon lacks comparing to rivals (Google, Apple) is more in-depth information about their behavior other than shopping behavior (like Google’s information about the trip,  calendar location, appointment,etc). This is  also the reason Amazon launched a series of hardware devices recently. Not all products in this Amazon launching will be successful, but if one of them succeeds, it will expand the reach of Amazon data.

Figure 7. AI on Amazon’s AWS platform. Source: Amazon.     

With such potential, Alexa as the convergence of the river – Amazon’s business arm, bringing Amazon to new heights. In the next section, we’ll learn the secret of innovation at Amazon.

Hoang Nam Le

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