Alexa is huge. Amazon’s still trying to find all the things it’s good for.

Amazon built a technology people like. Now it has to build an ecosystem around Alexa, so it can be bigger than Amazon.

An Amazon Echo on a bar table.

The Echo is popular, but it may not be the most important part of Alexa's future.

Photo: Amazon

There was a period of time during Amazon's development of Alexa and the Echo that Paul Bernard didn't see it going anywhere. "I'd been part of the beta team that experimented with it," he said, "and quite frankly, very early on, I was like, 'this isn't going to work.'" But Bernard, who was at the time a relatively new corporate development executive at the company, was quickly proven wrong. Amazon launched the Echo in 2014, it didn't do much and didn't do it all very well, but people loved it anyway.

Once it was clear the Alexa team was onto something, Bernard started brainstorming how his team might be able to help this new platform take off. They could buy a bunch of related companies, but that didn't feel big enough. They could do some commercial partnerships, but too many of those end up being a waste of time.

Bernard knew Amazon was going to launch two products — the Alexa Skills Kit and the Alexa Voice Service — that would let developers build their own stuff on top of Amazon's tech and devices. And the company had a long history of investing in other companies, though mostly in a non-systemic way. So Bernard and his team decided, maybe they should become venture capitalists. They wrote a proposal for a VC fund that would live inside Amazon, and spend the company's money investing in startups doing Alexa- and voice-related stuff. They presented it to Jeff Bezos, who bought in fast. "Jeff was like, 'I love it, let's go do it,'" Bernard said. The Fund was given $100 million to spend (it now has double that). "And I was like, oh god, I have to figure this out now."

The goal was simple enough: to create startup momentum around Alexa, and get interesting developers working on interesting projects on the platform. This playbook isn't unique to Amazon, by the way. The iPhone's success — both as a business in its own right and as proof that a thriving ecosystem makes any product better — taught a generation of tech companies about the value of third-party developers. Zoom's venture arm is funding video-first companies; Facebook has invested in and worked with lots of VR developers.

In a way, this ecosystem is uniquely important for companies building virtual assistants. They're designed to be ambient, trusted companions, and that only truly works when they're practically omnipresent and omnipotent. Aaron Rubenson, the vice president of the Alexa Voice Service at Amazon, likes to call Alexa a "digital fabric." "And for that digital fabric to be useful to customers, it has to be available everywhere that customers expect to be able to interact with their AI," he said. "And we recognize that we can't build everything." Assistants that know baseball scores but not song lyrics aren't useful; neither are ones that work in the living room but not in the kitchen.

Around the industry, there's a sense that the moment is right now to make a voice ecosystem happen. More than 58 million smart speakers were shipped in last year's holiday season alone, according to Strategy Analytics, and the whole space has grown quickly over the last year and a half. With so many people stuck at home, it's no wonder they decided it might be useful to have an easier way to set timers or listen to music.

The competition in the assistant space is hotter than ever, said Blake Kozak, an analyst at Omdia. Chinese companies like Alibaba and Xiaomi are making big moves in smart speakers, Google's Nest strategy is paying off and even Apple finally made a HomePod that people actually want to buy. Still, Amazon's alone at the top of the heap: It accounted for about 30% of global smart speaker shipments last year, Kozak said, and 57% in the U.S.

When it comes to what people actually do with those devices, though, the list remains concerningly short. Remember when Steve Jobs introduced the iPhone by saying, "It's an iPod, a phone, an internet mobile communicator"? The App Store eventually made the iPhone much more than that. Well, smart speakers are music players, timer setters and weather reporters. And largely still waiting on the next thing.

Within Amazon, the Alexa Fund quickly figured out its strategy: It doesn't typically lead rounds or take huge chunks of companies, instead preferring to be a smaller and more strategic investor. "We leaned into building a team of product and program managers whose sole purpose in life is to support the companies we invest in," Bernard said. Sometimes that's technical support, sometimes it's early access to APIs, sometimes it's just helping those startups get connected to other teams and executives inside of Amazon. When it works, it's a virtuous cycle: Startups tell Amazon what they need, Amazon builds better tools and platforms, those platforms make it easier for other developers to get started, everybody wins.

Matthew Crowley, the CEO of Vesper, which makes durable and high-fidelity microphones, said Amazon is both an investor and a customer, and that it works out pretty well on both sides. "If we say, 'I have a great idea,' or we have this new product, and we think this business group would really benefit from it, they can reach out on our behalf and try to organize a meeting." And, he said, the Fund seems to be "a way for Amazon to get exposed to external ideas." Vesper has bigger and more-involved investors, he said, but having Amazon on board also helps validate the company and its tech. And that helps double when they're trying to sell to a very large company called Amazon.

The Fund deliberately casts a wide net, Bernard said, in part because voice is still in such early stages that it's hard to know who's going to win. It has invested in hardware companies, even ones making products that ostensibly compete with Echos. It invests in the supply chain, like processor-maker Syntiant. It funds companies building skills, companies building other developer tools. Since Alexa is both a product and a toolkit, Amazon has to think about it broadly.

Still, Bernard did offer a hint about his overall thesis: "I think consumer products that have daily habit characteristics just have a higher chance of being successful." Same for Alexa: People learn to do certain things through a conversational assistant, and then they do them over and over again. It can be much harder to make an ambient interface feel habitual, compared to a smartphone that users look at and can buzz in their pocket, but when things stick for voice users, they really stick.

One place where that thinking led was to smart home products. (Nothing's more habitual than turning on lights and brewing coffee, right?) Most people in the virtual assistant space see connected homes as a key driver for virtual assistants, and Amazon has been investing in that idea since the beginning. The Alexa Fund invested in ecobee, Rise Gardens, August and even Ring before it was acquired by Amazon. The goal with all of it, Bernard said, "is to make the home feel like the product … you're interacting with a thermostat, but it feels like you're interacting with the home, right?"

Fitness has been another surprise win both for the Alexa Fund and for Alexa in general, largely thanks to the pandemic. Companies like Zwift, Tonal and Aaptiv all grew fast as a locked-down public needed a new way to exercise, and many people turned to their smart speakers for guidance. In a way, it's a perfect showcase for the tech: "Using an app to navigate your way through an exercise program is really, really suboptimal," Bernard said. Since Amazon had invested in those companies a few years ago, they'd been working on the tooling and interaction models to make fitness work. And so they were ready.

This is where the flywheel comes in again. Much of what Amazon learns through working with startups ends up back in tools like the Alexa Skills Kit and the Alexa Voice Service, where they become self-serve tools for any developer to access. That's ultimately the only way for the ecosystem to scale, and Amazon knows it.

This strategy also helps Amazon win even if it loses. The company's most ambitious plan is to be both the flagship product in the voice industry, and the AWS-style infrastructure for all the others. Through the Custom Assistant feature, companies like Verizon are already building their own tools that don't respond to Alexa but nevertheless use Alexa tech.

Increasingly, it seems that the future of the virtual assistant is veering away from the path set out by the smartphone. In the original metaphor, Amazon imagined Alexa as the iPhone: the one surface on which everything runs. But Alexa and other voice assistants are turning out to be more like Android, or maybe the internet as a whole: malleable platforms that developers can build on top of, with as little or as much customization as they'd like. For a while, it looked like the future involved a lot of sentences beginning with "Alexa" or "OK Google." Going forward, those look more like underlying technologies for a huge variety of applications and devices.

There are now more than 200 devices with Alexa built in, Rubenson said, more than 140,000 smart-home products that work with Alexa, and more than 130,000 skills available for users. That presents Amazon with a new kind of app store problem: discoverability. Amazon is trying lots of ways to help people find new stuff to do — weekly emails, recommendations on devices with screens, even Alexa itself offering ideas — but Rubenson admits it's still a challenge. And until Amazon cracks discovery, getting developers to build new and original capabilities for Alexa might be a tough sell.

So far, voice assistants have been most useful (and most used) in the home. The Alexa app works fine, but Amazon has largely stopped working on efforts to get Alexa integrated more deeply into the mobile experience. Instead the company and the Fund are looking ahead, investing in companies like Mojo Vision, which is working on smart contact lenses. "That was less leaning into our strengths, and more leaning into the things we needed to know for Alexa to be pervasive and not just bound to the home," Bernard said.

Mobility in general — from Alexa in your glasses to Alexa in your car to Alexa on the scooter you pick up on the street — is top of Bernard's mind right now. As the world re-emerges into a post-pandemic reality, after more than a year of time spent at home talking to Alexa and Google Assistant, it's time for the assistants to move into the real world as well. "I think there's a lot of other opportunities," Kozak said, "not necessarily for the smart speakers themselves, but the digital assistants." Assistants are being built into new condo complexes, integrated into jewelry and coming standard in new cars. They're becoming ubiquitous. And for Amazon, the race is on to make sure Alexa is in there somewhere. Even when it's not named Alexa.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins