Amazon is turning to AI startup Anthropic to power the online retailer’s revamped Alexa when it’s released in October — rather than using its own artificial intelligence, five people familiar with the matter told Reuters.
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 queries, while still offering the “Classic” voice assistant for free, Reuters reported in June.
But initial versions of the new Alexa using in-house software simply struggled for words, sometimes taking six or seven seconds to acknowledge a prompt and reply, one of the sources said.
Alexa has cost the company billions of the dollars because of its limitations, according to internal documents reviewed by The Journal.
So Amazon turned to Claude, Anthropic’s AI chatbot, since it performed better, sources said.
Though not quite 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 just this past year.
Amazon funneled resources into its smart devices for years despite the division’s less-than-lucrative sales.
Staffers hoped customers would buy the devices and speak to Alexa to make purchases from Amazon. In theory, the device sales were not the profit-making part of the business – the future Amazon.com sales were.
But most customers have simply used the smart devices to answer questions, play music and set timers.
“We worried we’ve hired 10,000 people and we’ve 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 bled more than $25 billion from its devices business, the Journal reported.
So the pressure is on for the Alexa devices to make money this year, especially from CEO Andy Jassy – who took the helm in 2021. Jassy has set his sights on cutting costs, and the smart device business is reportedly on the chopping 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 variety of different models—including Titan and future Amazon models, as well as those from partners—to build the best experience for customers.”
The company did not answer whether Anthropic’s Claude is one of those models.
Amazon’s Alexa team has focused largely on competing in the AI sprint, sources told Reuters.
Employees have said they are skeptical whether customers will pay between $60 to $120 annually for a service that is currently free, especially in addition to their Prime memberships.
The premium Alexa will be able to respond to more complex prompts, like giving customers shopping advice, ordering food delivery or drafting emails, sources said.
Amazon wants the device to become a helpful assistant, able to remember things customers might forget – like setting a daily timer, sources said.
The advanced Alexa’s release could be delayed if it fails to meet certain benchmarks, sources said.
Bank of America analyst Justin Post estimated in June that there are about 100 million active Alexa users and about 10% of them might opt to buy the paid Alexa, bringing in $600 million in annual sales.
Amazon announced last September it was investing $4 billion in Anthropic, which would give customers early access to the startup’s tech.
It is 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 have been facing an antitrust probe in the UK investigating whether the partnerships hamper competition.
