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Connected Homes August 2021 Viewpoints

Technology Analyst: David Strachan-Olson

Amazon's Continued Improvement of the Alexa Platform

Alexa continues to be a key component of Amazon's strategy in the connected home. A host of new features will give Alexa platform developers new opportunities to attract users and monetize their creations. Amazon is set on expanding the capabilities of the Alexa platform in an effort to transform it from a virtual assistant into an "ambient intelligence system."

Description

At its third-annual Alexa Live developer event, Amazon.com announced several new features and tools that Alexa developers can use to improve the skills (similar to apps on smartphones) they create for Alexa. Widgets for Alexa devices with screens will enable developers to create "glanceable," self-updating views related to certain aspects of their skills. Amazon will also reserve space on Alexa devices' home screens for featured skill cards, which on the basis of device use highlight popular skills users might find interesting. Expansion of the Name‑Free Interaction Toolkit, which lets developers tell Amazon that their skill can support certain common commands, will enable developers to improve skill discoverability during voice requests. Alexa will then direct users to these skills when they trigger the associated command. Amazon is adding new features to this tool kit by expanding the number of phrases with which developers can create associations and by offering users personal suggestions it bases on past skill use.

In addition to new tools to increase skill discoverability, developers will also have better tools for monetizing skills. Amazon added in‑skill purchase capabilities previously, but the company is now giving developers the option of having skills that require payment upfront. Developers will now also receive a 10% marketing commission from Amazon if they direct users to buy products on Amazon.com. Finally, a series of Food Skill APIs (application programming interfaces) will help companies build skills specifically for food-delivery and -pickup experiences.

Implications

Skill discoverability continues to be a major challenge for voice-platform developers because many users use virtual assistants for only simple interactions such as setting timers, asking about the weather, and controlling smart devices. Although voice platforms have digital stores similar to the App Store and Google Play, users visit these stores very infrequently. Recommending skills on the display of Alexa devices could help improve skill discoverability, but the inclusion of recommended skills on their home page might annoy users. In comparison, handing off certain Alexa voice commands to third parties provides a discoverability mechanism that integrates with the overall Alexa experience in a fluid way. Providing new monetization features will keep skill developers engaging with the Alexa platform and creating new skills.

Amazon has ambitions to grow Alexa from a virtual assistant into an ambient intelligence system that is capable, proactive, personal, and everywhere users want it to be. For Amazon, this means building a platform that can extend Alexa's capabilities and skills across many devices both with and without screens. Amazon is making steady progress in these efforts and has shown that it is willing to support third-party developers to achieve this goal. However, if Amazon wants to turn Alexa into an ambient intelligence system, it will need to convince users that Alexa is more than an easy interface for a few common commands and smart-home controls.

Relevant Areas to Monitor

  • Strategic Strongholds

    Companies often seek to create and leverage strategic strongholds through supply chains, value networks, content libraries, and user touch points to maintain business advantages and expand their reach. However, the value of strategic strongholds is always shifting as new technologies emerge and customers' needs change.

  • Postpurchase Monetization

    The initial sale of a smart device is not the end of potential revenue. For instance, smart TVs make money from serving targeted ads, and internet-protocol cameras often come with cloud subscriptions. Understanding how to provide a competitive product and generate postpurchase revenue is increasingly important for device manufacturers.

Impact Scale

On a scale of low, medium, or high, the anticipated level of impact for this topic is: High.

Impact Timing

On a scale of now, 5, 10, or 15 years, the anticipated impact timing for this topic is: 5 to 10 years.

Opportunities in the Following Industry Areas

  • AI/Automation/Software
  • Consumer Packaged Goods
  • Internet of Things
  • Retail
  • Sensors/Electronics