Amazon Seeks to Defend Alexa's Lead as Competition Heats Up

By Laura Stevens Features Dow Jones Newswires

Amazon.com Inc. is pouring more resources into Alexa to maintain its edge as competition heats up among artificial-intelligence assistants, according to people familiar with the company's thinking.

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Amazon is adding hundreds of engineers to the Alexa program and giving it hiring preference over other divisions, the people said. It has also put Tom Taylor, a veteran Amazon executive known for scaling high-growth operations, in charge of the business, after the former Alexa chief retired.

Alexa powers Amazon's Echo speaker device, which was the first of its kind when it was launched nearly three years ago. The Echo has about three-quarters of the U.S. market for smart speakers, with more than 11 million total devices sold through the end of last year, according to analyst estimates.

But the people say Amazon executives are eyeing a land rush they have created, with new or planned devices using similar virtual assistants from Alphabet Inc.'s Google, Apple Inc., Microsoft Corp. and Samsung Electronics Co. All four rivals have access to different, deeper pools of data through their huge device businesses, which could be used to quickly train assistants on user behaviors and language.

On Wednesday, Amazon said it was teaming up with Microsoft to allow their voice-enabled digital assistants to work together, a move analysts said would help boost Alexa's content. But the two won't be sharing data.

Amazon draws its user data primarily from its retail website, which gives it a big advantage when it comes to shopping and other related machine learning, and its Echo devices.

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Google gathers data from its widely used search engine in addition to its Android operating system for smartphones. It is directing its voice assistant at Amazon's stronghold, e-commerce, with the partnership it announced with Wal-Mart Stores Inc. last week. Users of its Google Express shopping service will be able to order from the retail giant by voice via Google's virtual assistant.

Google's virtual assistant, which responds to "OK, Google," now understands questions as well as Alexa, at about 95%, according to Loup Ventures research, which tested 800 questions on both systems. Google previously lagged behind in a February test, understanding about 77% of queries, versus 94% for Alexa. Google answered 65% of the questions correctly, compared with 54% for Alexa, although both improved.

"If I am the person who is in charge of the Echo, I would be concerned about the war chest of data that Google has to make this experience better," says Gene Munster, head of research at Loup Ventures.

Amazon declined to comment on its Alexa strategy.

Amazon already has bolstered its Alexa business, including the launch last year of the $49.99 Dot, a smaller cousin to the $179.99 Echo. That has helped drive adoption of Alexa because the Dot has sold faster than the Echo, according to an internal document viewed by The Wall Street Journal and people familiar with the matter.

Amazon also integrated Alexa with outside developers and products, adding more than 15,000 skills that allow consumers to ask Alexa to digitally shake a Magic 8-ball or turn on the lights. Alexa has also been added to devices ranging from Ford Motor Co. cars to Sears Holdings Corp.'s Kenmore refrigerators, which Google is also trying to do.

Still, Amazon needs Alexa to keep getting smarter. Josh Vickerson picked up a Dot late last year when it was on sale for $35. The 24-year-old originally tried out features like playing Jeopardy and integrating his Fitbit. Now he uses it to play videos, set timers and turn off the lights.

"It's fun to play with when you first get it," said Mr. Vickerson, a Rochester, N.Y.-based web developer. But "there's no enormous value proposition." He's considering purchasing Apple's new $349 Home Pod, which comes out in December, in which Apple's AI assistant, Siri, is expected to be integrated.

Amazon has been accelerating the growth of its Alexa staff at a rapid pace for years -- long before competitors emerged. The company recognizes when it has to boost growth in certain divisions to grab more share in an emerging market, the people said.

It's unclear exactly how large the Alexa unit's staff is now, but LinkedIn shows nearly 3,000 current Amazon employees with Alexa in their description. Amazon's jobs site recently had nearly 1,500 openings mentioning Alexa.

The Alexa division now generally wins when competing within Amazon for promising job candidates and other resources -- even against Amazon Web Services, the highly profitable cloud services division, according to the people.

Overseeing the effort since June is Mr. Taylor, a nearly 20-year veteran who previously ran seller services. That includes the company's Fulfillment by Amazon program, where Amazon stores and ships merchandise for sellers on its site. That division has experienced explosive growth over the past few years. Mr. Taylor succeeded Mike George, who retired after two decades at Amazon.

A major goal is to generate more data via greater Alexa adoption. The added engineers are developing new features and pushing deployment of new Alexa-enabled devices, as well as helping with algorithms to improve functionality, the people said. The hope is that attracts more companies to integrate Alexa into more smart cars, appliances and other devices, thereby adding more users who generate more data that Amazon can use to further train Alexa.

Write to Laura Stevens at laura.stevens@wsj.com

(END) Dow Jones Newswires

September 01, 2017 07:14 ET (11:14 GMT)