Amazon Enlists Anthropic’s Claude to Help Fuel Alexa AI Innovation

Amazon’s revamped Alexa, due out in the U.S. in October ahead of the holidays, will be powered primarily by Anthropic’s Claude artificial intelligence models, rather than its own AI, five people familiar with the matter told Reuters.

Amazon plans to charge $5 to $10 per month for its new “Remarkable” version of Alexa, as it will use powerful generative AI to answer complex questions, while still offering the “classic” voice assistant for free, Reuters reported in June.

But early versions of the new Alexa that used proprietary software struggled to find words, sometimes taking six or seven seconds to acknowledge and respond to a prompt, one of the sources said.

That’s why Amazon turned to Claude, an AI chatbot developed by startup Anthropic. According to the sources, Claude outperformed the online retail giant’s own AI models.

Reuters based this story on interviews with five people with direct knowledge of Alexa’s strategy. All asked not to be named because they were not authorized to discuss nonpublic matters.

Alexa, which is primarily used through Amazon TVs and Echo devices, can set timers, play music, act as a central hub for smart home controls, and answer one-off questions.

But Amazon’s attempts to convince users to shop through Alexa and generate more revenue have largely failed, and the division is still loss-making.

That’s why senior management has emphasized that 2024 is a crucial year for Alexa to finally show that it can generate meaningful sales. The revamped paid version is seen as a way to do that and keep pace with the competition.

“Amazon uses many different technologies to power Alexa,” a company spokeswoman said in a statement in response to detailed questions from Reuters for this story.

“When it comes to machine learning models, we start with the models that Amazon has developed, but we have used and will continue to use a variety of models, including Titan (Amazon’s AI model) and future models from Amazon, as well as those from partners, to create the best experience for customers,” the spokeswoman said.

Anthropic, in which Amazon has a minority stake, declined to comment for this story.

AI partnerships

Amazon has typically preferred not to rely on technology it has developed itself, seeking to have full control over the user experience, data collection and direct relationships with customers.

But it wouldn’t be alone in turning to a partner to improve AI products. Microsoft and Apple, for example, have both partnered with OpenAI to use ChatGPT to power a number of their products.

The Remarkable Alexa, as it’s called internally, is expected to launch in October. The new service will be previewed during Amazon’s annual devices and services event, which is typically held in September, the sources said.

Amazon has not yet announced when it plans to hold the showcase event, which will mark the first major public appearance for new device chief Panos Panay, who was hired last year to replace longtime CEO David Limp.

The broad introduction in late 2022 of ChatGPT, which provides complete answers to complex questions almost instantly, led to a wave of investment and corporate maneuvering to develop better AI software for a variety of functions, including image, video and voice services.

By comparison, Amazon’s 10-year-old Alexa seemed old-fashioned, Amazon employees told Reuters.

While Amazon’s mantra is to “work backward, starting with the customer” to come up with new services, some people said the emphasis within the Alexa group since last year has actually been on keeping up with competitors in the AI ​​race.

Amazon employees are also skeptical about whether customers will be willing to pay $60 to $120 a year for a service that is free today — on top of the $139 many customers already pay for their Prime membership.

Alexa Upgrades

According to people with knowledge of Alexa’s strategy, the paid version of Alexa would, as envisioned, continue conversations with a user based on previous questions and answers.

The upgraded Alexa is designed to let users ask for shopping advice, such as what clothes to buy for a vacation, and to gather news stories, the people said. And it’s intended to handle more complex requests, such as ordering food or composing emails, all from a single prompt.

Amazon hopes the new Alexa will also become a powerful home automation hub, remembering customers’ preferences so that, for example, the alarm is set in the morning or the TV knows to record favorite shows even if the user forgets, the company said.

However, the company’s plans for Alexa could be delayed or changed if the technology fails to meet certain internal benchmarks, the sources said, without providing further details.

Bank of America analyst Justin Post estimated in June that there are about 100 million active Alexa users, and that about 10% of them would opt for the paid version of Alexa. Assuming the low monthly price range, that would bring in at least $600 million in annual sales.

Amazon says it has sold 500 million Alexa devices, but the company does not disclose how many active users it has.

When Amazon announced a deal to invest $4 billion in Anthropic last September, it said its customers would get early access to its technology. Reuters could not determine whether Amazon would have to pay Anthropic extra for using Claude in Alexa.

Amazon declined to discuss details of the deals with the startup. Alphabet’s Google has also invested at least $2 billion in Anthropic.

The retailer, along with Google, is facing a formal investigation by Britain’s antitrust regulator over the Anthropic deal and its impact on competition. It announced an initial investigation in August and said it had 40 business days to decide whether to move it to a higher level of scrutiny.

The Washington Post previously reported that the new Alexa would be released in October.

© Thomson Reuters 2024

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