Exclusive-Amazon taps Anthropic’s Claude to revamp Alexa AI by Reuters

By Greg Bensinger

SAN FRANCISCO (Reuters) – Amazon’s (NASDAQ: ) revamped Alexa due to launch in October ahead of the U.S. holiday season will be powered primarily by Anthropic’s Claude artificial intelligence models rather than its own AI , five people familiar with the matter said. Reuters.

Amazon plans to charge $5 to $10 a 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 initial versions of the new Alexa using the in-house software simply struggled to find words, sometimes taking six or seven seconds to confirm a request and respond, one of the people said.

That’s why Amazon turned to Claude, an AI chatbot developed by startup Anthropic, because it outperformed the online retail giant’s AI models, the people said.

Reuters based this story on interviews with five people with direct knowledge of Alexa’s strategy. All declined to be named because they are not authorized to discuss non-public matters.

Alexa, accessed primarily through Amazon TVs and Echo devices, can set timers, play music, act as a central hub for smart home controls, and answer unique questions.

But Amazon’s attempts to get users to shop through Alexa to generate more revenue have been largely unsuccessful, and the division remains unprofitable.

As a result, senior management has stressed that 2024 is a critical year for Alexa to finally prove it can generate meaningful sales – and the revamped paid version is seen as a way to both do that and keep up with rivals.

“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 ones built by Amazon, but we’ve used and will continue to use a variety of different models — including (Amazon AI model) Titan and future Amazon models as well as those from partners — to build the best customer experience,” the spokesperson said.

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

AI PARTNERSHIPS

Amazon has typically avoided relying on technology it didn’t develop in-house so it could ensure it had full control over user experience, data collection, and direct customer relationships.

But it wouldn’t be alone to turn to a partner to improve AI products. Microsoft (NASDAQ: ) and Apple (NASDAQ: ), for example, have partnered with OpenAI to use ChatGPT to power some of their products.

The launch of Remarkable Alexa, as it is known internally, is expected in October, with a preview of the new service coming during Amazon’s annual devices and services event, which is usually held in September, the people said.

However, Amazon has not yet said when it plans to hold its unveiling event, which will be the first major public appearance of its new head of devices, Panos Panay, who was hired last year to replace longtime executive David Limp.

The mass release in late 2022 of ChatGPT, which provides near-instant complete answers to complicated questions, has sparked a frenzy of investment and corporate maneuvering to develop better AI software for a variety of functions, including image services, video and voice.

By comparison, the decade-old Alexa seemed outdated, Amazon workers told Reuters.

While Amazon has a mantra of “working backwards from the customer” to come up with new services, some of the people said that within the Alexa group, the focus over the past year has instead been to keep up with competitors in the AI ​​race .

Amazon workers also expressed skepticism that customers would be willing to pay $60 to $120 a year for a service that’s free today — on top of the $139 many already pay for their Prime memberships .

ALEXA UPDATES

As expected, the paid version of Alexa would have conversations with a user based on previous questions and answers, people familiar with Alexa’s strategy said.

The updated Alexa is designed to let users look up shopping advice, such as what clothes to buy for a vacation and buy news, the people said. And it’s meant to handle more complicated requests, like ordering food or composing emails, all in one request.

Amazon hopes the new Alexa will also be a supercharged home automation hub, remembering customers’ preferences so that, say, morning alarms are set or the TV knows to record favorite shows even when a user forget, they said.

However, the company’s plans for Alexa could be delayed or changed if the technology fails to meet certain internal criteria, the people said, without elaborating.

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

Amazon says it has sold 500 million Alexa-enabled devices, but does not disclose how many active users there are.

In announcing a deal to invest $4 billion in Anthropic last September, Amazon said its customers would have 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 the details of its agreements with the startup. Alphabet’s (NASDAQ: ) Google has also invested at least $2 billion in Anthropic.

The retailer, along with Google, faces a formal investigation by the UK’s antitrust regulator into the Anthropic deal and its impact on competition. It announced an initial investigation in August and said it had 40 working days to decide whether to move it to a more intensive stage of scrutiny.

The Washington Post previously reported the October timeframe for the new Alexa launch.