The optimistic article on CNBC titled Amazon’s Voice Assistant Alexa Could Be a $10 Billion ‘Mega-Hit’ by 2020: Research breaks down the argument by one investment bank (RBC Capital Markets) for Alexa becoming an earnings juggernaut for Amazon by 2020. The article does point out that other investors are less confident in how Alexa will translate into revenue. RBC explores device sales, shopping sales, and platform revenues to make their projections. The article expands,
The investment bank said it estimates totally retail revenue per active Amazon customer will be around $350 by the end of 2017. If this grows 5 percent annually it means the revenue per customer will be $400 by 2020. Alexa devices could increase spending between 5 percent and 15 percent or $40 per customer.
IF RBC is correct about the total install base of 128 million by 2020, then shopping incremental revenue will be roughly $5 billion. Of course, that depends on how many people purchase Alexa devices. RBC estimates a 40% adoption rate in the US and a 25% rate globally. Additional revenues will also come into play through the creation of a marketplace for the “skills” (akin to apps) that Alexa uses. Let the high stakes betting commence!
Chelsea Kerwin, May 12, 2017