As of 2016, two years after the world first met Alexa, the marketplace for her apps was a very small place.
According to reporting in CNET, the market for making Alexa skills was worth a mere $500,000 in 2016 — and the marketplace was populated mainly by independent developers and a handful of marketing tech firms looking to build skills for enterprise players. It looked particularly tiny when stacked next to the iPhone App or Google Play stores’ revenues, which collectively brought in roughly $43 billion in app revenue 2016.
But the numbers in the Alexa marketplace have been climbing rapidly — estimates from VoiceLabs indicate it will be worth over $50 million in revenue for skill developers. That’s still an order of magnitude less than the over $60 billion in revenue the mobile apps marketplace is forecast to generate, but 100 times more revenue than it was bringing in two years ago.
And that figure may be heading for an upward revision, because this month Amazon has made it much, much easier for developers to directly profit from the app they build.
The Problems With Monetization
Amazon does not — and thus far does not intend to — allow advertising on the platform, in the sense that Alexa doesn’t give you the weather and then speak a message from the weather sponsor.
“I don’t know many consumers that find ads popping up in life to be convenient and friction-free,” he commented. “We care deeply about the customer experience being natural and personal. Your personal assistant in the room sitting next to you would not be a walking billboard for advertisers, and Alexa shouldn’t be either.”
With advertising out of the question, developers’ next best bet would be to monetize their apps directly by either selling them, allowing them to offer premium content or embedding them with the ability to make transactions.
As of a month ago, none of those things were possible.
This meant developers essentially had two methods for being paid directly for the skills they built.
The first was through a program Amazon rolled out about a year ago: its direct rewards program for developers whose apps lead in certain categories on the platform in terms of customer engagement, usage, visits, new customers, and ratings.
The program was popular, and the payouts often came to grateful, if somewhat surprised, programmers.
“I wasn't thinking in terms of revenue. I was just doing it for fun” said Joel Wilson, the hobbyist developer behind Question of the Day and Three Questions — trivia apps that give users short quizzes on topics like popular culture and science.
Whatever his motive, people liked the app — and a month in, Amazon paid him $2,000 as a reward for his skills’ popularity. And the figures went up from there — in his best run, Wilson netted $9,000 per month for three consecutive months.
But Wilson didn’t quit his day job as the CEO of a marketing analytics company — and neither do most independent Alexa skill programmers, because only a lucky few were ever granted cash rewards from Amazon for their efforts.
The second, somewhat more reliable, way to get paid for Alexa skills was leveraged largely by marketing tech firms who charged larger brands largish sums to build their Alexa skills for them. According to TechCrunch, the cost of those skills vary by complexity and range in price from $10,000 to $200,000 a piece.
But Amazon, now working in a more competitive field, very much wants to give developers an incentive to come and build for the platform.
“Every skill makes Alexa smarter or more useful,” Rob Pulciani, director of Amazon Alexa, said in a statement. “We can't do that by ourselves, and we want to enable indie developers to innovate and extend Alexa capabilities at a rapid pace. If our developer community succeeds, we succeed.”
Two New Ways To Get Paid
After announcing in November that upgrades were coming soon that would make Alexa skills more monetizable for developers , the first week of May saw two such major upgrades.
The first change came to how developers can charge for the content of their apps. While all apps on Alexa will continue to be free, developers can now charge customers to unlock premium features within Alexa skills. Those purchases can either be one-offs for specific content — or ongoing subscriptions. Developers own 70 percent of revenue from the in-skill purchase, while Amazon grabs 30. Prime members will also reportedly receive some special treatment that might amount to discounted prices or early access to new features and content.
This is not a totally new area for Amazon — it has allowed some limited in-app purchasing capacity through Amazon Pay for select partners — but in May 2018 the skill is up and online for the general app programming public.
Amazon’s other great leap forward for voice commerce, announced a little over a week and a half ago, was the reveal that it is offering up Amazon Pay to third-party developers so that they can sell their products through their Alexa skills.
The add-on will make it easy for customers to make orders from the voice assistant directly, much the way customers already can within the Amazon app. TGI Fridays and 1-800-Flowers are the first companies to create skills with the new feature, though Amazon noted in its blog post that more are to come.
The Right Change At The Right Time
“I think it was getting really crucial that Amazon make these apps something that you can make money off of — because I think with Google, Amazon cannot count on winning voice developers by default,” AI Developer Chandra Pradyumna told PYMNTS.
Pradyumna noted that the Alexa ecosystem is currently the best-developed — which has a lot of draw — but that developing for Amazon is a slightly more difficult and labor intensive process than doing similar work for Google Home development.
“And developing for natural language interaction is actually quite hard already, when mobile apps are a much better known commodity.”
Moreover, developer Kurt Walker noted, computer programmers and developers can make or break platforms — and Apple and Google both have a pretty significant advantage in a decade spent developing relationships with app developers. Amazon, he noted has some catching up to do.
“But payments, that definitely adds a whole new consideration — particularly when you think about how fast voice is growing. I think that now that there is that direct channel for that on the best known and most popular voice AI platform — that is a very different landscape.”