Will “Skills” soon be paying the bills?

Amazon Echo has officially been available in Germany since mid-February—and with it, Alexa, Amazon’s voice assistant. The device opens up a new realm of marketing opportunities for companies through voice-automated apps called “Skills,” which anyone can develop and distribute on the mother platform. We spoke to several first movers to learn more about the current opportunities and challenges facing players on the fledgling platform, and to get a feel for the current reach figures popular skills can expect to achieve.

Nick Schwab explains how he got 250.000 Alexa Skill listeners per month:

The latest ads and video tutorials for Echo are an obvious signal of intent: Amazon is on the march for (even) more user terrain. After Prime and dash buttons gained significant ground, Alexa and the possibilities of hands-free everything, could very well be the final step to Amazon’s absolute commercial dominance. A world in which you can read the news, recite recipes, manage your calendar, control your home’s smart devices and play music—all without hands—is a world that Amazon dominates hands down.

10,000 Skills around the world

To increase Alexa’s attractiveness to users, Amazon is enticing a slew of companies to join the platform as developers of the aforementioned voice-activated Skills. Unsurprisingly, many companies jumped at the chance to hop on Amazon’s new platform, especially since Skills are not limited to the Amazon family of products and can be used to play tunes on Amazon Music or Spotify. In Europe, e.g., users can get the latest train schedules from national railways or soccer audio streams from domestic leagues, like Germany’s Deutsche Bahn and Bundesliga. Users can activate Skills using the Alexa app, with their preferred browser, on Amazon.com or per voice command on Alexa directly if they know the name of the Skill.

The front page of the current Skills Store (screenshot)

Currently, there are over 10,000 Skills available in the US Skills store, while in our home market of Germany there are 1200—pretty good considering that it only launched last year.  Be it stateside or in the old country, companies around the world seem to be more than happy to bet on Alexa being a major success—and thus reaping the lucrative potential rewards.

Five-digit users per Skill

OMR research showed that German developers have not yet been able to generate reach comparable to that of local Android app developers with Alexa Skills. But in light of the brief amount of time Echo devices have been on the German market, the figures are still encouraging.

For example, the Skill “Fernsehprogramm” (TV Schedule), which has only been around for just over 2 months, has already amassed 29,000 unique customers, a fact backed up by screenshots made available to OMR by local developer, Tobias Knisch. After activating the Skill, Echo users can ask Alexa for the TV schedule at, for example, 8PM that evening. The Skill has thus far averaged 700 users a day, and maxed out at 2000.

Traffic stats for “Fernsehprogramm” (Image: Tobias Knisch)

4000 users a day

Knisch, a 25-year-old insurance rep, seems to have struck a nerve. Despite the fact that he only creates Skills on a hobby basis, his Skill topped the most-activated Skills chart in the German store as recently as last week. (The exact requirements for topping the charts is unclear.)

Another permanent resident in the German Top-10 is “Gehirnjogging” (engl. brain jogging) by freelance developer Alexander Martin. Once activated, “Gehirnjogging” presents numerical problems to users that get harder the further you progress. The screenshots Martin made available to OMR show that “Gehirnjogging” has a similar reach to that of “Fernsehprogramm” and tops out at 4000 users per day.

Traffic history for “Gehirnjogging” (Image: Alexander Martin)

Berlin transit authority and 45K connections

Companies too have also begun notching reach in the tens of thousands: Swiss company Bring Labs, for example, offers an app which allows several users to create and synchronize a shopping list. The “Bring! Einkaufsliste” Skill now enables users to add articles to a given shopping list using Alexa. Recently, the Skill has been featured repeatedly on the home page, e.g. in the top-10 of most activated Skills. “In Germany, we have over 10,000 users who are both Alexa and Bring! users—and it’s trending upwards,” says co-founder Dominic Mehr.

Since January, the Berlin transit authority (BVG) has had its own Skill available to give Alexa users current information on subway and bus connections. “We have thus far received a total of 45K requests on our Alexa Skill,” a BVG spokesperson told OMR. “The number of daily uniques varies, but right now is around 150 on high-traffic days.” Other companies, like Mytaxi, Deutsche Bahn and Spotify, declined to comment on their current user figures.

30,000 users a day in the US

After reaching out to American Skills developers, we were not surprised to find out that Skills have a larger reach stateside. “I typically see over 30,000 unique users per day across all my Ambient Noise skills,” says Nick Schwab, a web developer based in Michigan. “I currently stream around 7 terabytes of audio per day.” In total, Schwab has created a total of 11 Skills, eight of which were released under the Alexa Sounds label, a label for ambient noises. Several of his Skills have been featured in the Top-10 in the past and three are there now: Fireplace, Ocean and Fan.

Other developers, like Jeff Bolton from Sleep Sounds, have also been successful with ambient noise; Bolton, too, is no stranger to the top-10. With Sleep Sounds, users can choose from several different soothing sounds designed to help you sleep. “Sleep Sounds is currently getting about 2500 new users every day. A little over 10% of those will use the skill on a daily basis,” Bolton told OMR.

 

10 million Echos in 2017?

So learning that raw figures in the USA are higher than those in Germany is not breaking news, as not only is the domestic market much larger, but so is the number of Echo owners, which in turn is due to the fact that the product has been on the market since June 2015. Just how many Echo devices are on the market is unclear and Amazon declined to provide OMR with any official sales figures. In a press release from December of last year, Amazon boasted that Echo was one of the biggest sellers of the 2016 Christmas season and also announced that Echo Dot was the top-selling product on Amazon since its launch.

In February, Consumer Intelligence Research Partners, a US market research group, estimated that 8.2 million Amazon customers own an Echo. According to Morgan Stanley, quoted here in the Seattle Times, Amazon sold 11 million devices through December 1, 2016—before the peak of the holiday shopping season. While the majority of sales were generated in the USA, 400,000 and 300,000 units sold in Germany and the UK respectively show that Echo, and Alexa, have begun establishing themselves abroad. California tech publication “The Information” is on record as saying that Amazon is aiming for 10 million devices sold worldwide. Also helping boost Alexa’s reach is the fact that you can now use it with the Amazon app in the US. All signs point to the service being rolled out in Germany very soon.

Siri sits behind closed doors

Just how big Alexa will end up being, and just how much developers and companies beyond Amazon can expect to profit from it, largely depends on the willingness of users to regularly use voice-based services. All the big players in Silicon Valley seem to be certain that they will come around as every company worth its reach has an in-house voice-automated system: Apple has Siri, Google has Google Home, Microsoft has Cortana and, most recently, Samsung threw its hat in the ring with Bixby.

Smartphone-based virtual assistants like Siri or Google Now have appeared to struggle in breaking through to the mainstream. A recent survey of 500 American phone owners by a US market research group revealed that many of them are aware of the voice-activated services, but that two-thirds of owners asked do not use them. And the biggest apparent drawback: using the service in public. Only two percent of participating iPhone owners said they would use Siri outside their homes.

Amazon investing heavily in Alexa

With all this in mind, it’s obvious that Amazon with Echo and Google with Google Home are very interested in claiming a spot in customers’ kitchens and living rooms. Google Home devices are not yet available in Germany, meaning that Amazon has not only entered the market much earlier than its competitors, but has also has a reach of more than 300 million customers worldwide. Thus, the eCommerce behemoth not only has the financial means to keep developing the product and increasing its attractiveness (word on the virtual street is that over 1000 employees are currently working on the project), but also has the distribution power to force Alexa on the market through an array of special deals, discounts and bundles.

What’s in it for companies or unaffiliated developers to allocate resources to the platform? Selling Skills at present is not allowed; all apps are gratis. In the “App Economy,” Gaming apps are among the top revenue generators. The first wave of games on Alexa have already been released, such as “Rollenspiel Soloabenteuer,” a popular game in the German developer scene. If Alexa is to remain attractive for independent developers in the long-term, Amazon will have to begin providing monetization opportunities. Another feasible option would be offering simple “in-Skill” purchases that customers could make via Amazon Pay.

Order flowers, coffee or dinner

At the moment, Alexa Skills certainly justify themselves for companies using the service to boost transactions. Among the first movers in Germany is Mytaxi, whose Skill lets users order a taxi. In the US, Uber offers a similar service with its “Ride Hailing” skill; with the 1-800-Flowers Skill, users can order flowers, while Starbucks Reorder lets you order coffee. Amazon also recently began providing Skill developers with access to user locations—as long as they opt-in. British start up “Just eat” is among the first enterprises worldwide that uses this data and lets users order food through the Just eat Skill.

For users to place an order with a Skill, companies must use an OAuth to integrate an interface to their own client data base and then users must use account linking to connect their device cloud account.  As opposed to apps, companies using Skill are not required to fork over a portion of their revenue generated from using Skills with Amazon—at least according to official Amazon documentation. Nevertheless, Amazon figures to retain access to the valuable data on the business conducted by Skill providers.

Alexa still irrelevant as a traffic driver

The single biggest factor for getting digital publishers and content providers to stick with the platform is whether or not Alexa turns into a traffic generator for external outlets in the mid and long-terms. Right now, it is not. Users can find a recipe that they selected via a Skill or even send it as a card to the Alexa app. However, linking the recipe card in the app to the website of the Skill provider is not currently supported. As we heard from German recipe provider Chefkoch, it is keeping the business development department from investing more resources into the platform.

It is unclear at the moment if Alexa Skills can help boost app downloads. When OMR spoke to “Bring!” founder Dominic Mehr, he was skeptical, saying “As we cannot track it accurately, I cannot make any definitive statements. But I don’t think it’s more than one percent.”

“Washington Post” places ads

Der Menüpunkt “Tägliche Zusammenfassung” in der Amazon-Alexa-App

One option for publishers to monetize their Alexa Skills is to implement audio ads. News-driven publishers can take advantage of a special Skill type: they can offer users their content in the form of daily recaps, where Alexa reads the content from the selected publisher. In the USA, the Washington Post was the first publisher to promote flash briefings last summer. Since then, Morgen Stanley has sponsored the recap.

Other publishers, too, may also be promoting their “Flash Briefings.” At least that is the case according to users on Reddit (e.g here, here and here), as well as several users on Twitter that Alexa has ran ads for Taco Bell. It will certainly be of interest for radio broadcasters from an ad-placing perspective when Alexa begins providing them with more user data: such as location and demographics.

Removing obstacles

From a strategy perspective, Alexa Skills could serve company interests as an instrument that promotes customer loyalty as voice-activated products increase a product’s usability. This, in turn, improves the likelihood that a product will be used regularly (in his State of the German Internet keynote, OMR founder and CEO Philipp Westermeyer said that products and marketing are no longer independent from each other). And that applies to companies all across the board—even banks. In the US, Capital One allows customers to access their recent account and credit card history with a Skill after they provide their four-digit PIN. Back in notoriously private Germany, Hamburg agency Nuuk recently presented a demo version of skill for a German bank which lets customers transfer money.

Developing a Skill: here’s how it’s done

How exactly do Alexa Skills work and what do companies need to keep in mind when developing a Skill? The fundamental elements are so-called slots, which consist of pre-defined sentences that Alexa users can ask. At present, there is no text search function available and each Skill may entail 50,000 possible slots.

At first glance that sounds like enough options to get creative, but for current Skill providers, 50,000 is not enough. Chefkoch, for example, has more that 300,000 recipes in its database according to company figures, while the Deutsche Bahn services roughly half a million stops, when including all the local affiliated stops. And that’s without considering other variables that could potentially increase the number of slots needed, e.g. offering sentences in more than one language.

Take your time testing

The solution: self-imposed limitations. Chefkoch only offers the recipe of the day through its Alexa Skill and a handful of other select categories, while Deutsche Bahn only offers information to its own stops, approximately 10,000 train stations.

Selecting which sentences to actually use, shouldn’t be done arbitrarily. Furthermore, rigorous testing is a must, because if users do not phrase their question exactly as developers planned for, the Skill will not work.  “The amount of testing that goes into a Skill is not to be underestimated,” says Alexander Köhn from Hamburg-based agency Nuuk. “Ideally, you have enough time and resources to carry out real-life tests with external users.”

Rethink and focus

An additional challenge is the fact that voice automation is a new user interface. “We have to make a mental switch from the graphical to the verbal,” says Dominic Mehr from “Bring!.” “When you are dealing with graphic elements, users can choose from various visible options and thus develop a familiarity with the interface. When dealing with interfaces employing language, it’s an entirely different process.

Reduction can aid the process. “Focus on simple, short exchanges which quickly address your customers’ problems or needs. It’s very easy to overcomplicate the user experience in voice-based environments,” according to Nick Schwab. Alexander Köhn recommends using voice diagrams, while Capital One also published helpful tips for developers in a presentation.

Users slip more than they stick

As is the case in the world of apps, discovering new Skills for Alexa is not easy. “It’s awfully hard to get new users unless you’re featured in one of Amazon’s highlighted categories,” says Nick Schwab.

So wird Mytaxi gerade im deutschen Skill Store gefeatured (Screenshot)

Further complicating matters are the low retention rates for Skills. “As a daily Alexa user, I can say from experience that most of the skills I enable get disabled shortly after enabling them,” says Sleep Sounds developer Jeff Bolton. He is by no means alone. According to a study by Voice Labs, only three percent of all users actually use an activated Skill in the second week. One way of bucking that trend is to prioritize customer service. “We respond to every less than 5-star review.  If the reviewer has exposed an issue, we resolve that issue as quickly as possible.”

 

Amazon enticing users with free hosting

Amazon is make a concerted effort to convince skeptical developers and companies to invest in Alexa and is enticing them with a promotional program, where they can host their Skills on Amazon for free up to a certain volume.

 

Now or never

If there was ever going to be a time for Alexa or other voice-automated software to succeed, it would be now. In fact, failing to breakthrough to the mainstream now, piggybacking on Amazon’s never-ending resources and vast customer base, would speak volumes to Alexa’s viability, or lack thereof.