The news: Amazon plans to put ads in its AI-powered Alexa+ voice assistant to boost product discovery and profits.

“There will be opportunities, as people are engaging in more multi-turn conversations, to have advertising play a role [in] discovery and also as a lever to drive revenue,” CEO Andy Jassy said on a Q2 earnings call.

Alexa+ has rolled out to millions of customers following multiyear delays and a laggy roll out.

Zooming out: Generative AI (genAI) companies are increasingly looking to position their platforms as ad engines.

• In November, Perplexity started testing ads in its genAI search engine.
• OpenAI is considering a “thoughtful” approach to ads incorporated into ChatGPT, per Axios.
• Google may integrate native ads into Gemini, CEO Sundar Pichai said during a Q4 earnings call.

But Alexa hits different. While those genAI engines are used by casual users on largely web-based interfaces, Alexa+ reaches consumers throughout their homes in highly contextual and intentional moments, such as via reorders or product searches.

• This opens the door for deeply targeted advertising but also could dissuade adoption of Alexa+ if in-conversation ads feel intrusive or invasive.
• Given that Alexa+ is voice-based and not text-based, ads could also interrupt the flow of users’ conversations and cause them to lose interest or focus.

Ad-supported assistant: Jassy said that, over time, Amazon might introduce a “subscription element” beyond what exists today. Alexa+ is currently free for Prime members and costs $19.99 per month for non-members.

• This could mean further dividing Alexa+ access into multiple ad-supported and ad-free tiers.
• A tiered model could limit reach if ads only reach users on a free tier, potentially reducing audience size for campaigns.

Adding another subscription tier could let Amazon further monetize Prime subscribers and help recover the over $25 billion its devices business lost between 2017 and 2021, per The Wall Street Journal.

Our take: If Amazon rolls out sponsored answers to Alexa+ user queries or in-conversation ads, the voice assistant’s vast trove of personal user data will help marketers target consumers on a micro level. However, if hallucinations arise and lead to irrelevant or inaccurate product recommendations, Amazon risks eroding both user trust and brand confidence.