Voicebot has learned that VoiceLabs has discontinued its sponsored messages advertising program for Amazon Alexa skill publishers. Sponsored Messages was the first voice interactive advertising monetization solution for for Alexa skill developers. VoiceLabs CEO Adam Marchick commented:
We are very proud that we delivered millions of Audio Ads on the Alexa service that were accepted by consumers. There were a few consumers unhappy with the advertising, but statistically, consumers accepted the ads and kept using the Alexa skills at the same rate, and developers were elated to finally have a real revenue stream. We paid out thousands of dollars to developers, and they were invigorated to invest more in their Alexa skills.
VoiceLabs officially launched the program on May 11, 2017 although Voicebot first reported on the program while it was still in beta testing in April. Mr. Marchick confirmed that the beta testing began in January and the May launch included prominent national advertisers.
New Amazon Alexa Policy Restrictions Spurred the Cancelation
Marchick says that two Amazon Alexa policy changes led to the program’s cancelation. The first came out on April 20, 2017 when Amazon explicitly prohibited Alexa skills from including advertising in their user experience except for streaming music, radio and flash briefings. Marchick claims that this change “cut 85% of skills” because only about 15% of skills fell into the exception categories. Voicebot data from May 2017 found that 22% of Alexa skills are flash briefings and there are at least a few dozen streaming music, podcast and radio skills as well. It may be closer to 77% of skills are ineligible, but the point remains true that few Alexa skills qualified for advertising monetization after the policy change.
Despite the smaller inventory of potential skills eligible for advertising, VoiceLabs pressed ahead with the program launch in early May. Independent Alexa skill developers such as Nick Schwab with Ambient Noise skills and Federated Media’s B100 radio station immediately started generating ad revenue. Schwab commented at the time:
The hardest part about it was the more popular my Skills became, the more money and time I had to spend to support them, with no prospect of recouping my investments. Today, this major issue is solved with VoiceLabs’ Sponsored Messages.
However, then came another policy update. On May 21, 2017 Amazon “clarified” its policy and placed further restrictions on advertising. Marchick interpreted that policy update to prohibit “interactive” ads that enable Alexa users to respond to questions posed by advertisements and ask questions about the products or promotions. Marchick commented recently:
This ability to react to user preferences opens the door to a whole new field of audio advertising, and the May 21st Policy prevents this. We understand why Amazon did this, and based on this policy change combined with the limited set of Alexa skills that are allowed to advertise, we made the decision that the market was not ready. VoiceLabs is and always will be 100% within Amazon policy.
The program officially lasted a mere 25 days. Marchick did not comment on his direct conversations with Amazon executives and pointed only to the policy changes as motivating his decision to discontinue the program earlier this week. It is easy to surmise that those conversations provided little encouragement for continuing sponsored messages as a means for skill monetization.
Will This Eliminate Ads on Voice Assistants? No.
Neither the policy nor VoiceLabs current decision will eliminate advertising on Amazon Echo. There is audio content that Amazon wants to make available to users that has advertising embedded within it. Take a listen to Vermont Public Radio’s Alexa skill to hear several examples each day.
Amazon also wants to encourage consumer brands to establish an Alexa presence and their skills by definition tend to be promotional either directly or indirectly. A completely ad-free experience on Alexa is unlikely and would actually undermine user access to certain content which is popular. In addition, Amazon itself advertises on the platform with its daily deals promotions.
The question is not about advertising versus no advertising. It is about what type of advertising will be accepted by consumers and be viewed as acceptable by Amazon. Amazon doesn’t need to generate revenue from advertising. It is already earning more from retail sales ordered through Alexa and from Echo device sales. However, skill developers don’t have access to these revenue streams. A healthy developer ecosystem requires the ability to generate income. Without advertising, Alexa skill content developers such as the Jeff Bezos-owned Washington Post would either have to give their product away for free or create a paywall gate within the skill. The free approach undermines the value of high quality content production and the latter creates unwanted friction for users.
The Changes Do Limit Monetization Options
Part of the genius of the Apple App Store was the availability of monetization options for developers. The revenue sharing model for app and in-app purchases, and the in-app advertising option created the opportunity for a healthy, self-sustaining developer ecosystem. The numbers tell the story. At Apple’s annual Worldwide Developer Conference (WWDC) this week, CEO Tim Cook announced that there are 16 million registered iOS developers today and three million were added in the last year alone. The bigger story is the $70 billion that has been paid to developers in less than a decade. It is a self-sustaining developer ecosystem.
Not every iPhone app includes monetization. However, the option for monetization brought many developers into the iOS developer program. The large number of iOS developers meant that many had requisite skills to build other apps not intended for monetization. For those choosing to monetize, the revenue streams increased the return on their time from building better apps to the delight of many Apple users.
The other robust economic models of the internet era are almost entirely ad supported. Facebook, Google, Twitter, Snap. The list goes on. In those instances, the revenue goes to the platforms and not the content developers. However, Alexa doesn’t have a user generated content model so it relies on developers to supply the applications and content that enhance Alexa user experience. In this way, voice assistants are similar to the mobile ecosystems that rely on developers as opposed to the web where anyone can publish on their own terms because it is an open system. Without a revenue option, the Alexa developer ecosystem will become stagnant over time and the consumer experience is guaranteed to suffer. This isn’t only true for Amazon. Google, Microsoft, and Apple will all need to face this reality.
Filling the Gap by Paying Some Developers Directly
Voicebot was the first to report two weeks ago that Amazon has begun issuing reward checks to Alexa game developers with particularly popular and high engagement skills. The checks were appreciated by developers but are too small for anyone to make a living or compete financially with the snow cone alternative. Reward checks may help partially fill the monetization gap for one small segment of Alexa skills, but hardly seem like a sustainable model. Alexa developers need a monetization solution.
Economic Incentives Will Become More Important
Amazon executives understand economic incentives as well or better than anyone. They are trying to balance the need for a strong uninterrupted user experience with the friction introduced by monetization models. Thus far, the company has managed that balance and successfully grown a large user and developer base. That equilibrium is quickly shifting as Alexa shifts from a hobbyist orientation to a more professional focus. Economic options for skill publishers may well determine the long-term health of the Alexa ecosystem.