Amazon to lower its cut of Alexa skill developer revenue starting in 2022


Sarah Perez

Amazon is joining other tech giants by lowering its cut of developer revenue generated by voice apps, known as Alexa skills, which run on Amazon’s smart speakers and other Alexa-powered devices. The company this week announced it would next year reduce its commission from 30% to 20% for Alexa skill developers who earn less than $1 million in revenue through things like Skill purchases (paid installs), in-skill purchases (the Alexa equivalent of in-app purchases) and skill subscriptions.

The changes will go into effect starting in the second quarter of 2022, and will be joined by an expansion of developer benefits designed to help third-party developers generate traffic and increase their skills’ visibility. Amazon says developers who generate less than $1 million in the previous calendar year, as well as new Alexa developers, will be eligible for the new program.

The update to Amazon’s commission structure for Alexa developer revenue follows similar moves made by other tech giants, including Apple, Google, and Microsoft.

Just over a year ago, Apple responded to the increased regulatory scrutiny of its App Store business by dropping its commission rate to 15% for small businesses developers with under $1 million in App Store revenues over the course of a year. Previously, those developers had to pay Apple’s standard 30% commission. Google soon followed suit with a similar program for Google Play which lowered its cut to 15%, with a slight differentiation as to how it calculated when the lowered commissions would apply. Both companies have since gone on to carve out further exceptions to their standard commission rates for select categories of apps, including news publishers and other subscription apps.

In addition, Microsoft this year updated its revenue share terms to more favorable rates, with an 85/15 revenue split for app developers using its payments platform and an 88/12 split for game developers.

Amazon’s Alexa platform, however, isn’t quite in the same category as these other, larger app ecosystems.

While the company had originally planned for a voice app catalog to rival any other app store, the reality is that few developers have been able to capitalize on Alexa’s sizable footprint in U.S. consumers’ homes to create profitable businesses.

In fact, Amazon has struggled over the years with skill discovery, as studies found that Alexa device owners largely used their smart speakers and screens for their built-in functions — like controlling smart home devices, playing music, making shopping lists, setting timers, listening to news and getting quick updates on things like the weather or sports scores, for example. Even voice-based shopping, which Amazon had hoped would take place through Alexa devices, never fully took off.

In other words, Amazon’s adjustment to its commission rates can’t be viewed in the same light as the changes to other app stores’ policies. While, to some extent, Amazon likely feels pressure to follow market trends, it clearly also hopes that lowered commissions could incentivize Alexa developers to build for its platform.

In the same announcement, Amazon also said it will roll out more benefits designed to increase developers’ potential revenue under the new program that begins next year. These additional perks could be worth “up to an additional 10 percent” of a developer’s potential revenue, Amazon noted. The benefits will include incentive programs, personalized feedback to help developers optimize their skills, help identifying monetization opportunities, and more.

Amazon has repeatedly tried direct payments for top skill developers over the years. It’s unclear for now if the new incentives will be different, or just more of the same. Amazon said it will share more details about the program closer to its launch next year.

The company over the past year, has tried to bring back interest in skill development, by introducing more opportunities to make Alexa skills profitable. It launched Paid Skills, where consumers pay upfront to access the add-on voice app, introduced Alexa Shopping Actions to allow developers to sell from within their skill (and earn affiliate income), expanded access to in-skill purchases to more international developers, and reduced the cost of hosting skills to nearly $0.