How Charlotte helped build Amazon's Alexa
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In 2006, an IBM engineer in Charlotte launched a small, unheralded speech-recognition company. Five years later, Amazon bought it in a secret deal.
Igor Jablokov founded Yap in Charlotte in 2006. Five years later, he had offers from Amazon, Google and Microsoft to buy the company, he says. Yap’s contribution to building the Amazon Echo is mentioned in a recent biography of Amazon founder Jeff Bezos.
By Tony Mecia
In his time in Charlotte in the late 1990s and 2000s, Igor Jablokov was an under-the-radar kind of guy. His small tech company, Yap, rented space in a warehouse behind Bank of America Stadium.
Yap, which developed speech-to-text technology, attracted little publicity. When it was sold to a holding company based in Seattle in 2011, the deal went mostly unnoticed.
A few bloggers, including one in Charlotte, connected some dots and discovered that the buyer of Jablokov’s company was Amazon, the steadily growing online retailer that had recently cracked the list of the country’s largest 100 companies. Still, nobody paid much attention to its acquisition of an obscure Charlotte start-up.
Now, though, the significance of that deal is coming into sharper focus. Amazon, now the second-largest company in the United States, is receiving far more attention. A recent biography of Amazon founder Jeff Bezos says the company’s 2011 acquisition of Yap was its first purchase of an artificial intelligence-related firm for a secret project that would eventually become the Amazon Echo, the device more commonly known by the name of its virtual assistant, Alexa. It’s the most popular smart speaker in the U.S., with more than 100 million sold.
The biography — “Amazon Unbound: Jeff Bezos and the Invention of a Global Empire” — says the Echo project was so secret at the time that Amazon didn’t even tell Yap why it wanted to buy the company. Yap’s “engineers would help develop the technology to convert what customers said … into a computer-readable format,” the book says. Amazon’s work on artificial intelligence, with Yap employees on board, led to the release of the Amazon Echo in 2014.
It’s unclear precisely how much Yap’s efforts in Charlotte shaped what would become a popular piece of consumer technology. The Amazon Echo sprang from years of work by many people, including those at other companies the retail giant acquired. However, it’s indisputable that Yap and its Charlotte workers played a role — a rare moment of tech glory for a city traditionally known more for its banks.
“I always find it hilarious, because places like Charlotte and Raleigh get such a bad rap,” Jablokov told The Ledger in a recent interview about his company and the deal. “I always love this story, because I can mess with people, like, ‘Where do you think something like that that’s so high end and in everybody’s home came from?’ I’m like, ‘No, it was in a warehouse right behind the Panthers’ stadium, for God’s sake.’”
Roots at IBM in University City
Like many of today’s Charlotte tech workers, Jablokov moved to Charlotte right out of college. He graduated from Penn State and moved here in 1996 to take a job at IBM. Today’s young people come to Charlotte for tech jobs in South End and uptown, at places like LendingTree, AvidXchange and plenty of smaller upstarts. But since the 1970s, the big tech employer in Charlotte at the time had been IBM, with its campus in University City.
As it happens, IBM’s Charlotte research operations in decades past also happen to have some tech lore. It’s credited with helping develop some of the world’s first automated teller machines (ATMs) in the late 1970s, and later was said to work on early versions of what became Watson, the question-answering computer that famously defeated quiz show champion Ken Jennings on “Jeopardy,” demonstrating the power of artificial intelligence.
Jablokov rose through the ranks at IBM and had taken over some of its artificial-intelligence related portfolio. But he grew frustrated at the blue-chip company’s reluctance to move more aggressively on what he considered promising technologies, like cloud computing and AI.
So in 2006, he left, picked off some of his IBM scientists and engineer colleagues and founded Yap. They initially rented space at the Design Center of the Carolinas in South End, which Jablokov recalls as being “down the street from Price’s Chicken Coop” (which has since closed and appears destined to become luxury apartments) and Pike’s Old Fashioned Soda Shop (now a Shake Shack).
The company had about 50 employees: engineering and operations in Charlotte, research in Boston and sales and marketing in the Bay Area.
The idea behind the company was to be able to develop speech-recognition technology that could be paired with the power of the internet. “One of the things that fascinated me is what if I can ask any question and get the content in one second back?” Jablokov said. “… Imagine saying anything that you want, and in a second later, there’s the answer.” As at many tech companies, the vision was also cast as part of an important social mission: He told The New York Times in 2008 that he founded the company after seeing his teenage sister texting while driving, and figured voice recognition could help end that practice.
It sounds commonplace now, but in 2006, that technology really didn’t exist. Smartphones were in their infancy. Most people had flip phones. Some businesspeople had Blackberries. The first iPhone wasn’t released until 2007.
Initial reaction: Why would we want to have speech transcribed?
Jablokov says he recalls going to the first-ever TechCrunch Disrupt conference, as the only company in the Southeast, and that nobody understood the appeal.
“Everybody was scratching their heads not understanding why would I just talk to a little mobile device, like a little flip phone, when I can just open up a laptop and type these things,” he said. “… Marissa Mayer [later CEO of Yahoo] was still at Google. I’m walking next to her. I’m showing her this. I’m showing it to Ashton Kutcher. I’m showing it to all these people. And they don’t know what the hell I’m talking about. It wasn’t anything that was on people’s radar.”
A four-sentence item in The Charlotte Observer noted that Jablokov was presenting at the 2007 conference. It said Yap had “innovative technology that lets you talk into your phone to voice-activate a Web search or text-message.”
To perfect the voice recognition, Yap partnered with wireless companies like Sprint, turning cell phone voicemails into text. A similar “visual voicemail” service is today available on most smartphones.
Jablokov said Charlotte was a good place to build a business, in large part because of its hub airport, which allowed him to easily reach other cities. Around town, he mostly kept a low profile. The Observer and the Charlotte Business Journal wrote only a couple articles on the company, mostly short pieces logging in its efforts to raise money.
Jablokov said he recalled having a one-on-one lunch with former Charlotte Mayor Pat McCrory, shortly before McCrory became governor in 2013. “He’s like, ‘How the heck did I not know that you were right under my nose?’”
A secretive deal comes together
But people in the tech industry nationwide knew about Yap.
Amazon, Jablokov says, first learned of Yap at a small telecom conference in Florida. They started talking in the spring of 2011. After Amazon gave them a term sheet outlining the deal, Google also made an offer, “and then Microsoft lowballed us,” he recalls.
Jablokov declined to share the terms of the deal. The Bezos biography says it was “around $25 million.” Jablokov told The Ledger the figure was higher than that.
The biography also portrays Amazon as obsessed with secrecy about the purchase: “During the prolonged courtship, Amazon execs tormented Yap execs by refusing to disclose what they’d be working on,” it says. It also says that after the deal closed, Amazon executives attending a conference in Florence, Italy, that was also attended by Yap engineers insisted that the two groups pretend not to know each other, “so that no one could catch on to Amazon’s newfound interest in speech technology.”
The deal closed in September 2011, with Yap being purchased by a shell company called Yarmuth Dion Inc. Some bloggers, including CLTBlog.com, pieced together that Amazon was the buyer, because the Yarmuth Dion address listed in securities filings was the same as Amazon’s headquarters.
Asked if there was a celebration after being bought by Amazon, Jablokov said there was actually little sense of joy: “It’s actually pretty sad. You spend years building this great team. … To hand it off to somebody, it’s probably like a bittersweet moment when a parent ships their kid off to university.” Amazon didn’t bring Yap’s founders aboard, but it absorbed its engineers and researchers. The Charlotte office shut down.
In the biography, author Brad Stone, an editor at Bloomberg News, wrote that after the purchase, “much of Yap’s technology would be discarded.” Though buying tech companies to acquire their engineers and researchers is common in the industry, Jablokov says he believes Yap’s research was one of a few components that eventually became Amazon Echo.
“It is a little bit surreal to see it and know we were championing that type of service and technology early on,” he says. “To see it so diffuse and part of the fabric of modern life as one of the top products of the last decade is very surreal.”
Today, Jablokov, age 48, is CEO of Raleigh-based artificial intelligence company Pryon, which he founded in 2017.
In 2018, Amazon wounded Charlotte’s pride by omitting it from its short list of cities in contention for a second headquarters. Ironically, the company cited a lack of tech workers here.
Early Charlotte tech successes go unrecognized
Dan Roselli, co-founder of Packard Place and a longtime participant in Charlotte’s startup scene, says stories like Yap’s are little-known in Charlotte. There are so many newer tech workers here that many don’t know the older stories — which weren’t popularized at the time because they were top secret.
“Success stories got missed or hidden, because there wasn’t any community to bring it to life and publicize it a little bit,” he says.
He points to other Charlotte brushes with tech greatness, too — like the engineer who soldered together the first iPod for Steve Jobs to present to Apple’s board of directors; the developer of ExxonMobil Speedpass payments who’s now the CEO of Charlotte tech company Payzer; and the developer of Disney’s MagicBands, who then moved to Bank of America in Charlotte.
Another indisputable legacy of Yap: Roselli says that after it was acquired by Amazon, Yap donated its desks to Packard Place — which other Charlotte tech companies have used for coworking.
Tony Mecia is executive editor of The Charlotte Ledger.
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Executive editor: Tony Mecia; Managing editor: Cristina Bolling; Contributing editor: Tim Whitmire, CXN Advisory; Contributing photographer/videographer: Kevin Young, The 5 and 2 Project