Conversational AI Market Research Report: By Component (Platform, Service), Deployment (Cloud, On-Premises), Type (Chatbot, IVA, IVR), Industry (BFSI, Retail and E-Commerce, Healthcare, Hospitality, Telecom, Media and Entertainment), Technology (Natural Language Processing, Machine Learning, Automated Speech Recognition), Application (Customer Support , Personal Assistant, Branding and Advertisement, Customer Engagement and Retention, Onboarding and Employee Engagement), Geographical Outlook (U.S., Canada, U.K., Germany, France, Russia, Italy, China, Japan, India, South Korea, Australia, Brazil, Mexico, U.A.E., Saudi Arabia, Turkey, South Africa) – Global Industry Analysis and Forecast to 2024

Market Outlook

The conversational artificial intelligence (AI) market size was $3.2 billion in 2018, and it is expected to cross $15.0 billion by 2024, registering a CAGR of 30.2% during 2019–2024.

In 2018, the North American region generated 42.0% of the revenue in the global industry. This can be primarily ascribed to the rapid technological advancements, huge investments to promote the integration of machine learning (ML) and natural language processing (NLP) in existing conversational solutions, rising government spending on AI-enabled technologies, and presence of established players, such as International Business Machines Corporation, Oracle Corporation, Microsoft Corporation, and Google LLC.

Usage of AI Solutions by Customer Service Departments Boosting Market Revenue

AI solutions, primarily chatbots, are being widely leveraged for customer service as they can resolve customer queries without the guidance of a human agent. Moreover, these solutions allow for the management of high volumes of data in a more-structured manner. Owing to these advantages, businesses are able to reduce their operational costs and offer effective customer services. The rapid advancements in AI technologies have led to the development of conversational capabilities in such solutions, which is an upgrade from the earlier models of speech-to-text translation.

The constant technological developments in the conversational AI market will vastly benefit the retail and e-commerce industry, especially in the area of customer service. For instance, in 2019, a Mumbai-based online shopping website, Try and Buy Fashion, patented software that creates a virtual trial room for online customers. This augmented reality (AR)-based module will smoothen the online shopping process and amplify the sales of the company.

Spurring Demand for AI-Powered Customer Support Services Fueling Market Growth

The growth of the conversational AI industry is driven by the burgeoning demand for AI-supported customer support services. In recent years, the adoption of automated customer support services has surged due to the integration of conversational AI solutions, such as intelligent virtual assistants (IVA), intelligent interactive voice response (IVR), and chatbots, into traditional systems.

AI-supported conversational tools engage consumers by collecting relevant information about them before redirecting them to a human agent, which leads to the creation of a personalized experience for the customer and enhancement in the work efficiency. Automated services also help users in taking better decisions while purchasing a product or service.

Usage of Chatbots for Employee Retention and Engagement Driving Market

The growth of the conversational AI market can also be attributed to the rising adoption of chatbots by enterprises for employee retention and management. AI-supported chatbots provide insightful information regarding the engagement level of an employee, which can decrease the churn rate. For instance, in August 2019, Squadgain Techlabs Private Limited, an India-based HR technology company, launched an AI-powered chatbot, Amara. This chatbot helps businesses by talking to the employees on several aspects of their professional life and predicting attrition. It is equipped with NLP and sentiment analysis, which evaluate the responses of candidates and predict their overall engagement and experience with business entities.

Market Segmentation

In 2018, the cloud category accounted for the larger market share under the deployment segment. Businesses are showing a greater preference for cloud-based solutions as they offer customization, anytime, anytime access, and cost-effectiveness.

The chatbot category generates the highest revenue within the type segment, and it is expected to attain an over 45.0% share by 2024. This can be primarily owed to the mushrooming demand for the integration of chatbots with social media platforms, surging preference for intelligent engagement, and increasing penetration of websites and mobile applications.

The machine learning category, under the technology segment of the conversational AI market, is expected to witness the fastest growth in the coming years. This technology enables conversational AI solutions to learn from the previous responses based on several queries, thereby enhancing the capability of the machine in answering questions.

The personal assistant category, within the application segment, will register the fastest growth, at a CAGR of 31.0%, in the foreseeable future. This can be owed to the rising usage of chatbots and IVA as personal assistants, as they understand open conversations while converting them to distinct conversations, as per the needs of users.

Geographical Analysis

The North American market for conversational AI solutions generated the highest revenue during 2014–2018, and it is projected to continue its domination in the future. This will primarily be on account of the constant technological advancements, existence of many conversational AI vendors, huge investments directed at the integration of NLP and ML in the existing solutions, and strong  emphasis of governments on spending on AI-supported technologies.

Competitive Landscape

The conversational AI market is fragmented in nature, owing to the presence of established players including Microsoft Corporation, International Business Machines Corporation, SAP SE, Oracle Corporation, Google LLC, Nuance Communications Inc., Haptik Inc., Conversica Inc., Amazon.com Inc., and Baidu Inc. The market also consists of regional players such as Avaamo Inc., Creative Virtual Ltd., Inbenta Technologies Inc., Artificial Solutions International AB, Kore.ai Inc., and Solvvy Inc.

Recent Strategic Developments of Major Conversational AI Market Players

In recent years, major players in the conversational AI market have taken several strategic measures such as acquisitions and product launches, to gain a competitive edge in the industry. For instance, in November 2018, Microsoft Corporation signed an agreement to acquire Xoxco Inc., a U.S. based solution provider for conversational AI and bot development. With this acquisition, the company aims to offer accessible software tools to developers, which assist in creation and deployment of conversational interfaces across platforms.

In May 2018, Nuance Communications Inc., acquired U.S.-based provider in conversational voice technology for homes, cars, mobile devices, named Voicebox Technologies Corporation for $82.0 million. With this acquisition, the company aims to strengthen its offerings in conversational speech technology and voice assistants, and expand its operations worldwide.

In April 2018, Google LLC, launched a beta version of its Dialogflow Enterprise Edition, which is a platform that help companies to operate personal intelligent chatbots. It can be used to build virtual assistant skills for Google Assistant, Cortana, and Siri. It enables users to integrate Google cloud services, such as Speech-to-Text and Text-to-Speech, and offer technical support for enterprises.

Key Questions Answered in the Report

• What is the current scenario of the conversational AI market?
• What is the historical and the present size of the market segments and their future potential?
• What are the evolving opportunities for the players in the market?
• What are the key strategies adopted by the major players to expand their market share?
• Which are the key geographies from the investment perspective?
• What are the emerging technologies for the development of conversational AI solutions?
• What are the major catalysts for the market and their impact during the short, medium, and long terms?
• What are the key trends observed in the conversational AI market?
• What are the major growth drivers impacting the market?