The global conversational AI market is valued at $3.2 billion in 2018, and is projected to surpass $15.0 billion by 2024, witnessing a CAGR of 30.2% over the forecast period. Among all regions, North America held the largest share, of 42.0% in 2018, in the market. This can be largely attributed to rapid technological advancements, presence of conversational AI vendors such as Microsoft Corporation, Google LLC, International Business Machines Corporation, and Oracle Corporation, rising investments related to integration of machine learning and NLP, in existing conversational solutions, and continuous focus of government on spending in AI-based technologies.
Factors Governing Conversational AI Market
Increasing adoption of artificial intelligence (AI) solutions in customer service application
AI solutions are increasingly being adopted for customer service application, as AI solutions like chatbots have gained prominence due to their ability of resolving customer queries without the guidance of a human agent. These solutions also enable the management of large volumes of data in a more structured manner. This has resulted in providing effective customer care services and reduced costs for the businesses. AI solutions have witnessed rapid advancements as these systems now possess conversational capabilities compared to their earlier models of speech to text translation. Retail and e-commerce industry are expected to benefit the most from the growth of AI solutions due to heavy investments made by these sectors toward customer service. For instance, in 2019, Try and Buy Fashion, a Mumbai, Maharashtra based online shopping website patented a software for their application that would create a virtual trial room for online shoppers. The module based on augmented reality (AR) is expected to ease-up the process of online shopping for their buyers, and is expected to increase sales of the company.
Growing demand for AI-powered customer support services
Growing demand for AI-powered customer support services is amongst the major factors supporting the growth of the global conversational AI market. With the combination of conversational AI solutions such as chatbots, IVA and IVR has enabled in the adoption of automated customer support services. The deployment of AI-enabled conversational tools engages customers, gather relevant information about them, before redirecting it to a human agent, which results in enhancing work efficiency and create a personalized experience for the user. It also assists users in taking better decisions related to the purchase of product or service.
Integration of chatbots for employee retention and engagement
The implementation of chatbots for employee retention is one of the key opportunities noticed in the market. AI-powered chatbots support in providing insightful information to the companies related to the engagement level of an employee, which could lead to reduced churn rate. For instance, in August 2019, India-based HR technology company, Squadgain Techlabs Private Limited, launched an AI-enabled chatbot “Amara”. It helps companies by chatting with the employees at various touch points and predicts about the attrition risks. The chatbot is equipped with sentiment analysis and NLP, which analyzes candidate’s responses and predict the overall engagement and experience with the organization.
Conversational AI Market Segmentation
Based on type, chatbot is the largest category in the conversational AI market and is expected to hold over 45% share by 2024. This can be mainly attributed to increasing demand for integration of chatbot with social media platforms, rising penetration of mobile application and websites, and growing preference for intelligent customer engagement.
On the basis of deployment, cloud category held the largest share in the market in 2018. This is due to shift in preference toward cloud-based solutions which offer benefits such as complete access, cost effectiveness, and customization.
On the basis of technology, fastest growth in conversational AI market during forecast period is expected from machine learning category. With the help of this technology, conversational AI solutions are able to learn from previous responses based on different queries, which in turn is increasing the capability of the machine in answering questions, and also played a significant role in the growth of this category.
Based on application, personal assistant category is anticipated to exhibit fastest growth, with 31.0% CAGR, during the forecast period. This is owing to conversational AI solutions including chatbots and IVA, which act as a personal assistant, as it understands open conversations while converting them to specific conversation, based on the requirements of the user.
Geographical Analysis of Conversational AI Market
Globally, North America was the largest market for conversational AI solutions during the historical period and is expected to maintain the trend during the forecast period as well. This is mainly attributed to the rapid technological advancements, presence of conversational AI vendors such as Microsoft Corporation, Google LLC, International Business Machine (IBM) Corporation, and Oracle Corporation, rising investments related to integration of machine learning and NLP, in existing conversational solutions, and continuous focus of government on spending in AI-based technologies.
Competitive Landscape of Conversational AI Market
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?