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Market Size and Trends

The conversational AI market is estimated to be valued at USD 10.65 Bn in 2024 and is expected to reach USD 44.38 Bn by 2031, growing at a compound annual growth rate (CAGR) of 22.6% from 2024 to 2031.

Conversational AI Market Key Factors

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The widespread adoption of conversational platforms across industries, such as retail, BFSI, healthcare, travel, and hospitality, is expected to drive significant growth in the market during the forecast period.

The conversational AI market is expected to witness strong growth over the coming years. Increased investment in AI and natural language technologies by major technology companies is supporting the development of more human-like conversational interfaces. Additionally, the need for automation and personalized customer engagement is promoting the adoption of conversational AI solutions in applications such as web virtual assistants, chatbots, and voice assistants.

Growth of AI-powered Customer Support Services

The rise of AI-powered customer support services is significantly contributing to the growth of the conversational AI market. As customers increasingly expect fast, efficient, and personalized experiences, companies are looking at ways to scale their support operations beyond traditional call centers. This is driving a huge demand for AI chatbots and virtual assistants that can handle high volumes of repetitive query handling through natural language conversations 24/7.

Many large enterprises are investing in sophisticated AI solutions that not only answer questions but can also resolve issues by taking required actions. For example, chatbots being deployed by telecom and utility providers can check account balances, make bill payments, track order status, and even activate or deactivate connections upon user request. This is empowering customers with instant self-service options while reducing operational costs for companies. Furthermore, COVID-19 has accelerated the digital transformation of customer support as lockdowns compelled organizations to virtualize their engagements through digital channels.

Going forward, the conversational AI industry is expected to further innovate as AI capabilities keep enhancing. Chatbots and virtual agents will gain abilities to deeply understand context and intent behind queries. They will be equipped with vast knowledge bases covering diverse topics. Embodiments using mediums like augmented reality and voice assistants will provide richer engagement experiences. As AI systems analyze massive conversation data over time, their responses will become more and more human-like and consistent. According to Eurostat, the usage of internet and electronic means of communication for contacting public authorities and utilities had increased in the EU from 32% in 2014 to 41% in 2020. This showcases growing customer preference for digital and AI-powered engagement channels.

Market Concentration and Competitive Landscape

Conversational AI Market Concentration By Players

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Developing Partnerships between Humans and AI

Rather than focusing solely on replacing human capabilities, many companies are exploring how AI tools can empower, extend, and enhance human abilities. By developing AI-assisted partnerships between people and technology, new applications and possibilities are emerging. For example, AI agents are being designed to handle initial customer queries, freeing up specialists to work on more complex issues. Within organizations, AI is augmenting knowledge workers through features like search, translation, and automated note-taking. By intelligently routing certain tasks to AI while retaining humans for others, work becomes more efficient and satisfying for all. As both companies and consumers recognize the value in these types of AI-enhanced, human-AI partnerships, it fuels ongoing investment in developing conversational technologies that are useful aids rather than replacements. This collaborative model points the way towards sustained growth for the conversational AI sector.

Conversational AI Market Key Takeaways From Lead Analyst

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Market Challenges: Issues Related to Lack of Contextual Understanding

One of the key challenges in the conversational AI market is the difficulty of creating conversational agents that can truly understand natural human language at scale. The complexity of human language makes it difficult for current systems to grasp context, nuance, cultural references, and non-literal meanings. Even large data sets may not cover every possible interaction or follow-up question from users. Developing conversational AI also requires significant investment in training data and computational resources.

Market Opportunities: Adoption across SMEs

As virtual assistants become more helpful, harmless, and honest over time through continued machine learning, user adoption will likely expand across more use cases and demographic groups. Partnerships between major technology companies and smaller start-ups also aim to more rapidly advance the state of the art. Furthermore, as conversational AI platforms automate more tasks, they could meaningfully reduce costs for businesses and public sector organizations alike.

Conversational AI Market By Component

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Insights, by Component - Growing Adoption of Automation Drives the Solutions Segment

The solutions segment is estimated to contribute the highest share of 64.4% in 2024 in the market owning to increasing demands for automation across industries. Conversational AI solutions provide an automated way for organizations to engage with customers, enabling round-the-clock support without needing additional human resources. The use of dialog systems and natural language interfaces has seen rapid growth as it allows businesses to scale customer support operations efficiently.

In the banking sector, chatbots are widely deployed to answer basic customer queries and direct them to the appropriate human agents for complex issues. This frees up employees to focus on more complex tasks. Automated assistance is also gaining popularity in e-commerce to handle high volumes of repetitive questions from online shoppers. Solutions allow personalizing customer experiences based on their interactions and purchasing history.

Moreover, conversational interfaces add a human-like element to IoT devices, bringing intelligence to home appliances, smart speakers, and virtual assistants. As voice control gains ground, solutions providers are enhancing capabilities around voice recognition, contextual understanding, and multilingual support. Institutions are attracted to the cost savings and round-the-clock availability that automated platforms offer compared to traditional call centers. The rise of virtual assistants on mobile apps further propels the solutions segment.

For instance, in February 2022, IBM introduced IBM watsonx Assistant, a market-leading, conversational artificial intelligence platform.

Insights, by Type - Growth of Messaging Platforms is Driving the Chatbots Segment

The chatbots segment is estimated to contribute the highest share of 67.2% in 2024 in the market driven by increasing popularity of messaging platforms. Chatbots have emerged as the most widely adopted form of conversational AI due to their seamless integration with messaging apps. Customers have grown accustomed to chatting with brands through Facebook Messenger, WhatsApp, Wechat, and other platforms.

Businesses are eager to deploy chatbots on these channels to stay connected with customers in a convenient, personalized manner. Chatbots allow customers to find information instantly through natural dialogue rather than browsing menus or websites. They are well-suited for handling high volumes of basic inquiries from customers. This keeps human agents free for more complex queries that require judgment and problem-solving skills.

As messaging becomes the preferred mode of communication globally, chatbots are poised to take on more human-like qualities through advances in NLP. They can understand context, exhibit memory, and maintain conversations over long periods to deliver engaging customer experiences. Chatbots are also being incorporated into customer support workflows on company websites and mobile apps. This creates a unified experience for customers across different touchpoints.

For instance, in November 2022, Google introduced Bard, an AI chatbot, throughout Europe and Brazil. The product has undergone its largest expansion since its launch in February. The bot competes with ChatGPT, which is supported by Microsoft.

Insights, by End-use Industry - Continuous Innovation in Retail Drives the e-Commerce Industry

The retail & e-commerce segment is estimated to contribute the highest share of 23.3% in 2024 in the market owing to continuous innovations in the retail sector. The explosive growth of e-commerce has increased demand for conversational assistance that can guide customers through their shopping journey. Interactive shopping experiences are being designed to feel more natural than static websites.

Chatbots help customers browse products, get recommendations, track orders, and manage accounts using natural language. They are highly effective at reducing cart abandonment rates by answering questions and resolving issues in real-time. For instance, fashion retailers deploy virtual stylists to suggest outfits and sizes based on customers' preferences. Grocery stores use chatbots that can read shopping lists and direct customers to product aisles.

As mobile commerce expands, retailers implement conversational interfaces into mobile apps and messages to stay within a click of their customers. Moreover, voice assistants integrated with e-commerce platforms allow shopping through commands. This elevates convenience for customers and increases cart values. Lastly, data gathered from conversations helps merchants gain real-time insights into trends, demand patterns and personalize offers.

Regional Insights

Conversational AI Market Regional Insights

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North America has firmly established itself as the dominant regional market for conversational AI currently. North America is estimated to contribute the highest share of 28.8% in 2024 in the market. With technological hubs like Silicon Valley located here, this region is home to the largest tech companies globally who are pioneering research and development in this field. Companies, such as Amazon, Microsoft, Apple, IBM, and Google, have invested heavily in building their own conversational AI platforms as well as making key acquisitions of startups working in this area.

The presence of such industry giants has created a huge demand for conversational AI solutions from enterprises across various sectors looking to integrate these technologies into their products and services. Coupled with high technological adoption rates, North America accounts for the largest share of the overall conversational AI market spend today. Furthermore, cutting-edge research in AI happening at top universities also feeds into continued innovation in conversational technologies, thereby strengthening the region's leadership position.

The Asia Pacific region is seeing the fastest growth in the conversational AI market currently. Several factors are driving this growth. The ever-increasing penetration of internet and smart devices is opening up massive opportunities for the deployment of conversational interfaces. Countries like China and India especially are digitalizing rapidly and have the highest number of internet users globally. This makes Asia Pacific an attractive market for scaling conversational solutions.

Additionally, various national 'Digital India' and 'Made in China 2025' initiatives are promoting local entrepreneurship and new technologies strongly. This has fostered the emergence of startups developing conversational AI products tailored for the local population's needs. The presence of booming technology hubs like China's Shenzhen and India's Bengaluru further stimulates innovation and commercialization capabilities. Local tech giants such as Baidu, Alibaba, Tencent, and Flipkart along with R&D centers of multinationals are also doing significant work to advance conversational AI.

The combination of above factors is translating to Asia Pacific becoming a hub for rapidly growing conversational AI deployments across a variety of fields including banking, e-commerce, healthcare, and others. While North America still holds the leadership position, the Asia Pacific region is positioning itself as the new global frontier for this revolutionary technology.

Market Report Scope

Conversational AI Market  Report Coverage

Report Coverage Details
Base Year: 2023 Market Size in 2024: US$ 10.65 Bn
Historical Data for: 2019 To 2023 Forecast Period: 2024 To 2031
Forecast Period 2024 to 2031 CAGR: 22.6% 2031 Value Projection: US$ 44.38 Bn
Geographies covered:
  • North America: U.S. and Canada
  • Latin America: Brazil, Argentina, Mexico, and Rest of Latin America
  • Europe: Germany, U.K., Spain, France, Italy, Russia, and Rest of Europe
  • Asia Pacific: China, India, Japan, Australia, South Korea, ASEAN, and Rest of Asia Pacific
  • Middle East & Africa: GCC Countries, Israel, and Rest of Middle East & Africa
Segments covered:
  • By Component: Solutions and Services (Managed Services, Professional Services)
  • By Type: Chatbots and Intelligent Virtual Assistant (IVA) 
  • By Deployment: On-premises and Cloud 
  • By Enterprise Size: SMEs and Large Enterprise 
  • By End-use Industry: BFSI, Healthcare, IT & Telecom, Retail & E-commerce, Education, Media & Entertainment, Automotive, and Others 
Companies covered:

Google, Microsoft, Amazon Web Services, Inc., IBM, Oracle, Nuance Communications, Inc., FIS, SAP SE, Artificial Solutions,, Inc., Avaamo, Conversica, Inc., Jio Haptik Technologies Ltd., Rasa Technologies Inc., Solvvy, Pypestream Inc., Kasisto, Cognigy, MindMeld, and Creative Virtual

Growth Drivers:
  • Growth of AI-powered Customer Support Services
  • Developing Partnerships between Humans and AI
Restraints & Challenges:
  • Issues Related to the Lack of Contextual Understanding
  • Data Privacy and Security Concerns

Key Developments

  • In January 2024, OpenAI, the AI powerhouse behind ChatGPT, introduced an innovative feature called GPT Mentions, offering users a seamless way to integrate custom GPTs or bots into conversations. This beta-stage feature is set to redefine the landscape of conversational AI dynamics, enabling users to effortlessly tag and invoke specialized AI models during their interactions.
  • In August 2023, Baidu, a China-based multinational technology company, launched its chatbot, Ernie Bot
  • In February 2023, Google, a U.S.-based multinational technology company focusing on artificial intelligence, launched Bard, a generative artificial intelligence chatbot powered by LaMDA
  • In January 2022, Visionstate Corp. announced the launch of its new ViCCi 2.0 customer service kiosk powered by conversational chatbot artificial intelligence (AI)
  • In November 2021, Google launched Bot-in-a-Box, a conversational AI tool.
  • *Definition: The conversational AI market involves the development and delivery of AI-powered chatbots, digital assistants, and other conversational platforms that can understand natural human language and automate interactions through messaging, voice, and other modalities. These conversational AI solutions are being adopted across various industry verticals to improve customer service, employee productivity, and data analytics through their ability to have human-like dialogue, perform on-device processing, and learn from interactions over time via machine learning technologies.

Market Segmentation

  •  Component Insights (Revenue, USD BN, 2019 - 2031)
    • Solutions
    • Services
      • Managed Services
      • Professional Services
        •    Training & Consulting
        •    System Integration & Implementation
        •    Support & Maintenance
  •  Type Insights (Revenue, USD BN, 2019 - 2031)
    • Chatbots
    • Intelligent Virtual Assistant (IVA)
  • Deployment Insights (Revenue, USD BN, 2019 - 2031)
    • On-premises
    • Cloud
  •  Enterprise Size Insights (Revenue, USD BN, 2019 - 2031)
    • SMEs
    • Large Enterprise
  • End-use Industry Insights (Revenue, USD BN, 2019 - 2031)
    • BFSI
    • Healthcare
    • IT & Telecom
    • Retail & E-commerce
    • Education
    • Media & Entertainment
    • Automotive
    • Others
  • Regional Insights (Revenue, USD BN, 2019 - 2031)
    • North America
      • U.S.
      • Canada
    • Latin America
      • Brazil
      • Argentina
      • Mexico
      • Rest of Latin America
    • Europe
      • Germany
      • U.K.
      • Spain
      • France
      • Italy
      • Russia
      • Rest of Europe
    • Asia Pacific
      • China
      • India
      • Japan
      • Australia
      • South Korea
      • ASEAN
      • Rest of Asia Pacific
    • Middle East & Africa
      • GCC Countries
      • Israel
      • South Africa
      • Rest of Middle East & Africa
  • Key Players Insights
    • Google
    • Microsoft
    • Amazon Web Services, Inc.
    • IBM
    • Oracle
    • Nuance Communications, Inc.
    • FIS
    • SAP SE
    • Artificial Solutions
    •, Inc.
    • Avaamo
    • Conversica, Inc.
    • Jio Haptik Technologies Ltd.
    • Rasa Technologies Inc.
    • Solvvy
    • Pypestream Inc.
    • Kasisto
    • Cognigy
    • MindMeld
    • Creative Virtual

Frequently Asked Questions

The CAGR of the conversational AI market is projected to be 22.6% from 2024 to 2031.

Growth of AI-powered customer support services and developing partnerships between humans and AI are the major factor driving the growth of the conversational AI market.

Issues related to lack of contextual understanding and data privacy and security concerns are the major factors hampering the growth of the conversational AI market.

In terms of component, solutions is estimated to dominate the market revenue share in 2024.

Google, Microsoft, Amazon Web Services, Inc., IBM, Oracle, Nuance Communications, Inc., FIS, SAP SE, Artificial Solutions,, Inc., Avaamo, Conversica, Inc., Jio Haptik Technologies Ltd., Rasa Technologies Inc., Solvvy, Pypestream Inc., Kasisto, Cognigy, MindMeld, and Creative Virtual are the major players operating in the market.

North America is expected to lead the conversational AI market.

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