CHATBOT MARKET ANALYSIS

Global chatbot market is estimated to be valued at US$ 30 Bn by 2030, exhibiting a Compound Annual Growth Rate (CAGR) of 25.7% from 2023 to 2030.

Chatbots are sophisticated software applications designed to enable seamless interaction between humans and machines, typically through text or voice conversations over the Internet. This implementation relies on artificial intelligence to enable natural and meaningful interactions with users. Chatbots enable businesses to interact effectively with their customers and clients by using various communication mediums such as video, text, voice, file sharing, and images.

Accessible through digital platforms, such as mobile apps, websites, and standalone devices, these chatbot applications are readily available and easy to use. Additionally, Over-the-top (OTT) messaging apps are pioneering new ways for businesses to engage with their audiences. This provides both businesses and consumers with great opportunities for optimized and efficient communication.

In the ever-evolving landscape of business communications, organizations are increasingly adopting platform-based approaches. By integrating their chatbot services and offers into communication apps, businesses can enable many features such as games, payment processing, advertising, and others.

Global Chatbots Market- Regional Analysis

North America held the dominant position in the global chatbot market in 2022, followed by Asia Pacific and Europe.

Figure 1. Global Chatbot Market Share (%), By Region, 2022

The North American market is expected to dominate the global chatbot market during the forecast period. The market growth in this region is primarily driven by the significant increase in the use of chatbots across multiple business verticals. Technological innovations, such as Internet of Things, Application Programming Interface, and artificial intelligence, are also evolving rapidly. Sophisticated chatbots are integrated with these technologies, enabling operational improvements and increasing market demand.

The Asia Pacific chatbot market is expected to show significant growth as more than 50% of the world's population is concentrated in this region, and major technological innovations, such as AI and IoT, are propelling the growth of the market in this region. The massive expansion of information and communication technology infrastructure in emerging countries, such as India and China, is likely to drive the market growth during the forecast period.

Global Chatbot Market- Driver

Increased use of generative models in chatbots

Increasing use of generative models in chatbots has become a major market driver for the global chatbot market. By leveraging advanced language models, such as GPT-3, the chatbot's Natural Language Processing (NLP) capabilities have been enhanced to enable more sophisticated and contextual conversations with users. This improves the user experience by allowing chatbots to provide personalized, human-like responses. Additionally, the flexibility and adaptability of generative models allows chatbots to be tailored to specific industries and use cases, making them a very popular solution across multiple industries. As businesses increasingly realize the value of efficient and interactive customer interactions, the demand for chatbots based on generative models is expected to continue growing, driving significant growth in the global chatbot market. For instance, on July 20, 2023, Swiggy, an online food order and delivery services provider, announced in its blog post that it is on board the Generative AI bus to begin piloting its food recommendation tool in September. Swiggy is also working with a third party to build his GPT-4 based chatbot to provide customer support. In September 2023, Swiggy plans to test a neural search service that offers personalized recommendations in response to users' open-ended questions. Swiggy's neural search was created using Large Language Model trained on his database of 50+ million items in Swiggy's grocery catalog.

Growing need for effective and immediate customer support

Chatbots have emerged as the leading solution to meet the growing demand for immediate and effective customer support regardless of geographic restrictions. By offering 24/7 support, businesses can ensure uninterrupted service and give consumers access to world-class support to get their queries answered quickly. The ability of chatbots to simulate human-like conversations has become a key factor in increasing their value and improving the live chat customer service experience. Due to these benefits, companies in various industries are adopting chatbot technology to meet customer expectations and streamline customer support processes, and the global chatbot market is expected to witness significant growth in the coming years. For instance, on July 13, 2023, the CEO of Dukaan, an e-commerce company, has been reported to have laid off 90% of customer support staff and replaced them with artificial intelligence chatbot. The response time has gone down from 2 hours 13 minutes to 3 min 12 seconds and customer support costs have gone down by ~85%.

Global Chatbot Market- Restraint

Inability to recognize and effectively respond to customer intent

The global chatbot market faces the challenge of being unable to recognize and effectively respond to customer intent. Although chatbots have made great strides in natural language processing, they still face challenges in accurately deciphering complex user intent and providing appropriate responses. This limitation often leads to a frustrating customer experience and can hinder the smooth flow of conversations between users and chatbots. Customers expect personalized and contextual interactions, and the inability of chatbots to capture customer intent and effectively respond to their queries can lead to customer satisfaction and loss of trust. Overcoming this limitation will require further advances in machine learning and AI technology to improve the understanding capabilities of chatbots. Moreover, combining chatbot functionality with human assistance when needed is proving to be beneficial in providing a more satisfying customer experience and driving the growth of the global chatbot market. According to a study by Aivo, over 30% of customers are willing to abandon a brand if their customer service experience is unsatisfactory. It also mentions that, bad experiences are usually caused by lack of empathy on the part of the customer-facing side, auto responder with no solution, a non-customized solution that does not consider individual user needs, lack of response, or excessive wait time. Furthermore, it mentions that, conversational chatbots aren't the same as human agents, so they can't always understand your requests. Answer choices may be limited depending on the information uploaded. The interactions may appear "robotic".

Global Chatbot Market- Opportunity

Developing a self-learning chatbot that provides a human-like conversational experience

The global chatbot market presents great opportunities through efforts aimed at developing self-learning chatbots that can provide a human-like conversational experience. As companies strive to improve customer retention and satisfaction, it is becoming increasingly important to focus on developing self-learning chatbots. Using artificial intelligence and machine learning technology, these chatbots can continuously analyze and adapt user interactions to better understand customer intent and context. This evolution to self-learning chatbots can provide more personalized and contextual responses, similar to human conversations, ultimately leading to increased customer satisfaction and loyalty. Additionally, self-learning chatbots reduce the need for manual intervention and constant program updates, improving operational efficiency. By capitalizing on this market opportunity, businesses can remain competitive, provide superior customer experience, and drive the growth of the global chatbot market. For instance, on February 24, 2020, Fortinet made a significant advancement in the field of cybersecurity by introducing FortiAI, a cutting-edge self-learning artificial intelligence appliance for sub-second threat detection. Leveraging deep neural networks, FortiAI aimed to automate threat detection and remediation, thereby expanding the company's AI-driven security offerings.

Global Chatbot Market- Segmentation

The mobile segment is expected to dominate the global chatbot market during the forecast period.

The platform segment includes web-based, mobile, and stand-alone. Website chatbots are chatbots integrated into websites to provide instant customer support, personalized interactions, and a streamlined user experience. The market is likely to grow due to growing online businesses which are looking for cost-effective ways to improve customer engagement and automate customer service.
Chatbots built for mobile apps improve user engagement and provide personalized recommendations. The popularization of smartphones and increasing demand for real-time support on the go is expected to bolster the market growth during the forecast period.
The stand-alone segment includes independent chatbot applications used across various platforms, offering specific functionalities and services. Increased focus on AI-powered conversational interactions for tasks like voice assistants and virtual companions are expected to drive the market growth.

Figure 2. Global Chatbot Market Value (US$ Billion) Analysis and Forecast,

The global chatbot market was valued at US$ 4.85 Bn in 2022 and is expected to reach US$ 30 Bn by 2030, exhibiting a CAGR of 25.7% between 2023 and 2030.

Global Chatbot Market- Key Competitors

The major players operating in the global chatbot market include Facebook, Inc., Kiwi, Inc., Astute Solutions, Google, Inc., Pandorabots, Inc., Haptik, Inc., Yahoo Inc., Helpshift, ToyTalk (PullString Inc.), Imperson Ltd. Slack Technologies, Inc., Kasisto Inc., and Microsoft Corporation.

Global Chatbot Market- Recent Developments

• In July 2022, Tata Consultancy Services, an India-based IT outsourcing company and a subsidiary of TATA Group, an Indian multinational conglomerate, developed an AI-powered chatbot that helps patients cut the three-month wait for a consultant. Tata Consultancy Services has announced a partnership with The Walton Centers NHS Foundation Trust (Walton Centres), a neurology hospital based in Liverpool, U.K., to develop digital solutions that increase professional productivity, reduce patient wait times, and improve patient experience.
• On April 13, 2023, Zendesk, a cloud based platform that helps businesses manage sales and customer service, added OpenAI integration to extend the AI-powered customer experience. By combining Zendesk Suite's industry-leading capabilities with OpenAl's capabilities, organizations can save time and money while delivering smarter customer experiences. Zendesk has announced a partnership with OpenAl, an AI research and implementation company, to introduce new capabilities that complement the power of Zendesk's own base model with OpenAl's capabilities.
• On July 11, 2023, ai, a conversational AI software platform and solutions company, announced a partnership with Felix Consultants, a global IT and engineering services company based in the U.K., to accelerate the adoption of AI-powered virtual assistants in enterprises. Felix Consultants leverages the Kore.ai platform to build advanced virtual assistants that meet client-specific needs for use cases such as customer experience, employee experience, enterprise automation, and personalized solutions based on user experience.
• On July 13, 2023, Elon Musk made an announcement about the establishment of a new company named AI, aimed at "understanding reality," according to his tweet. The company's website stated its purpose as "understanding the true nature of the universe."

Global Chatbot Market- Impact of COVID-19:

The global chatbot market experienced both challenges and opportunities following the COVID-19 pandemic. Businesses are facing increased demand for digital customer support solutions as the pandemic led to lockdowns and social distancing. As a result, the adoption of chatbots increased, providing a cost-effective and efficient way to manage customer queries across multiple industries. These AI-powered chatbots have become essential tools for businesses to maintain continuity of customer service during employee disruptions. However, the market also faced difficulties as uncertain economic conditions prompted some companies to postpone or reassess their investment plans. Despite the challenges, the pandemic accelerated the growth trajectory of the global chatbot market as businesses realized the importance of digital transformation and the need to improve remote customer experience. The global chatbot market is poised to expand further based on the lessons learned during the pandemic. For instance,

The Government of India prioritized countering panic and misinformation during the COVID-19 fight. Haptik's WhatsApp chatbot played a key role by providing accurate information in English and Hindi. This helped treat people and prevent the spread of the respiratory disease, ensuring public access to reliable updates and answers to their queries.

*Definition: A chatbot is a software application intended to mimic human conversation, usually through text or voice interactions online. Modern chatbots are Artificial Intelligence (AI) systems that can converse with users in natural language and simulate the behavior of human interlocutors. Such technologies often leverage aspects of deep learning and natural language processing.