Chatbots – Will they replace apps and end the Apple, Google duopoly?

Android and iOS have been the prominent platforms in the App Economy and the network effect created by the number of apps and developers building apps has enabled Apple and Google to wade off competition. Attempts to thwart this duopoly (Facebooks endorsement and later abandonment of HTML5;  players like Microsoft trying to entice developers to build apps on their platforms) were unsuccessful as is evident from Apple’s App store revenue of $20 Bn last year and estimates of $7 Bn revenue from Google Play. Now, can chat bot change all of this?  Well, there is an explosion in the market with tons of AI start ups and M&A activity in this space. Chat bot explosion resembles the fledgling app economy in 2009 and the main drivers of this recent interest are –

1. Natural Interface – We are conversational creatures and that’s how we are wired. The testimony for this is that there are more users on the Top 4 Chat platforms rather on the Top4 Social Media.
2. App Over Exposure – With millions of apps, its often difficult to find the right app, not to mention the additional friction of App setup time. After all of these hurdles, people rarely tend to use them - according to a Forrester report last year, consumers spent 80 percent of their time on just five apps.
3. Human Appeal – With improvements in NLP and AI, when designed right ( I really mean designed right), it becomes almost indistinguishable from a human. Xiao Ice is used by over 40 million people, and 25% of them have told Xiao Ice “I love you”.  When the user sends a photo of swollen ankle to Xiao Ice, “she” recognized that the picture is a human ankle?—?a swollen ankle no less. She reasoned that a swollen ankle is probably painful, and then formulated an emotionally appropriate response: “Wow! Are you badly wounded?”

But companies are following different strategies in their quest for supremacy in this bot war. Kwik, Telegram has  mimicked the Appstore route with bot stores, while Facebook eyeing to be the WeChat of West is keen to use its messenger as the platform. Then there’s the popular office productivity software Slack, which has also encouraged startups to build chat bots onto its platform. So while there is explosion as in the apps era, the market is much more fragmented and there are no clear signs that any single company or group will be dominant.

Tech giants such as Microsoft (announced its Chat bot framework), Facebook (with over 11,000 chat bots on its messenger) and Amazon (which has allowed developers to build services on its virtual assistant, Alexa) are all forging ahead. Apple and Google are also making tremendous investment with acquiring new AI companies and enhancing their own versions of Siri and Allo. Although Silicon Valley is enthusiastically embracing this next frontier; Chatbots still have limitations in existing technology (Artificial Intelligence and deep learning) and still have a long way to evolve before they become truly autonomous and succeed the Turin’s test.

 Despite these limitations, it is clear that if chat bots replace apps or relegate them to being “invisible apps”, Google and Apple have lot more to lose and the likes of Facebook, Amazon and Microsoft tend to gain much more. In my mind, it is very clear that the dominance of apps will wane down as chat bots gain momentum but both will coexist (as usescase where a click of the button is much easier than a text or a voice will continue to exist). The question of whether a dominant player in the chatbot ecosystem emerge continues to remain unanswered but the duopoly of Apple, Google will become irrelevant and there will be an opportunity again for all players to participate and compete in the bot war …..