Voice Commerce

NLP-driven technologies like virtual assistants, chatbots, and smart speakers are poised to have powerful business models—and may even disrupt markets like e-commerce and marketing. We have already seen an early version of this with Tencent’s WeChat franchise. The company, which was founded during the heyday of the Internet boom in the late 1990s, started with a simple PC-based messenger product called OICQ. But it was the introduction of WeChat that was a game changer, which has since become China’s largest social media platform with over 1 billion monthly active users.¹⁵

But this app is more than for exchanging messages and posting content. WeChat has quickly morphed into an all-purpose virtual assistant, where you can easily hail a ride-sharing service, make a payment at a local retailer, place a reservation for a flight, or play a game. For example, the app accounts for close to 35% of the entire usage time on smartphones in China on a monthly basis. WeChat is also a major reason that the country has become increasingly a cash-less society.

All this points to the power of an emerging category called voice commerce (or v-commerce), where you can make purchases via chat or voice. It’s such a critical trend that Facebook’s Mark Zuckerberg wrote a blog post,¹⁶ in early 2019, where he said the company would become more like…WeChat.

According to research from Juniper, the market for voice commerce is forecasted to hit a whopping $80 billion by 2023.¹⁷ But in terms of the winners in this market, it seems like a good bet that it will be those companies that have large install bases of smart devices like Amazon, Apple, and Google. But there will still be room for providers of next-generation NLP technologies.

OK then, how might these AI systems impact the marketing industry? Well, to see how, there was an article in the Harvard Business Review, called “Marketing in the Age of Alexa” by Niraj Dawar and Neil Bendle. In it, the authors note that “AI assistants will transform how companies connect with their customers. They’ll become the primary channel through which people get information, goods and services, and marketing will turn into the batter for their attention.”¹⁸

Thus, the growth in chatbots, digital assistants, and smart speakers could be much bigger than the initial web-based e-commerce revolution. These technologies have significant benefits for customers, such as convenience. It’s easy to tell a device to buy something, and the machine will also learn about your habits. So the next time you say you want to have a soft drink, the computer will know what you are referring to.

But this may lead to a winners-take-all scenario. Ultimately, it seems like consumers will use only one smart device for their shopping. In addition, for brands that want to sell their goods, there will be a need to deeply understand what customers really want, so as to become the preferred vendor within the recommendation engine.

Virtual Assistants

In 2003, as the United States was embroiled in wars in the Middle East, the Defense Department was looking to invest in next-generation technologies for the battlefield. One of the key initiatives was to build a sophisticated virtual assistant, which could recognize spoken instructions. The Defense Department budgeted $150 million for this and tasked the SRI (Stanford Research Institute) Lab—based in Silicon Valley—to develop the application.¹⁹ Even though the lab was a nonprofit, it still was allowed to license its technologies (like the inkjet printer) to startups.

And this is what happened with the virtual assistant. Some of the members of SRI—Dag Kittlaus, Tom Gruber, and Adam Cheyer—called it Siri and started their own company to capitalize on the opportunity. They founded the operation in 2007, which was when Apple’s iPhone was launched.

But there had to be much more R&D to get the product to the point where it could be useful for consumers. The founders had to develop a system to handle real-time data, build a search engine for geographic information, and build security for credit cards and personal data. But it was NLP that was the toughest challenge.

In an interview, Cheyer noted:

The hardest technical challenge with Siri was dealing with the massive amounts of ambiguity present in human language. Consider the phrase ‘book 4-star restaurant in Boston’ — seems very straightforward to understand. Our prototype system could handle this easily. However, when we loaded in tens of millions of business names and hundreds of thousands of cities into the system as vocabulary (just about every word in the English language is a business name), the number of candidate interpretations went through the roof.²⁰

But the team was able to solve the problems and turn Siri into a powerful system, which was launched on Apple’s App Store in February 2010. “It’s the most sophisticated voice recognition to appear on a smartphone yet,” according to a review in Wired.com.²¹

Steve Jobs took notice and called the founders. Within a few days, they would meet, and the discussions quickly led to an acquisition, which happened in late April for more than $200 million.

However, Jobs thought there needed to be improvements to Siri. Because of this, there was a re-release in 2011. This actually happened a day before Jobs died.

Fast forward to today, Siri has the largest market share position in the virtual assistant market, with 48.6%. Google Assistant is at 28.7%, and Amazon.com’s Alexa has 13.2%.²²

According to the “Voice Assistant Consumer Adoption Report,” about 146.6 million people in the United States have tried virtual assistants on their smartphones and over 50 million with smart speakers. But this only covers part of the story. Voice technology is also becoming embedded into wearables, headphones, and appliances.²³

Here are some other interesting findings:

• Using voice to search for products outranked searches for various entertainment options.
• When it comes to productivity, the most common use cases for voice include making calls, sending emails, and setting alarms.
• The most common use of voice on smartphones occurs when a person is driving.
• Regarding complaints with voice assistants on smartphones, the one with the highest percentage was inconsistency in understanding requests. Again, this points to the continuing challenges of NLP.

The growth potential for virtual assistants remains bright, and the category is likely to be a key for the AI industry. Juniper Research forecasts that the number of virtual assistants in use on a global basis will more than triple to 2.5 billion by 2023.²⁴ The fastest category is actually expected to be smart TVs. Yes, I guess we’ll be holding conversations with these devices!