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The conversational AI market size is estimated to grow by USD 12.75 billion at a CAGR of 23.04% between 2023 and 2028. There is a notable rise in the utilization of natural language processing, machine learning, and AI technologies, driven by increasing smartphone adoption and the growing need for AI-driven customer support services. These technologies are witnessing significant growth due to their ability to enhance efficiency and accuracy in data processing, decision-making, and automation across various industries. The proliferation of smartphones has accelerated access to AI-powered applications, transforming how businesses interact with customers through intelligent virtual assistants and personalized services. Concurrently, the demand for AI-driven customer support continues to surge, fueled by the desire for responsive and efficient solutions that improve user experiences. This trend underscores a broader integration of AI technologies into everyday operations, promising advancements in communication, automation, and customer service delivery in the digital age.
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The market is experiencing significant growth due to the integration of advanced technologies such as generative AI, computer vision, and voice recognition. These technologies enable AI-powered chatbots and virtual assistants to effectively manage customer interactions across various industries, including patient care, administrative processes, retail, and telecommunications. The scalability and efficiency advantages of conversational AI have led to its widespread adoption, debunking common misconceptions about the limitations of chatbots. Accuracy is a crucial factor in delivering optimal user experiences, making Natural Language Processing (NLP) and conversational AI essential components. Deployment mode, such as cloud, further enhance the accessibility and flexibility of these solutions. However, data privacy and security remain key concerns, necessitating robust security measures to safeguard online interactions. In summary, the Conversational AI market is poised for continued growth, driven by advancements in AI, NLP, and conversational technologies, as well as the increasing demand for personalized, efficient, and secure customer service solutions. Our researchers analyzed the data with 2023 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Growth in natural language processing (NLP), machine learning (ML), and AI technologies is notably driving market growth. Conversational AI has emerged as a game-changer in various industries, driven by advancements in Natural Language Processing (NLP), processing speed, and Machine Learning (ML) models. This technology, also known as Artificial Intelligence (AI), enables computers and AI-driven chatbots to understand and respond to human queries in a conversational manner. By replicating human thought processes through ML and neural networks, companies are enhancing online interactions and improving user experiences.
Conversely, conversational AI assists in retrieving accurate information, reducing human errors, and creating more precise analytic models. With the increasing deployment of conversational AI in both cloud and on-premise environments, data collecting devices have transformed into potent analytic tools. Customer expectations for personalized and efficient interactions continue to rise, making conversational AI an indispensable asset in industries such as automotive, where data privacy and security are paramount. Advanced AI techniques further augment the capabilities of conversational AI, enabling it to learn and adapt to user behavior, thereby creating a more human-like interaction. Thus, such factors are driving the growth of the market during the forecast period.
Increasing need for customer engagement is the key trend in the market. The market is experiencing significant growth due to the escalating need for AI-driven customer support services. As competition intensifies, companies are prioritizing the retention of their customer base and the acquisition of new clients. To foster customer loyalty, businesses must offer engaging and consistent interactions through conversational AI.
Furthermore, with the convenience of online interactions, user experiences are paramount, and conversational AI facilitates efficient information retrieval. Advanced AI technologies, such as chatbots, are increasingly deployed in conversational AI systems to cater to customer expectations. Deployment modes, including cloud and on-premise, offer flexibility to businesses, ensuring data privacy and security are maintained. The automotive industry is also embracing conversational AI to enhance customer experiences, further fueling market growth. Thus, such trends will shape the growth of the market during the forecast period.
Resistance to using chatbots is the major challenge that affects the growth of the market. The conversational AI market faces challenges in meeting customer expectations due to the inaccuracies and technical issues encountered with AI-driven chatbots and virtual assistants. Users express concerns over the shift towards chatbots for cost reduction, which may hinder their ability to engage with human representatives when desired. Technical hurdles during the deployment of conversational AI solutions, particularly in unstructured conversations, pose significant challenges for enterprises.
Furthermore, Language interpretation and information retrieval are particularly challenging in an unstructured environment. Furthermore, data privacy and security concerns are paramount in online interactions, necessitating advanced AI capabilities to ensure user experiences are not compromised. Deployment modes, such as cloud and on-premise, also impact the adoption and implementation of conversational AI solutions. Companies must address these challenges to provide accurate and effective conversational AI experiences for their customers. Hence, the above factors will impede the growth of the market during the forecast period
The market forecasting report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.
Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Alphabet Inc. - The company offers a wide range of software products and platforms.
The market research and growth report also includes detailed analyses of the competitive landscape of the market and information about key companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
The market share growth by the On-premises segment will be significant during the forecast period. The conversational AI market encompasses advanced technologies such as generative AI, computer vision, and voice recognition, which are integrated into messaging platforms and AI-powered chatbots. These solutions facilitate customer interactions, offering efficiency and scalability advantages over traditional customer service methods.
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The On-premises segment showed a gradual increase in the market share of USD 3.09 billion in 2018. Misconceptions surrounding chatbots and virtual assistants persist, with some questioning their ability to provide humanlike responses and maintain accuracy. However, advancements in natural language processing (NLP) and machine learning (ML) have led to significant improvements in conversational AI, enabling personalized recommendations, feedback, and customer loyalty and retention. The chatbot segment of conversational AI is experiencing significant growth, with applications in various industries including healthcare, administrative processes, retail, and telecommunications. Hybrid conversational AI, which combines the benefits of on-premises and cloud-based systems, is also gaining traction. In the healthcare sector, AI chatbots are being used to improve patient care and streamline administrative processes. In the retail industry, conversational AI is being employed to enhance the customer experience and provide personalized recommendations. The on-premises segment of conversational AI continues to be popular among major clients due to the security advantages it offers. The need for complete control over hardware and software has led many firms to prefer on-premises AI infrastructure over cloud-based alternatives. This trend is particularly prevalent in industries such as automotive and telecommunications, where data security is paramount. Language translation and digital transformation are also driving the growth of conversational AI. With the increasing use of mobile devices, conversational AI is becoming an essential tool for businesses looking to provide seamless and efficient customer interactions. Generative AI, which can generate humanlike responses, is expected to further enhance the capabilities of conversational AI and drive market growth. In conclusion, the conversational AI market is experiencing significant growth, driven by advancements in technologies such as generative AI, computer vision, and voice recognition, and the increasing demand for efficient and scalable customer interactions. The chatbot segment, which includes AI-powered chatbots and virtual assistants, is expected to continue dominating the market, with applications in various industries including healthcare, retail, and telecommunications. The on-premises segment, which offers security advantages, is also expected to remain popular among major clients. The use of conversational AI for language translation and digital transformation is also expected to drive market growth.
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North America is estimated to contribute 35% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.
Conversational AI, a subset of artificial intelligence (AI), is experiencing significant growth, particularly in North America. This region hosts numerous leading technology companies, including Alphabet Inc., Microsoft Corp., and International Business Machines Corp., which are investing heavily in advanced technologies such as generative AI, computer vision, voice recognition, and messaging platforms. These investments have led to the development of sophisticated AI-powered chatbots and virtual assistants like Google Assistant, Microsoft Cortana, and Amazon Alexa. The adoption of conversational AI offers numerous advantages, including scalability and efficiency in customer interactions. However, there are misconceptions regarding the accuracy and humanlike responses of chatbots and virtual assistants. To address these concerns, companies are focusing on improving NLP and ML capabilities, resulting in more personalized recommendations and feedback. Moreover, conversational AI is transforming various industries, including healthcare, retail, telecommunications, and automotive, by streamlining administrative processes and enhancing customer service. Hybrid conversational AI, which combines rule-based and machine learning approaches, is gaining popularity due to its ability to handle complex queries and language translation. The conversational AI market is segmented into on-premises and cloud segments, with the latter experiencing rapid growth due to its ease of deployment and integration with mobile devices. In the chatbot segment, Astro and Bard are notable players, offering customizable solutions for businesses. The market's digital transformation is expected to continue, leading to positive brand image and customer loyalty through improved retention.
The market research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in "USD billion " for the period 2024-2028, as well as historical data from 2018 - 2022 for the following segments.
Conversational Computing Platform Market Analysis North America, APAC, Europe, South America, Middle East and Africa - US, China, UK, Canada, Germany - Size and Forecast
Chatbot Market Analysis North America, APAC, Europe, South America, Middle East and Africa - US, China, UK, Germany, Japan - Size and Forecast
Generative Artificial Intelligence (AI) Market Analysis North America, APAC, Europe, South America, Middle East and Africa - US, China, Germany, UK, France - Size and Forecast
Conversational AI, a cutting-edge technology, is revolutionizing the way businesses interact with their customers. This technology enables computers to understand, interpret, and respond to human language in a conversational manner. The market is experiencing significant growth due to the increasing demand for personalized customer experiences. Companies are leveraging this technology to automate customer support, streamline business processes, and enhance overall customer engagement. The adoption of Conversational AI is also driven by the availability of large amounts of data and advancements in natural language processing and machine learning algorithms. The Conversational AI market is expected to continue its growth trajectory in the coming years, with the increasing use cases across various industries such as healthcare, finance, retail, and education. The technology's ability to understand context, intent, and sentiment makes it an essential tool for businesses looking to provide superior customer experiences.
Market Scope |
|
Report Coverage |
Details |
Page number |
140 |
Base year |
2023 |
Historic period |
2018 - 2022 |
Forecast period |
2024-2028 |
Growth momentum & CAGR |
Accelerate at a CAGR of 23.04% |
Market growth 2024-2028 |
USD 12.75 billion |
Market structure |
Fragmented |
YoY growth 2023-2024(%) |
19.48 |
Regional analysis |
North America, Europe, APAC, Middle East and Africa, and South America |
Performing market contribution |
North America at 35% |
Key countries |
US, China, Germany, Italy, and Canada |
Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
Key companies profiled |
Alphabet Inc., Amazon.com Inc., AmplifyReach India, Artificial Solutions International AB, Avaamo Inc., Baidu Inc., Cognigy GmbH, Conversica Inc., Creative Virtual Ltd., Fidelity National Information Services Inc., Gamut Analytics Pvt. Ltd., International Business Machines Corp., Jio Haptik Technologies Ltd., Kasisto Inc., Kore.ai Inc., Microsoft Corp., Oracle Corp., Rasa Technologies Inc., SAP SE, and SoundHound AI Inc. |
Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for market forecast period |
Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Deployment
7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Opportunity/Restraints
10 Competitive Landscape
11 Competitive Analysis
12 Appendix
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