Conversational AI Market to See 22 Percent CAGR Through 2025

Analyst firm MarketsandMarkets expects the worldwide conversational artificial intelligence market to grow for its current valuation of $4.9 billion to $13.9 billion by 2025, growing at a compound annual rate of 21.9 percent.

It expects increasing demand for AI-powered customer support service; omnichannel deployment, particularly through social media; reduced chatbot development costs; and increasing integrations to drive the growth of the market. At the same time, though, the lack of accuracy in chatbots and virtual assistants and a lack of awareness of conversational AI will continue to restrain the market, MarketsandMarkets concluded.

As COVID-19 has dragged on, understaffed government agencies, grocery stores, and financial services firms have all scrambled to set up chatbots and other conversational AI solutions to handle a spike in call volume, the firm noted, pointing out that IBM has seen a 40 percent increase in traffic to Watson Assistant from February to April, and Google launched the Rapid Response Virtual Agent, a special version of its Contact Center AI, and lowered the price of its services in response to client demand. While call centers have long been a frontier of workplace automation, the pandemic has accelerated the process, MarketsandMarkets observed, while vendors keen on taking advantage of the situation are sweetening incentives.

Over the past few years, advances in natural language processing (NLP) have also dramatically improved on the clunky automated call systems of the past. The latest generation of chatbots and voice-based agents are easier to build, faster to deploy, and more responsive to user inquiries, the firm concluded.

Among the type of conversational AI platforms and solutions, MarketsandMarkets projects the intelligent virtual assistants (IVA)segment will record the highest growth, as advanced NLP and dialog management techniques allow companies to achieve high levels of automation without sacrificing accuracy.

With the help of IVA, complex customer queries can be handled effectively, while advanced dialogue management engines give full control over the conversational flow. Virtual assistants are, therefore, also capable of understanding customers' intent, regardless of the order in which the data is given throughout the conversation. Virtual agents are designed to provide customer services, product information, marketing, support, sales, order placing, reservations, and other custom services.

MarketsandMarkets also found that IBM, Microsoft, Google, and Amazon Web Services account for the majority of shares in the conversational AI market and that adoption of AI technology by verticals such as financial services, travel and hospitality, and retail will contribute to the high growth of the conversational AI market.