Distilling market noise into market sense

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Beyond Siri: Breaking down the Virtual Assistant market

[Helped by Apple's successful launch of its Siri technology in 2011, voice-activated mobile virtual assistants (VAs) have crossed the chasm into mass-market deployments. Apple's product triggered a wave of both imitation and innovation in the last year, including tens of smartphone applications. This was only for starters. Developers, speech recognition and AI vendors, telcos and handset manufacturers are now all working on bringing the next-generation VA to life.]

Read more about the evolution of virtual assistants from 1995 to 2015 in the full report (free download)

Apple got a head start by embedding Siri in its UI, but Samsung is now countering with Samsung Voice. And Nokia is also working on a Siri-like interface, our sources say. Telecom operators are also warming up to the idea; some VA integration with RCS could hit the European market in early 2014.

With technology advances in Artificial Intelligence (AI) — in particular Natural Language Processing (NLP), user profiling and search – VA technology is moving from understanding language to anticipating user intent. As such the focus for virtual assistant apps is shifting from today’s command-and-control (“I ask, you answer”) towards continual dialogues of recommendations and user actions. Established vendors such as SRI International, Apple, Google and Nuance as well as challengers like Artificial Solutions, Dexetra and i-Free Innovations, are all working on this shift from commands to dialogue. SRI International is to showcase a back-and-forth dialogue technology by fall 2012.

With the advances in VA technology, virtual assistant personalities will move from devices to the cloud due to the immense amounts of data needed to process. With personalities stored in the cloud, virtual assistants will become readily and seamless available not only on smartphones, but also on TVs, in cars, and in smart homes. Established cloud storage and processing companies like Google and Amazon stand to benefit the most.

 

Virtual assistants are disrupting ad-based business models

Traditional search and ad-based business models are being disrupted. Delivering answers rather than search results, is a core value proposition of virtual assistants. For traditional search engines, this translates into decreasing page hits and consequently to a fall in search advertising revenue. Google has seen declining search traffic from iPhones following the launch of Siri, according to our sources. Disruption to advertising business models (read Google and Facebook) arises as virtual assitants become a point of convergence for user profiling data. By amassing deep knowledge of user search terms, VAs can become pivotal to third parties wanting to target users by interest.

Amidst these disruptions, we expect Google to launch a free Siri alternative across multiple smartphone platforms, hardwired to Google’s search results and advertising revenue streams.

Google’s open speech recognition API creates traction for Android. It also means more efforts required by licensing SR vendors to attract and keep voice-based app developers.

 

Exploring business models for virtual assistants

Paid downloads generate little revenue for VA vendors today. The 43 VA apps we looked into generated under 2 million USD, despite over 133 million downloads. Nearly 86 percent of paid download revenue were on iOS. What VA vendors are actually focusing on today is to build a large user base in order to cut intersting third-party content and service distribution deals for the future.

Moving forward, we see revenue coming in from search and advertising and, increasingly, from third-party deals and avatar customisation, rather than from paid downloads.

 

Virtual assistants as a discovery control point

As virtual assistants move from being apps to becoming access points for personalised service discovery, they will become strategic distribution channels for both mainstream and niche service providers.

Moreover, context-based user profiling opens new opportunities for contextual marketing and advertising, by letting brands push more user-relevant messages, offers and recommendations through virtual assistants.

Siri was just the beginning.

 

Don’t forget to download the full report – and send us your feedback!
- Marlène

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