Welcome to WealthWisdom, the economy and investment knowledge blog! Enjoy reading and do sign up as members, before logging off!
Saturday, April 9, 2016
Mobile services: Bots, the next frontier
YOU are a developer and you’ve just spent two weeks writing this amazing app. What is your dream? Your dream is to get it in front of every iPhone user.” That was how Steve Jobs, then Apple’s boss, introduced an online shop for smartphone apps eight years ago. At first few paid it much heed, but it launched one of the fastest-growing software markets ever. Since then over 100 billion apps have been downloaded, generating $40 billion in revenues for developers and billions more in subscriptions and other fees.
At a conference on April 12th in San Francisco, Mark Zuckerberg, Facebook’s boss, is expected to make a similar announcement. He will probably unveil an online shop and coding tools for “chatbots”. These are text-based services which let users complete tasks such as checking news, organising meetings, ordering food or booking a flight by sending short messages. Bots are usually powered by artificial intelligence (hence the name, as in “robot”), but may also rely on humans. Many in the technology industry hope that Facebook’s event will mark the beginning of another fast-growing, multi-billion-dollar software economy. Are bots the new apps?
The timing looks right, because smartphone software is in flux. Download numbers are still growing, but the app economy is clearly maturing. “The dream of the independent developer building a business in the app store is over,” suggests Activate, a consultancy. The 20 most successful developers grab nearly half of all revenues on Apple’s app store. Building apps and promoting them is getting more costly. Meanwhile, users’ enthusiasm is waning, as they find downloading apps and navigating between them a hassle. A quarter of all downloaded apps are abandoned after a single use.
Only instant messaging bucks the trend. Over 2.5 billion people have at least one messaging app installed, with Facebook Messenger and WhatsApp, which is also owned by Facebook, leading the pack (see chart). Within a couple of years, says Activate, that will reach 3.6 billion, about half of humanity. Many teenagers now spend more time on smartphones sending instant messages than perusing social networks. WhatsApp users average nearly 200 minutes each week using the service.
Talking out of your bot
As services based on artificial intelligence improve, they need a way to talk to real people. Chatbots are one option. At a conference on March 30th Microsoft showed off several prototypes. It will be a while before anyone trusts such services, however. A few days earlier one of Microsoft’s bots, “Tay”, designed to impersonate a millennial, started parroting racist language it had learned from users on Twitter. “Tay” had to be sent to her digital room.
As a result of these various developments, a new software ecosystem has started to emerge. Text-based services have been around since the dawn of internet time, but the birth of the bot economy can be dated to June last year, when Telegram, a messaging app with Russian origins and more than 100m users, launched a bot platform and a “bot store”. It now counts thousands of bots, such as news alerts from media organisations, or feeds that link to football videos or porn.
A few dozens startups exist. Some provide tools: Chatfuel is a web-based offering that lets users build bots for Telegram. Others offer specialised services: Digit allows users to interact with their bank accounts and find ways to save money; Pana is an online travel agency that takes text messages and turns them into bookings. MeeKan sets up meetings for users of Slack, a popular corporate-messaging service (now valued at nearly $4 billion).
Then there are firms which want to be the foundation for other services. Assist aims to be the equivalent of Google’s search box—to find bots. Another firm, Operator, hopes to become the Amazon of bot-commerce: when a shopper requests, for example, certain sports shoes, its system can contact a salesperson in a nearby shop or get one of its own “experts” to handle the order. Robin Chan, Operator’s boss, talks of creating a virtuous cycle of more buyers attracting more businesses, which will in turn draw in more buyers.
The app economy grew quickly only after Apple and then Google became enthusiastic champions. The bot economy will also need industry leaders, and Microsoft and Facebook look eager to play the role. Most smartphones are powered by operating systems controlled either by Apple or Google. The bot market, by contrast, is unconquered territory. At its conference, Microsoft also introduced tools to create clever new services. Facebook is expected to open its messaging platform to all sorts of bots (users can already chat with a selected few, including one impersonating Miss Piggy of the Muppets) and launch an online shop which will list the services.
Given the drawbacks of apps, there should be plenty of demand for bots, says Michael Vakulenko of VisionMobile, a market-research firm. Much like web pages, they live on servers, not a user’s device, meaning they are easier to create and update. This is likely to make them attractive to businesses which have shied away from developing their own apps, such as restaurants and shops.
Users should find bots smoother to use, which explains another of their monikers: “invisible apps”. Installation takes seconds; switching between bots does not involve tapping on another app icon; and talking to bots may be more appealing than dealing with a customer-support agent of a bank or airline, for example.
No guarantee exists, however, that the bot economy will be as successful as the app one, which has created 3.3m jobs just in America and Europe, according to the Progressive Policy Institute, a think-tank. The economics for developers are not obviously attractive: if bots are easier to develop, that means more competition. Consumers could, again, be overwhelmed by the cornucopia of services and ways of interacting with them. And designing good text-based interfaces can be tricky. After launching the first version for Slack, Matty Mariansky, a co-founder of MeeKan, was surprised by the many different ways users tried to communicate with his bot. He has since hired dedicated script writers, who have come up with more than 2,000 sentences to handle a meeting request.
The popularity of messaging apps suggests people will happily talk to bots. But much will depend on “killer bots”—hugely popular services that work best in the form of bots. Toby Coppel of Mosaic Ventures, a venture-capital firm, sees health care as a promising market. Bots could deal with routine ailments and send difficult ones to a doctor. Ted Livingston, the founder of Kik, another messaging app, which launched a “bot shop” on April 5th, expects “instant interaction” to dominate. He predicts businesses won’t just have phone numbers and web pages, but bots too. Restaurants could take orders via instant message—as some do already in China.
As with apps, bots will need much experimentation to find their place. That will, in turn, depend on how well providers manage their platforms. Telegram lets developers do pretty much what they want (although it has shut down chat channels related to Islamic State). Microsoft has promised to be as open as possible. Developers and investors have their doubts about Facebook, given its chequered history: it made life difficult for developers of applications for its website.
There will still be an app for that
Microsoft, Facebook and others will also have to deal with Apple and Google, both of which are laggards in messaging and bots. They could try to get ahead, for instance by attracting developers with their widely used payment systems. Or they might try something entirely new, says Benedict Evans of Andreessen Horowitz, another venture-capital firm. One possibility would be to allow bots to show up on a smartphone’s notification panel.
Still, there will soon be “a bot for that”, to paraphrase Apple’s iconic slogan which suggests that an app exists for everything. Yet bots, unlike the Daleks of Dr Who fame (pictured), won’t try to take over the world. They will be happy to co-exist on people’s smartphones with websites, apps and other things yet to be invented. The mobile world will keep changing, but will always be a mixed affair.