As 2017 winds down, it’s a good time to look back and retrospect about one of the many predictions made during the “Year of the Chatbots”, its apparent rivalry against the now-veteran platform, Applications.
The general opinion differs depending on who you ask and are almost entirely polarized.They usually range from, “CHATBOTS ARE NOTHING BUT HYPE.” to “ALL WEBSITES AND APPLICATIONS ARE GOING TO DIE BECAUSE OF CHATBOTS.”
Over the course of this conversation, we’ll try to have an objective discussion, driven more by numbers; and less by narrative. There’s a TL;DR at the bottom of the article, if you just want to jump to the SHOCKING consensus.
Let’s start off by saying, none of this is new.
We pit everything against everything, almost entirely for the joy of the conflict that it brings.
In the early 2010’s, just as we were just entering the “Age of Apps”, most people suggested that websites would be dead because of the rapid transition to mobile. Here we are, more than half a decade later (a century in tech world speak) and I’m sipping my chai latte, listening to 6Lack’s new album on my phone while typing this article out on my MacBook, using Medium’s website.
Apps have been around for a while and since we’re in 2017, most people older than the age of 3 know what they are and where to find one.
The term “app” has evolved to refer to small programs that can be downloaded and installed all at once.
They’re software and programs, usually small, specific ones, built for mobile devices. The term app originally referred to any mobile or desktop application, but more app stores have emerged to sell mobile apps to smartphone and tablet users.
But what are Chatbots?
Chatbots are the lesser heralded underdogs in this fight. To get an in-depth analysis into what they are and how they work, you can read this article I wrote earlier called “NLP, NLU, NLG and how Chatbots work”, that somehow made me a Medium Top Writer in Artificial Intelligence.
Simply put, Chatbots are a service powered by artificial intelligence that you interact with via a chat interface, an alternative to empty human conversation, so to speak. You’ve probably talked to one on a few of your favorite websites and chances are you didn’t even notice. If you haven’t, try a few out on LivPure and ApolloMunich Insurance.
Before we kick this off, let’s get one thing straight: Apps have had a great run.
Gartner’s estimates that over 268 billion mobile downloads that were undertaken in 2017, generated a revenue stream of close to $77 billion. This is more than the $58 billion that it brought in during 2016, which was more than the $45 billion in 2015, which was more than the $35 billion in 2014.
Apple’s App Store alone claims to have over 100 billion application downloads.
By virtue of being convenient and quick, applications are now an integral aspect of a range of devices that we use, from smartphones and tablets, to watches, laptops, and TVs. They’ve established themselves as the singular interface through which we interact with all our smart devices.
And therein lies the problem.
App Fatigue is a real and tedious thing for consumers.
Based on a report by App Annie, the average user uses only 9 or 10 apps on a daily basis, even though they have upwards of 35 or 40 downloaded.
App downloads have also plateaued despite a growing number of devices, indicating that people have moved away from downloading a range of applications, and are sticking to what they know, or what is popular.
According to research by Sensor Tower, the top 1% of publishers that produce paid apps (or apps with in-app purchases) collect 94% of revenue from the App Store platform.
That works out to 623 top publishers collecting $1.34 billion of the $1.43 billion in revenue estimated to come from the App Store.
Ultimately, the research underscores a trend that smaller developers are increasingly grappling with: it’s pretty hard to get noticed on an app based platform.
Applications also suffer from slightly more subjective problems, like payment requirements, monetization via annoying ads, hardware changes, UI acclimation and sign up issues.
So while apps are themselves a great tool, they’re facing growing pains from both customers and developers due to flooding of the markets.
It’s for all these reasons and a lot more besides, that people assume that applications are on their way out and the resulting void they leave is going to be replaced by Chatbots.
Don’t get me wrong, chatbots are the future.
Companies that fail to implement chatbots into their operations will suffer long and slow, in the same way that companies that failed to implement social media did just a few years prior.
But by no means will chatbots entirely replace apps, in the same way, that by no means did apps entirely replace websites. Apps were just an alternative to websites by way of a change in consumer preferences, i.e. a shift to mobile devices.
Chatbots, similarly, are simply a natural progression to change, the change being the dominance of messaging platforms in our lives.
Most pundits mocked, when in 2014 Facebook bought that pudgy little featureless messaging service called Whatsapp for an eye-watering $19 billion.
To put into perspective, $19 billion meant that Facebook valued the 55-employee startup, at the time, more than companies like Harley Davidson, American Airlines, Ralph Lauren, UnderArmour or Xerox.
But three years down the line, the bet seems to have paid off big. Social Media is no longer the unkillable beast it used to be. Driving off a change in consumer preferences, according to a 2016 Business Insider research study, Messaging Applications’ Big 4 (Whatsapp, Messenger, WeChat, and Viber) beat Social Media’s Big 4 (Facebook, Instagram, Twitter and LinkedIn) in terms of monthly active users.
Companies follow customers onto platforms, and as people gravitate towards messaging, businesses are trying to do it as well. Various companies already use chatbots, like Sephora, eBay, 1–800-Flowers, H&M and Pizza Hut and they’ve seen immense gains from it.
Adidas, for example, made a chatbot for its female customers, in order to boost interaction and purchases. In the first two weeks alone, more than 2,000 people signed up to participate, with a repeat usage rate of 80%. Retention after week one was 60%, which the brand claims was far better compared to an app.
Customer preferences lie in conversational marketing, as users spend more than half their mobile time in some form of messaging platform, they want to be courted the same way.
Think about it. When was the last time someone sold you something over a phone call?
So will chatbots replace apps as a whole? No.
But they will work great with them.
Chatbots are good at specific tasks, simple ones like a rule-based chatbot that answers basic customer service questions, or more complex operations, like helping customers find the right products based on their style and needs.
Chatbots aren’t a be-all, end-all solution for your company, but if they’re used right and made properly, they can be a consistent, context-driven, conversational and cost-effective way to change the way your business operates.
Building your own unique branded chatbot will take some creativity, but there are many services out there that can help you get started without touching any code, such as Chatfuel, Morph.ai, or Verloop.
TL;DR — Chatbots won’t replace websites or apps, in the same way, apps didn’t replace websites. Chatbots will, however, work great when integrated with apps and websites, in order to boost interaction with customers because of a change in user preference towards conversational marketing.