Global Chatbot Market Outlook, 2028

Chatbots are advanced software applications designed to facilitate seamless interactions between humans and machines, typically through text or voice conversations online. They rely on artificial intelligence to enable natural and meaningful interactions with users. These chatbots empower businesses to effectively engage with their customers and clients through various communication channels like video, text, voice, file sharing, and images. They are easily accessible through digital platforms such as mobile apps, websites, and standalone devices. Additionally, Over-the-top (OTT) messaging apps are at the forefront of innovative ways for businesses to connect with their audiences, offering both parties opportunities for streamlined and efficient communication. In the constantly evolving realm of business communications, organizations are increasingly adopting platform-based approaches. By integrating their chatbot services into communication apps, businesses can unlock various features like games, payment processing, advertising, and more. A chatbot system leverages conversational artificial intelligence (AI) technology to mimic natural language conversations with users via messaging apps, websites, mobile apps, or even phone calls. Live chat functions are carried out through rule-based language applications in response to real-time user interactions. One notable advantage of chatbots is that, unlike traditional applications, they don't need to be downloaded, updated, or consume phone memory. Furthermore, multiple chatbots can be seamlessly integrated into the same chat environment. Chatbots play a pivotal role in reducing operational expenses for enterprises by automating aspects of customer service and sales, resulting in significant cost savings. This cost-efficiency is one of the primary driving factors for the chatbot market's growth. In both business-to-consumer (B2C) and business-to-business (B2B) contexts, users are increasingly turning to chatbot virtual assistants to handle routine tasks. Integrating chatbot assistants helps lower overhead costs, enhances staff productivity, and enables organizations to provide customer support round the clock.

According to the research report, “Global Chatbot Market Outlook, 2028” the market is anticipated to cross USD 15 Billion by 2028, increasing from USD 5.63 Billion in 2022. The market is expected to grow with more than 20% CAGR by 2023-28. Currently, the chatbot market is experiencing significant growth due to the rising demand for chatbots to deliver efficient and personalized services to customers. Additionally, the proliferation of e-commerce platforms offering online products and doorstep delivery is contributing to market expansion. The increasing popularity of over-the-top (OTT) platforms for streaming movies, series, and documentaries is also fostering a positive market outlook. Furthermore, the growing need for automated and real-time customer support is a key driver of market growth. The increasing adoption of conversational AI, capable of understanding context, handling complex queries, and responding in a natural conversational manner, is further boosting market expansion. Advancements in natural language processing (NLP) are also playing a pivotal role in strengthening the market. Recent developments include companies focusing on the creation of self-learning chatbots. These chatbots are equipped with integrated technologies like cloud-based deployment, interference engines, natural language processors (NLP), and application programming interfaces (APIs). Self-learning chatbots can adapt to changing environments and conditions by learning from their previous conversations, actions, decisions, and experiences. Additionally, companies are collaborating to provide integrated self-service technology to customers. For instance, in February 2020, Creative Virtual partnered with Spitch AG to jointly develop speech recognition and conversational AI solutions, particularly in omnichannel settings. This collaboration introduced a multi-lingual voicebot to enhance sales and customer experiences.

North America region shares the maximum market as it’s the major hub of startups in the chatbot industry, and the majority of the implementations of chatbots occurred in this region.

The North American region, known for its pioneering adoption of AI technology, stands as the primary revenue-generating hub in the global chatbot market. North America dominates the global chatbot market share due to its leading adoption of cutting-edge technologies like natural language processing, voice recognition techniques, and chatbots themselves. These factors have spurred the widespread adoption of chatbot solutions across the region. Furthermore, various industry sectors, including IT and ITeS, telecommunications, healthcare, media and entertainment, retail, and BFSI, are embracing chatbot tools to swiftly address customer inquiries. The market's growth prospects are driven by several factors, including cost reduction, enhanced customer satisfaction, and increased operational efficiency for businesses. North America is home to a substantial number of chatbot startups and has witnessed the most significant number of chatbot integrations. The market's expansion is further propelled by well-established enterprises and the aggressive deployment of chatbots, particularly in the healthcare, BFSI, and e-commerce domains. Additionally, the region's market growth is fueled by the substantial increase in chatbot deployment across various business verticals. Furthermore, rapid technological advancements, such as IoT, APIs, and artificial intelligence, are evolving at a remarkable pace. Advanced chatbots are being seamlessly integrated with these technologies to offer enhanced operational capabilities, thereby driving increased demand in the market.

The solutions segment is anticipated to account for a leading share of over 40% of the global revenue. The leading share is attributable to the large-scale adoption of in-house chatbot technologies.

The solution type is leading the chatbot market because it encompasses the core offerings and capabilities that chatbot providers deliver to businesses and organizations. Solution types encompass a wide range of functionalities and services, making them a comprehensive choice for businesses. These offerings often include chatbot development platforms, pre-built chatbot templates, and tools for designing, deploying, and managing chatbots effectively. Solution types provide businesses with the flexibility to tailor chatbot solutions to their specific needs. This customization allows organizations to align chatbot capabilities with their industry, target audience, and unique requirements. Integration with existing systems and data sources is also a crucial aspect of solutions, enabling seamless operation within an organization's ecosystem. Many businesses opt for solution-based chatbots because they offer ready-made frameworks and tools that simplify the development and deployment process. This streamlines the implementation of chatbots and reduces the time and resources required to get them up and running. Solution providers often specialize in serving specific industries or verticals. This industry-specific expertise allows them to create chatbots that are optimized for particular sectors, such as healthcare, finance, retail, or customer support. Businesses seeking industry-specific chatbot solutions are more likely to turn to solution types. Solution-based chatbots are designed with scalability in mind. As businesses grow and their chatbot usage expands, these solutions can accommodate increased user interactions, data processing, and functionality enhancements.

Based on type, menu-based chatbots can provide quick and efficient solutions because they are designed to handle specific tasks or offer information directly.

Menu-based chatbots offer a structured and user-friendly interaction model. Users are presented with a clear menu of options or choices, making it easy for them to navigate and select the information or services they need. This simplicity appeals to a wide range of users, including those who may not be tech-savvy. Menu-based chatbots are particularly effective for handling straightforward tasks and inquiries. By presenting predefined options, they simplify the conversation and eliminate the need for users to formulate their queries in natural language. This reduces the potential for miscommunication and errors in user interactions. Menu-based chatbots provide predictable responses based on the available menu choices. Users know what to expect when they select a specific option, which helps manage user expectations and enhances the overall user experience. Menu-based chatbots can provide quick and efficient solutions because they are designed to handle specific tasks or offer information directly. Users can bypass lengthy conversations and receive immediate answers or perform actions. Developing menu-based chatbots is often less complex and time-consuming compared to building natural language processing (NLP)-driven chatbots. This can result in faster deployment and reduced development costs. Menu-based chatbots are well-suited for use cases where the range of user interactions is limited and predictable, such as order processing, appointment booking, FAQs, and simple customer support inquiries. Menu-based chatbots can cater to a wide audience, including individuals with diverse language skills or those who prefer a structured interface. This inclusivity can help businesses reach a larger customer base. Menu-based chatbots often deliver a clear return on investment (ROI) for businesses. They excel at automating routine tasks, reducing support costs, and improving operational efficiency.

Text-based communication is asynchronous, meaning that participants can engage in conversations without the need for real-time interaction. This flexibility is valuable in today's fast-paced world where people have busy schedules.

The integration of chatbots into text-based communication platforms has revolutionized customer service and support. Chatbots can provide quick and automated responses to customer inquiries, improving efficiency and customer satisfaction. Text-based bot communication is intuitive and user-friendly. Most people are familiar with texting as a mode of communication, so interacting with chatbots via text feels natural. Text-based communication is accessible to a wide range of individuals, including those with different levels of technological expertise and various disabilities. This inclusivity makes it a preferred choice for many. Text-based bot communication offers the convenience of asynchronous communication. Users can engage with chatbots at their own pace, without the need for immediate responses. This flexibility aligns with modern lifestyles where people are often multitasking and have busy schedules. Chatbots can provide round-the-clock assistance, which is especially valuable for businesses and customer support. Customers can get answers to their queries or resolve issues at any time, even outside regular business hours. Chatbots are efficient at handling routine inquiries and tasks, freeing up human agents to focus on more complex or specialized issues. This efficiency can lead to faster response times and improved customer satisfaction. Implementing chatbots for text-based communication can be cost-effective for businesses. Once developed, chatbots can handle a large volume of inquiries without incurring additional labor costs. Chatbots can use data and machine learning algorithms to personalize interactions, making them more relevant and engaging for users. This personalization can enhance the user experience and drive customer loyalty. Developing and deploying text-based chatbots is often faster compared to other forms of AI or automation. This rapid deployment can help businesses address immediate needs.

Sales and marketing chatbots are available round the clock, ensuring that potential customers receive assistance and information even outside regular business hours. This constant availability maximizes the chances of converting leads into sales.

Chatbots can actively engage website visitors and social media users, providing instant responses to inquiries and guiding them through the sales funnel. This proactive approach helps generate leads and convert prospects into customers. Chatbots can gather user data and preferences to deliver personalized marketing messages and product recommendations. This personalized approach enhances the customer experience and increases the likelihood of making a sale. Chatbots can handle routine sales and marketing tasks, such as answering frequently asked questions, processing orders, and providing product details. This frees up sales and marketing teams to focus on more complex and strategic activities. Chatbots can scale to handle a large volume of interactions simultaneously. As marketing campaigns generate interest and traffic, chatbots can efficiently manage increased customer inquiries and engagement. Chatbots can pre-qualify leads by collecting essential information from potential customers. This helps sales teams prioritize their efforts on leads that are more likely to convert, saving time and resources. Chatbots can collect valuable data on customer interactions, preferences, and behaviors. This data can be analyzed to gain insights into customer trends and inform marketing strategies. Chatbots can be integrated into various communication channels, including websites, social media platforms, messaging apps, and email. This omni-channel presence allows businesses to reach customers where they are most active. Chatbots can assist with post-sale support, ensuring that customers receive timely assistance with issues or inquiries. Satisfied customers are more likely to become repeat buyers and brand advocates.

In terms of vertical, retail & e-commerce segment dominated the market with a higher market share in 2022. Chatbots find applications in a wide range of industries, such as retail & e-commerce, healthcare, BFSI, media & entertainment, travel & tourism, it & telecommunication and other verticals (manufacturing, construction & real estate, government and defense, energy and utilities , automotive and education ).

Integrating chatbots with websites and email allows businesses to actively engage with visitors and subscribers. Chatbots can provide immediate responses to inquiries, offer assistance, and guide users through their online

journeys, resulting in enhanced customer engagement. Chatbots can offer real-time customer support through website chat widgets and email interactions. This reduces response times and ensures that customers receive assistance promptly, leading to higher customer satisfaction. Chatbots integrated with websites and email is available 24/7, providing users with assistance and information at any time. This round-the-clock availability is crucial for global businesses catering to diverse time zones. Chatbots on websites can capture leads by collecting contact information and qualifying potential customers. This data can be seamlessly integrated into email marketing campaigns, helping businesses nurture leads and convert them into customers. Chatbots can gather valuable data from website visitors and email interactions. This data can be used to analyze user behavior, preferences, and trends, informing marketing strategies and content creation. Chatbots can handle a significant portion of customer interactions and inquiries, reducing the workload on human support and marketing teams. This cost-saving aspect contributes to the attractiveness of chatbots for businesses. Also, chatbots are scalable and can handle a growing volume of interactions without a linear increase in costs. As businesses expand their online presence, chatbots can efficiently manage increased user engagement.

Market Drivers

• Enhanced Customer Service and User Experience: Chatbots have become a crucial tool for businesses to provide better customer service and enhance the overall user experience. They can offer 24/7 support, answer frequently asked questions, and assist with basic problem-solving tasks. This helps in reducing response times and ensuring consistency in responses. As businesses strive to improve customer satisfaction and loyalty, chatbots play a pivotal role in meeting these objectives. Additionally, chatbots can be integrated into various communication channels, such as websites, social media platforms, and messaging apps, making it easier for customers to reach out to businesses. In today's competitive business landscape, customer service is a critical differentiator. Customers expect quick and efficient support, and chatbots allow businesses to meet these expectations. By automating routine inquiries and tasks, companies can free up their human customer support agents to focus on more complex issues, resulting in faster response times and higher customer satisfaction. This improved user experience can lead to increased customer retention and brand loyalty, which are essential for long-term success.
• Cost Savings and Efficiency Gains: Another major driver of the global chatbot market is the potential for significant cost savings and efficiency gains. Once implemented, chatbots can handle a high volume of customer inquiries and tasks without incurring additional labor costs. This is particularly valuable for businesses operating on tight budgets or looking to streamline their operations. Chatbots can also assist with internal processes, such as HR and IT support, further increasing efficiency and reducing operational expenses. Businesses are always looking for ways to optimize their operations and reduce costs, and chatbots offer a compelling solution. By automating repetitive tasks, companies can reduce the need for additional staff or reallocate existing resources to more strategic activities. This efficiency can lead to increased productivity and profitability. Moreover, chatbots can scale easily to handle a growing customer base without a linear increase in costs, making them a cost-effective option for businesses.

Market Challenges

• Natural Language Understanding and Contextual Awareness: One of the key challenges in the chatbot market is improving the natural language understanding (NLU) capabilities of chatbots. While chatbots have made significant advancements in understanding and responding to human language, they still struggle with complex language, context switching, and understanding the nuances of human conversation. Achieving true contextual awareness is a persistent challenge, as users often expect chatbots to remember previous interactions and maintain a coherent conversation. Natural language processing technology is complex, and understanding human language in all its variations and contexts is a formidable challenge. Chatbots need to constantly evolve to recognize the subtleties of language, user intent, and emotional nuances to provide more meaningful and personalized interactions. Improving NLU capabilities is crucial for chatbots to deliver a seamless user experience and drive broader adoption across industries.
• Data Privacy and Security Concerns: As chatbots handle sensitive information and engage in personal conversations, data privacy and security concerns have become increasingly significant. Ensuring that chatbots comply with data protection regulations, safeguard user information, and prevent data breaches is a pressing challenge. A single security lapse can lead to reputational damage and legal consequences for businesses. In an era of heightened awareness regarding data privacy, users expect their personal information to be handled with care. Chatbot developers and businesses must invest in robust security measures, including encryption, access controls, and regular security audits, to protect user data. Additionally, staying compliant with data privacy regulations such as GDPR or CCPA is essential to avoid costly penalties and maintain user trust. Balancing the convenience of chatbots with the need for data security is an ongoing challenge.

Market Trends

• Conversational AI and Multimodal Interfaces: A significant trend in the global chatbot market is the advancement of conversational AI. Chatbots are evolving into more sophisticated conversational agents that can understand and generate natural language. They are also expanding beyond text-based interactions to support voice, video, and even gestures. This trend aligns with the growing demand for multimodal interfaces that offer users a seamless experience across various communication channels and devices. Conversational AI represents a shift from rule-based chatbots to machine learning-driven models that can engage in dynamic and context-aware conversations. This trend allows businesses to provide more interactive and personalized experiences to their users. The integration of voice assistants and chatbots, for example, enables hands-free interactions and expands the range of applications, from virtual shopping assistants to healthcare consultations.
• Industry-Specific Chatbots and AI-Powered Insights: Another emerging trend is the development of industry-specific chatbots tailored to the unique needs of various sectors such as healthcare, finance, and e-commerce. These specialized chatbots leverage domain knowledge and AI-powered analytics to provide valuable insights, recommendations, and solutions. Businesses are increasingly using chatbots not only for customer support but also for data-driven decision-making. Industry-specific chatbots are designed to address sector-specific challenges and opportunities. For instance, in healthcare, chatbots can assist with patient diagnosis and medication management, while in finance; they can provide investment advice and facilitate financial transactions. These chatbots leverage data analytics to deliver real-time insights and recommendations, helping businesses make informed decisions and improve operational efficiency.

Covid-19 Impacts

As the pandemic forced businesses to adapt to remote work and limited physical interactions, there was a surge in demand for digital customer support solutions. Chatbots played a pivotal role in addressing this need by providing 24/7 automated support. With many customer support call centers facing disruptions, chatbots helped fill the gap, handling a higher volume of inquiries efficiently. Chatbots were widely deployed by government agencies, healthcare organizations, and businesses to disseminate critical information related to COVID-19. They were used to answer frequently asked questions about the virus, provide updates on safety guidelines, and offer information about testing centers and vaccination sites. Chatbots became a valuable tool in combating misinformation and ensuring that the public had access to accurate and up-to-date information. With physical distancing measures in place, many businesses accelerated their digital transformation efforts. Chatbots were integrated into e-commerce platforms to assist customers with online shopping, track orders, and answer product-related queries. In the absence of in-person interactions, chatbots also facilitated contactless services, such as curbside pickup and online appointments, enhancing the overall customer experience. Chatbots were utilized to support employees working remotely. They provided guidance on IT issues, answered HR-related queries, and helped employees adapt to the challenges of remote work.

Additionally, chatbots were used for internal communications, disseminating company updates and policies related to the pandemic. In the healthcare sector, chatbots played a crucial role in providing initial assessments, scheduling appointments, and delivering healthcare information remotely. Telemedicine chatbots helped reduce the burden on healthcare systems and allowed patients to consult with healthcare professionals without visiting physical facilities, minimizing the risk of virus transmission. Recognizing the value of chatbots during the pandemic, businesses and organizations increased their investments in AI and chatbot technology. This led to advancements in chatbot capabilities, including improved natural language understanding, multilingual support, and better integration with existing systems. Chatbots were deployed to enforce health and safety measures in various settings. For instance, businesses used chatbots to screen employees and visitors for COVID-19 symptoms before granting access to their premises. Similarly, chatbots were used in public spaces to remind people to wear masks, maintain physical distance, and follow safety protocols. The urgency of the pandemic led to rapid innovation in chatbot technology and spurred the development of new use cases. For example, chatbots were used for virtual events, COVID-19 contact tracing, and even mental health support. These innovations expanded the role of chatbots beyond traditional customer support.

Competitive Landscape

The chatbot market vendors have implemented various types of organic and inorganic growth strategies, such as new product launches, product upgradations, partnerships and agreements, business expansions, and mergers and acquisitions to strengthen their offerings in the market. Key players operating in the chatbot market include The International Business Machines Corporation, Microsoft Corporation, Google LLC , Amazon.com, Inc, Salesforce, Inc. , Oracle Corporation, Kore.ai, [24]7.ai, Inc., eGain Corporation, Conversica, Genesys Telecommunications Laboratories, Inc., Zendesk, Inc., Intercom, Inc, Artificial Solutions, Verint Systems, Creative Virtual Ltd, Kevit Technologies Private Limited, Accenture plc, Contus Tech Private Limited and Inbenta.

Key Developments

• On 13 July 2023, Google's AI chatbot Bard will expand to Europe, competing with ChatGPT, which uses generative AI for user conversations. Companies are investing billions in AI to generate advertising and cloud revenue. Elon Musk's xAI, a startup with former Google, Microsoft, and OpenAI engineers, is also gaining attention.
• On 9 August 2023, Inbenta, an AI platform in Allen, introduced generative AI integration for content development and organization, enabling instant organization with minimal effort oversight and compliance.
• On 14 July 2023, ServiceNow introduced Now Assist for Virtual Agent, combining chatbots with Generative AI for conversational, self-service user experiences. This solution simplifies complex workflows and leverages the enterprise's enterprise value of Generative AI.
• April 2023 - Zendesk partnered with OpenAI, a prominent America-based AI research laboratory. The firm would provide its users with AI-supported solutions to simplify ticket-generating activities for CX and customer service employees. Zendesk and OpenAI are working together to improve the capabilities of Zendesk’s foundation models, which are proprietary, by integrating them with OpenAI’s.
• In January 2023, Kore.ai declared that the firm would introduce RetailAssist, a conversational sales assistant solution for the retail sector, at the National Federation of Retailers exhibition (NRF 2023) in New York City. RetailAssist helps retail and e-commerce businesses modernize, scale, and transform operations by developing expertise in self-service automation, customization, omnichannel fulfillment, and 24/7 pre-/post-sales service and support.
• In April 2023, Kore.ai disclosed that the firm had integrated its conversational AgentAssist with automated intelligent virtual assistant (IVA) support for Zendesk Inc. Through an everyday user experience, this AI virtual assistant for contact center employees manages the generation and sales processes, extending the capabilities of Zendesk Support across digital channels..

Considered in this report:

• Geography: Global
• Historic year: 2017
• Base year: 2022
• Estimated year: 2023
• Forecast year: 2028

Aspects covered in this report:

• Global Chatbot market Outlook with its value and forecast along with its segments
• Region & Country-wise Chatbot market analysis
• Various drivers and challenges
• On-going trends and developments
• Top profiled companies
• Strategic recommendation

Regions & Countries covered in the report

• North America (United States, Canada, Mexico)
• Europe (Germany, United Kingdom, France, Spain, Italy, Russia)
• Asia-Pacific (China, Japan, India, Australia, South Korea)
• South America (Brazil, Argentina, Colombia)
• Middle-East & Africa (UAE, Saudi Arabia, South Africa

By Offering:

• Solutions
• Services
• Training and Consulting
• System Integration and Implementation
• Support and Maintenance

By Type:

• Menu based
• Linguistic- based
• Keyword Recognition based
• Contextual
• Hybrid
• Voicebots

By Bot Communication:

• Text
• Audio/Voice
• Video

By Vertical:

• Retail & E-Commerce
• IT & Telecommunication
• Travel & Tourism
• BFSI
• Healthcare
• Media and Entertainment
• Others (manufacturing, construction and real estate, education, government and defense, energy and utilities and automotive)

The approach of the report:

This report consists of a combined approach of primary and secondary research. Initially, secondary research was used to get an understanding of the market and list the companies that are present in it. The secondary research consists of third-party sources such as press releases, annual reports of companies, and government-generated reports and databases. After gathering the data from secondary sources, primary research was conducted by conducting telephone interviews with the leading players about how the market is functioning and then conducting trade calls with dealers and distributors of the market. Post this; we have started making primary calls to consumers by equally segmenting them in regional aspects, tier aspects, age group, and gender. Once we have primary data with us, we can start verifying the details obtained from secondary sources.

Intended audience:

This report can be useful to industry consultants, manufacturers, suppliers, associations, and organizations related to the Chatbot industry, government bodies, and other stakeholders to align their market-centric strategies. In addition to marketing and presentations, it will also increase competitive knowledge about the industry.