Automating Local Commerce: Rise of the Chatbots

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Facebook Messenger, LINE, Kik, WeChat, and of course Snapchat — we’ve entered the age of messaging apps. But it’s not just banter between friends; these apps are increasingly used to converse and transact with businesses.

This type of conversation usually involves messaging a business to get a question answered. But as I’ve mentioned in the past, the real opportunity for local businesses is in action buttons and command prompts to schedule appointments, reserve products, or get personalized updates.

This “conversational commerce” is already prevalent overseas, and supported by messaging app penetration among millennials. Adoption at the brand level (see Sephora) also foretells what we could eventually see trickling down to SMBs.

But since most SMBs don’t have the time to text customers all day, there has to be some degree of automation. We’re talking a Siri-, Cortana– or Alexa-like assistant to play customer service rep for your local florist. Enter chatbots.

Branching from these smooth-talking personal assistant apps, chatbots bring AI-fueled dialogues to chat windows, both written and verbal. This is not only the venue of choice for millennials but it makes natural language the new interface.

That last part is key. One important trend over the past few years is the compression of local search. The process was previously characterized by queries, results pages, links, listings, reviews; then (maybe) making a buying decision.

But the combination of smartphones, immediacy-oriented millennials, and the on-demand movement have compelled a more direct path. This first led to social media “buy” buttons, and now conversational commerce and AI.

“Search started with consumers typing into a box,” Pingup’s Ron Braunfeld said at the Local Search Association’s conference last month. “[AI] is all about knowing where you are, time of day, what’s in your refrigerator; and giving you the right information without having to search.”

So who’s doing what so far? The latest move was revealed at last week’s Microsoft Build conference. The bot capability housed in Cortana will now be applied to Skype, Office 365 and tools for developers to build their own chatbots.

Think of travel or entertainments bookings based on the content of your inbox and calendar. However, Microsoft will be challenged by not owning the mobile OS — where most interaction will happen — like Apple (Siri) and Google (Now) do.

Facebook likewise doesn’t have hardware or OS in the game, but is an early favorite for chatbot dominance within Messenger and M. It does have the most popular mobile app, with 800 million active Messenger users and its new Bot Store.

Google is meanwhile positioned well, given a strong voice search and index that are the backbone of any good bot. As I’ve mentioned, an AI-fueled Google Now will be Google’s “micro-moments” counterbalance to search volume declines.

The wild cards are Slack and Snapchat. The latter’s penetration and recently launched multimedia approach give it high ground in the messaging wars. The question is if it will bring bot automation and local commerce into the equation.

Panning back, despite all this chatbot investment, they have an ironic retro twist. After years of advancing design and graphical user interfaces, chatbots bring us back to a DOS-like command interface (sometimes literally).

And when it comes to voice-based bots like Cortana, Siri and Alexa, machine learning and speech recognition still have a ways to go. There will be comically aggravating misfires in early days — the new “damn you auto-correct.”

But eventually, bots could displace apps just as apps displaced search. In other words, the bot is the new app. Instead of bulky American Airlines, Hyatt and 7-11 apps, in this new paradigm they’ll each have bots that interface with Facebook Messenger.

This addresses a classic problem in local: fragmentation. You can’t have an app for every SMB you transact with, which is one reason that apps like Yelp and YP shine. But if the bot is the new app for SMBs too, it could be the next local land grab.

Like other emerging tech including VR/AR, it could take a while to reach SMBs at scale. But also like VR/AR, now’s the time for anyone in local to pay attention. Channeling Kent Brockman, I for one, welcome our new bot overlords.

Michael BolandMichael Boland is chief analyst and vice president of content at BIA/Kelsey. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0, and other outlets.

Mike Boland has been a tech & media analyst for the past two decades, specifically covering mobile, local, and emerging technologies. He has written for Street Fight since 2011. More can be seen at