Are Bots the Answer? Sometimes But Not Always “ How are you today ” “ Do you know tomorrow’s weather? ” “ Where are you based ” “ New York ” Summary of the weather
Where Are We in the Bot Evolution? Turing Test: In 1950, Alan Turing developed a test of a machine's ability to exhibit intelligent 1950s behavior equivalent to, or indistinguishable from, that of a human. The test requires a machine to convince users of its human intelligence 70% of the time after five minutes of conversation. ELIZA: In 1966, MIT Professor Joseph Weizenbaum published ELIZA, a program 1960s applying primitive natural language processing to users’ responses to scripts. ELIZA utilized pattern matching rules to determine its replies. Interactive Voice Response (IVR): Advances in speech recognition technology spawned the 1970s growth of IVR within the call center industry, enabling automated systems to more efficiently route callers with a simple, scripted voice interface. Chinese Room: In 1980, John Searles’ paper Minds, Brains and Programs proposed the “Chinese room” 1980s experiment, arguing that just because a computer can have a conversation by recognizing symbols, it does not prove the machine can think and have consciousness as the Turing test proclaims. Loebner Prize: Awarded to a Deep Blue: In 1997, IBM’s Deep Blue 1990s bot that beats the Turing test. chess machine beats world chess No winners since start in 1990. champion Garry Kasparov. SmarterChild: Launched in Humanoid Robots: Robots 2000s 2001, this chatbot on AIM & capable of interacting with MSN reached 30M users humans commercialized 2010s ?
WeChat is Recognized as the Mobile Messaging Pioneer So what does WeChat’s history tell Connecting 700 million us about the potential for People with chats, calls and more commercialization in messaging, and what role bots may play?
The Commercial History of WeChat
WeChat – From a Messaging App to HOUSEHOLD the Social Services Hub NAME IN CHINA 800 WeChat MAU (mm) 697 600 500 MOBILE PLATFORM 400 355 ENTRY TO TENCENT 161 200 SOCIAL MEDIA EMPIRE 0 FY2012 FY2013 FY2014 FY2015 HIGH USER CENTRAL EXTRA KEY LAYER STICKINESS ON COMMUNICATIONS TO DIFFERENT HIGHLY AND SERVICES TYPES OF APPS INTEGRATED HUB PLATFORM
Started as a Messaging App WeChat GLOBAL COMPS Multimedia content 1 • Send pictures, stickers, files Message • Send text, audio messages • Create group chats Long-distance calls • Enables voice call, video call 2 Moments • Share articles & pictures / write posts • Follow Official Accounts (merchants, celebrities etc.) 3 Find new friends • “Shake” and “People Nearby” enables adding strangers as friends
Added Official Accounts for WeChat brands
4 Subscription accounts providing news and media articles – Content is King • All subscriptions are gathered under a separate tab called “Subscriptions” • Good for individuals or companies that provide contents as a core service • Less efficient at collecting data from users and at providing online services than Service accounts do
5 Service accounts providing corporate services to customers – Service is King • “App-within-an-app”: Not full scale apps but simple website-like apps using WeChat’s API China Eastern Airlines • Benefits early stage companies that do not have resources to build a fully developed app Example China Eastern Airlines Official Account on WeChat 4 • Shown as a contact in WeChat after users add its official account • Users can check flight info, 5 reserve tickets, check-in, select seats, manage membership through the airline’s WeChat account
More customized, context-based 6 Incorporated Bots into Official Accounts More conversational More accurate leveraging chat history Some popular bots built Less apps to be downloaded upon WeChat API Less 800 customer services calls Chumen Wenwen China Southern Airlines XiaoIce “ Is it going to be cold in the Yellow Mountains this weekend? “ How are you today ” “ 4/27 To Shanghai” “ Please enter Weather update on “ Do you know origin” tomorrow’s Yellow Mountain weather? ” ↓↓↓↓↓↓↓↓ “ Beijing ” “ Where are you based ” “ For what day? ” “ New York ” “ 4/27 ” Summary “ Sorry we don’t of the have tickets that weather match your need yet ” • Google Now / Siri type of digital assistant; • Requests information either by navigating • Developed by Microsoft; A chatbot that Supports voice recognition through menus or sending texts (applies to users can add as a friend and casually • Answers requests including weather, simple requests such as checking flight) converse with. Over 20 million users. restaurants, navigation etc. • Builds automated responses → reduces • Able to answer questions such as weather • Connects to other third party apps such as customer calls for businesses update, restaurant suggestions etc. Dianping where users can book restaurants • Not only responds to text messages but also / ordering delivery identifies and reacts to pictures and voice • Investors include Google messages
Incorporated Payment that Wallet transformed WeChat into a gateway of WeChat Pay m-commerce and enhanced user stickiness • Each individual or business account has a unique WeChat QR code that enables users to pay and receive money by scanning the code without adding a contact • Historical growth RED ENVELOP VOLUME DURING CHINESE NEW YAER (BN) # OF BANK CARDS BUNDLED2 (MM) 8 300 200 100 1 2015 2016 2014 2015 2016 ~ 420mm users (90% of urban mobile users1) TENCENT PAYMENT3 HAS GAINED MARKET SHARE OVER ALIPAY 1Q’15 3Q’15 Tenpay Tenpay 14% 19% Order Taxi Rail & Flights Special Others 9% Alipay Others Alipay 70% 11% 77% Movie Tickets Group Buy Meilishuo Source: iResearch 1 QiEZhiKu (owned by Tencent) 2 Bank cards bundled to WeChat Pay and QQ Wallet 3 Includes WeChat payment and QQ Wallet
Incorporated Payment that Wallet transformed WeChat into a gateway of WeChat Pay m-commerce and enhanced user stickiness 7 • Facilitate B2C transactions and off- GLOBAL COMPS 8 7 9 platform services: • Pay and receive money: card repay, utilities bills, healthcare bills 7 • Mobile credits top up • Link loyalty cards from multiple merchants to one WeChat account 7 8 8 8 • Enhance C2C transactions: • Transfer money among friends • Split bills 9 • Send out red packets, monetary gifts given for special occasions 9 • Provide various financial products • Crowdfunding Order Taxi Rail & Flights Special • Wealth management products (i.e. LiCaiTong) • Loan application Movie Tickets Group Buy Meilishuo
Evolved into Platform that integrates Wallet WeChat Pay O2O initiatives and third party apps • GLOBAL 10 Access links under “WeChat Wallet” to COMPS some of the most popular third-party apps to enrich more mobile payment scenarios Order taxi on demand Book rail / flight tickets online Online shopping Online shopping guide for women Reserve seats / buy movies tickets Provide user reviews of local services (i.e. restaurants) and group buying • Weidian: Allow third parties to open stores and connect with consumers on WeChat 10 • Virtual app stores: Announced to launch “Application Account ” where users can subscribe third party services in HTML5 Order Taxi Rail & Flights Special format Download on the (Bot Store) Virtual App Store Movie Tickets Group Buy Meilishuo To come….
Embedded Search function 11 within chats and accounts GLOBAL Search through Moments,
COMPS Search within Official Accounts, individual / Chat history group chats, and Moments Cu Search wit r hout r leav en ing current t dialogues Bring subscribers to Official Accounts Access to industry expert articles through subscription accounts Available from Sogou platform both on desktop and mobile Search through Official Accounts Much less contents on WeChat than those Ch on tr allen aditional search engines How to bring traffic to other We g Chat e third- party services (JD.com, Didi Kuaiche etc.) besides Official Accounts? More More personal contextual More traffic Higher Search to third party stickiness gateway services
Accelerated Monetization through diversified product offerings and cross-selling opportunities Ads on Ads on E-Coupon Official Moments Accounts Wealth management & other financial Game Targeted services offerings Center Ads Future monetization on payment transactions1 Sticker Gallery 1 Tencent currently still subsidizes payment transactions, which incurs an increasing burden of bank handling fees
Lessons from WeChat
Most WeChat Bots Take a Hybrid Approach • XiaoIce, Microsoft’s conversational bot, has over 20 million users. It functions reasonably well within the Chinese internet, where conversation is more restricted and less prone to trolling. • However, the majority of bots are conversation-centric but leverage graphical user navigation and/or human involvement Chumen China WenWen Southern Airlines • Even as bots inch closer to Turing’s test, GUIs will be utilized in visual messaging platforms • Most conversational commerce will not be text only. GUIs save 100s of keystrokes. • As with IVR systems, some complex user requests require human engagement
The Power of the Platform • WeChat has over 10 million Official Accounts operated by third parties. Relatively high data costs in China benefit WeChat, with users less prone to download apps. • The entire app ecosystem for Android and iOS is ~2 million each, including games. The bar to create an Official Account with simple “App-within-an-app” functionality is significantly lower. • However, WeChat’s platform dominance is similar to Android and iOS, with WeChat’s proprietary commercial features prioritized much like default apps Wallet WeChat Pay
Investing in Exclusive Commercial Partners “WeChat Wallet” channels exclusively operated by 3rd party services in Tencent’s portfolio TENCENT DESCRIPTIONS INVOLVEMENT KEY INVESTORS • Chinese largest B2C e-commerce platform that • Level 1 access to WeChat • Tencent offers online direct sales in electronics and general platform since Mar 2014 • Tiger Global merchandise (accessed under • KPCB CE • Mar 2014: Merged with Tencent’s online “Discover” as well as • Sequoia Capital JD.COM marketplace Paipai and Yixun under “Wallet” • Mar 2015: WeChat and QQ together drove ~20% of • Purchased 15% (~ JD.com’s new customers $220mm) in 2014 OMMER -C E • Provides Pinterest-like functions that enable women • Added to WeChat • Tencent to find clothing and skin care products platform in Mar 2014 • Sequoia Capital MEILISHUO • Jan 2016: Acquired by Mojujie • GGV • Feb 2015: Didi Dache and Kuaidi Dache merged • Added to WeChat • Tencent into Didi Chuxing, forming Chinese biggest taxi- platform in Jan 2014 • Alibaba XI hailing platform • Invested in Didi Dache • SoftBank A T ILING A • 21mm cab rides were booked in the first month after since Series B in 2013 • DST Global H DIDI CHUXING integration into WeChat platform • Temasek
• Chinese online travel booking services including rail • Added to WeChat • Tencent EL ING and flight tickets booking platform in Apr 2014 • Ctrip V TRA BOOK LY.COM
• Online movie ticket booking platform based on • Developed by Beijing • Tencent WeChat, QQ and WePiao App Weiying Technologies, a • Wanda Group OKING • 8% market share, 3rd largest company owned by • Southern Capital MOVIE • Dec 2015: Announced to merge with Gewara to Tencent, Wanda Group WEPIAO BO consolidate ~ 30% of the market share etc.in 2012
• Oct 2015: Dianping and Meituan merged to form a • Acquired ~ 20% of • Tencent L ES C dominant player in the group-buying and local Dianping and integrated it • Alibaba VI services businesses on WeChat in Feb 2014 R • Jul 2014: Experienced ~ 86% y-o-y growth in MAUs LOCA SE DIANPING one quarter after landing on WeChat
CONCLUSION: Bots Are A Nascent Contributor to WeChat • After stickers, monetization at WeChat was driven by the introduction of Official Accounts and their lightweight, app-within-an-app capabilities • Payments, Platform & Exclusive 3rd Party Apps, Commerce, Branding, Search, and Games have contributed to the commercialization of the world’s most innovative messaging platform • Bots have immense potential but are just starting to play a role on the WeChat platform • Broad bot functionality requires massive investment. Cash-rich companies like Amazon (Echo), Apple (Siri), Facebook (M), Google (Now), Microsoft (Cortana, XiaoIce) & SoftBank (Pepper) are in the early days of developing bots with seamless conversational capabilities. A few startups like Viv, comprised of the former Siri team, will compete to build the leading bot platform. • A wider array of bot startup opportunities will focus on discreet use cases like scheduling with x.ai or weather with Poncho, or rely on some human involvement for broader use cases like Fin. There is also an opportunity for cross platform bot development tools. Beyond just bots, startups can also offer a broader suite of messaging solutions for brands like Snaps. • For enterprises looking to follow consumers into the messaging world, bots alone are not yet ready to facilitate frictionless conversational commerce. The chase for the Turing test continues.