AI Chatbots Market Size, Share, Forecast, & Trends Analysis by Offering (Platforms, Services), Organization Size (Large, Small & Medium), Deployment Mode, Medium (Websites, Mobile Apps), End-use Industry (IT & Telecommunications, Retail & E-commerce, Others) & Geography - Global Forecast to 2031

AI Chatbots Market Size & Forecast

The AI Chatbots Market was valued at $3.3 billion in 2023. This market is expected to reach $22.6 billion by 2031 from an estimated $4.1 billion in 2024, at a CAGR of 27.8% during the forecast period 2024-2031.

The growth of this market is driven by a rise in the adoption of AI chatbots within the IT and telecommunications sectors, an increased focus on improving self-service operations, a surge in the use of generative models in AI chatbots, and a growing demand for 24/7 customer support. However, concerns regarding data privacy and security are anticipated to restrain the growth of the market.

The increasing need to automate business processes, the integration of AI chatbots with smart devices, and the rising implementation of AI chatbots in the retail and e-commerce sectors are anticipated to generate growth opportunities in the market. However, misconceptions and a lack of awareness surrounding AI chatbot solutions present a substantial challenge for companies operating in this space.

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AI Chatbots Market Growth Drivers

Surge in the Adoption of AI Chatbots in the IT & Telecom Sector

The IT and telecommunications industries are increasingly adopting AI chatbots to supplement human assistance for customer inquiries. These chatbots, equipped with advanced technologies, efficiently address basic queries, saving time and improving customer service effectiveness. By utilizing AI chatbots, IT and telecom companies can gather valuable real-time information about customer interactions and preferences, enabling them to gain insights into customer behavior, identify trends, and conduct business analyses. This data-driven approach allows companies to refine their strategies, tailor their services, and deliver more personalized experiences to their customers.

As the adoption of AI chatbots rises, many IT and telecommunications companies are increasingly launching chatbots that facilitate human-like interactions and manage more complex customer requests. For example, in March 2024, VOXI, a sub-brand of Vodafone Group PLC (U.K.), introduced a large language model generative AI chatbot aimed at enhancing customer experience. This new chatbot improves user engagement by interacting in a more human-like manner and effectively managing sophisticated inquiries. Such advancements are expected to drive demand for AI chatbots in the IT and telecommunications industry during the forecast period.

Growing Demand for 24/7 Customer Support

The demand for 24/7 customer support is on the rise, driving rapid adoption of AI chatbots for their ability to provide round-the-clock assistance. Various industries, including BFSI, IT and telecommunications, retail and e-commerce, healthcare and life sciences, and travel and hospitality, are increasingly implementing AI chatbots to enhance their customer support services.

Banks are increasingly utilizing AI chatbots for straightforward query resolution. These chatbots assist customers with tasks such as checking account balances, transferring funds, and making payments. Leveraging natural language processing technology, these chatbots understand customer inquiries and deliver instant responses.

In the healthcare sector, AI chatbots offer customer support by providing immediate responses and guidance, particularly outside of regular working hours. Patients can obtain quick answers to urgent questions, advice on minor health issues, and direction on when to seek emergency care, thereby reducing unnecessary hospital visits and alleviating pressure on healthcare systems.

Additionally, in the travel and hospitality industry, AI chatbots facilitate booking-related tasks and offer multilingual support to handle diverse customer inquiries, ultimately enhancing customer satisfaction.

Various key players are launching AI chatbots to deliver seamless and personalized customer support. For example, in June 2024, Jade E-Services Singapore Pte. Ltd. (ZALORA), Asia’s leading fashion and lifestyle e-commerce platform, introduced an AI-powered customer service chatbot aimed at providing tailored support to customers across Singapore, Malaysia, the Philippines, Indonesia, Hong Kong, and Taiwan. This AI chatbot is designed to learn from and understand the intent behind customer inquiries, delivering relevant and accurate responses in an intuitive, visually engaging format. Such advancements are expected to significantly drive market growth during the forecast period.

AI Chatbots Market Opportunity

Increasing Implementation of AI Chatbots in the Retail & E-commerce Industry

The retail and e-commerce sectors are rapidly evolving, with consumers increasingly demanding personalized and convenient shopping experiences. AI chatbots are being widely adopted in this industry to transform customer interactions, enhance satisfaction, and influence purchase behavior. In retail and e-commerce, AI chatbots provide instant support, personalized recommendations, and automated transaction processing for customers.

These chatbots are strategically designed to cater to various time zones and geographical locations, allowing retailers and e-commerce businesses to enhance customer experiences and promptly address issues for international clients. The increasing reliance on AI chatbots is crucial for improving overall customer engagement and satisfaction. Additionally, AI chatbots play a vital role in retail and e-commerce by responding to customer inquiries regarding products and order status, securing transactions, and streamlining the checkout process. By managing routine inquiries, these chatbots enable human customer service agents to focus on more complex issues, reducing operational costs.

As demand for AI chatbots continues to rise in the retail and e-commerce sectors, numerous companies are introducing innovative solutions to enhance customer support. For example, in September 2024, Amazon.com, Inc. launched an AI chatbot named Rufus during its festive sale event. Rufus facilitates natural language interactions within the Amazon app, simplifying the process of asking product-related questions, obtaining recommendations, and comparing products. Such developments are anticipated to drive the adoption of AI chatbots in retail and e-commerce, creating significant growth opportunities for market participants.

AI Chatbots Market Trend

Growing Adoption of AI Chatbots for Customer Interaction

Businesses are increasingly leveraging AI chatbots to engage with customers across multiple channels, including websites, social media, and messaging apps. These chatbots proactively interact with customers, offering support and information while delivering 24/7 availability. By managing multiple inquiries simultaneously, AI chatbots significantly reduce wait times and enhance the overall efficiency of customer service operations. Their ability to provide immediate and accurate responses contributes to increased customer satisfaction. Furthermore, AI chatbots analyze customer data to deliver personalized responses and recommendations, further enhancing the customer experience.

AI chatbots are capable of understanding and responding to complex queries, learning from interactions, and detecting customer emotions to deliver empathetic responses. Numerous online businesses employ AI chatbots for product recommendations, order tracking, and managing returns. In the banking sector, these chatbots assist customers with account inquiries, transaction details, and even financial advice. Furthermore, AI chatbots facilitate human-like conversations, making interactions more natural and effective. These advancements are anticipated to drive continued growth in the adoption of AI chatbots in the coming years.

AI Chatbots Market Analysis: Key Findings

The Platforms Segment to Dominate the AI Chatbots Market in 2024

Based on offering, the AI chatbots market is segmented into platforms and services. In 2024, the platforms segment is expected to account for the larger share of over 73% of the AI chatbots market. The segment’s large market share is driven by the increasing adoption of AI chatbots capable of communicating in multiple languages, thereby enhancing service for diverse customer bases. Additionally, businesses are leveraging AI chatbots to analyze user data and provide personalized recommendations and solutions. The growing chatbot platforms to automate routine inquiries and tasks also contribute to reduced labor costs for organizations.

However, the services segment is slated to register the higher CAGR during the forecast period. This segment's growth is fueled by the rising demand for AI chatbot services that allow businesses to create customized chatbots tailored to their specific needs. Additionally, there is a growing adoption of professional services aimed at training staff to effectively manage and utilize AI chatbots. Furthermore, the increasing reliance on AI chatbot services for maintaining performance, ensuring uptime, and providing technical support to resolve issues is also driving growth in this area.

The Large Enterprises Segment to Dominate the AI Chatbots Market in 2024

Based on organization size, the AI chatbots market is segmented into large enterprises and small & medium-sized enterprises. In 2024, the large enterprises segment is expected to account for the larger share of over 64% of the AI chatbots market. The segment’s large market share is attributed to the increasing adoption of AI chatbots by large enterprises to streamline internal communication. There is also a surge in the need to manage high volumes of simultaneous customer inquiries and a growing demand for analyzing customer data to deliver tailored responses and recommendations.

However, the small & medium-sized enterprises segment is slated to register the higher CAGR during the forecast period. The growth of this segment is driven by the increasing demand for 24/7 customer support, which helps SMEs reduce the need for large customer support teams. Additionally, SMEs are increasingly utilizing AI chatbots to manage higher volumes of customer interactions without requiring significant additional resources. Furthermore, there is a rising use of AI chatbots in SMEs for enhancing marketing and product development strategies.

The Cloud-based Segment to Dominate the AI Chatbots Market in 2024

Based on deployment mode, the AI chatbots market is segmented into cloud-based and on-premises. In 2024, the cloud-based segment is expected to account for the larger share of over 57% of the AI chatbots market. The segment’s large market share is attributed to the growing demand for deployment across multiple platforms, the increasing need to provide flexibility for remote management and updates, and the increasing need to integrate with other cloud services and business applications easily.

Moreover, the cloud-based segment is slated to register the higher CAGR during the forecast period.

The Websites Segment to Dominate the AI Chatbots Market in 2024

Based on medium, the AI chatbots market is segmented into websites and mobile apps. In 2024, the websites segment is expected to account for the larger share of over 63% of the AI chatbots market. The segment’s large market share is attributed to the increasing adoption of website-based AI chatbots that engage visitors by providing instant assistance. Additionally, the rising integration of AI chatbots into websites enables businesses to gather valuable insights into user behaviors, preferences, and feedback.

However, the mobile apps segment is slated to register the higher CAGR during the forecast period. The growth of this segment is driven by the increasing adoption of mobile AI chatbots in the e-commerce sector, which enhances user engagement through personalized interactions. Additionally, businesses are leveraging AI chatbots in mobile applications to reach a broader global audience by offering multilingual capabilities. Several companies are also introducing AI chatbot platforms for language learning. For example, in September 2024, Duolingo, Inc. launched an AI-powered video call chatbot and interactive mini-games at Duocon 2024 to enhance language learning experiences for users worldwide.

The IT & Telecommunications Segment to Dominate the AI Chatbots Market in 2024

Based on end-use industry, the AI chatbots market is segmented into IT & telecommunications, BFSI, retail & E-commerce, healthcare & life sciences, manufacturing, travel & hospitality, media & entertainment, education, government & public entities, real estate, and other end users. In 2024, the IT & telecommunications segment is expected to account for the largest share of over 31% of the AI chatbots market. The segment’s large market share is attributed to the growing adoption of AI chatbots in the IT and telecommunications sectors for fraud detection and prevention. There is also a rising demand for AI chatbots to enhance contact center operations within businesses and an increasing implementation of these chatbots to address various IT customer inquiries and concerns.

However, the retail and e-commerce segment is slated to register the highest CAGR during the forecast period. This segment's growth is driven by the increasing adoption of AI chatbots in retail and e-commerce to offer personalized product recommendations. There is also a growing demand for AI chatbots with multilingual capabilities to effectively interact with customers globally. Additionally, the rising need for 24/7 customer support to address inquiries and enhance the overall customer experience is further propelling this growth.

Geographical Analysis

North America to Dominate the AI Chatbots Market in 2024

In 2024, North America is expected to account for the largest share of over 39% of the AI chatbots market. The large market share is attributed to the significant presence of major players offering AI chatbot platforms and services, along with the high demand for AI-powered chatbots to provide customer support for businesses in the region. Additionally, ongoing technological advancements in AI chatbots in North America are contributing to this growth. Key players in the region are also launching new customer service platforms; for example, in September 2024, Amazon.com, Inc. launched the AI-powered chatbot Rufus ahead of its festive sale event. Rufus facilitates natural language interactions within the Amazon app, simplifying the process of asking product-related questions, obtaining recommendations, and comparing products.

However, the Asia-Pacific region is slated to register the highest CAGR of 29.5% during the forecast period. The growth of this region is driven by the increasing adoption of AI chatbots by large enterprises for routine customer service activities, along with the rising integration of AI chatbots in businesses for marketing and sales in the Asia-Pacific area. Additionally, government initiatives to provide AI chatbots for businesses navigating the application process are contributing to this growth. For instance, in September 2024, the Government of India launched the Saarthi chatbot, an AI and ML-based trademark search technology. This chatbot employs advanced AI and ML algorithms for precise trademark identification, streamlines search processes for both domestic and international businesses, and enhances trademark protection capabilities.

AI Chatbots Market: Key Companies

The report offers a competitive analysis based on an extensive assessment of the leading players’ product portfolios, geographic presence, and key growth strategies adopted in the last 3–4 years. Some of the key players operating in the AI chatbots market are OpenAI OpCo, LLC (U.S.), Microsoft Corporation (U.S.), Google LLC (A Subsidiary of Alphabet, Inc.) (U.S.), Amazon Web Services, Inc. (A Subsidiary of Amazon.Com, Inc.) (U.S.), NVIDIA Corporation (U.S.), International Business Machines Corporation (U.S.), Perplexity AI, Inc. (U.S.), Zoho Corporation Pvt. Ltd. (U.S.), GET JENNY OY (A Subsidiary of LeadDesk Oyj) (Finland), Acuvate (U.K.), Freshworks Inc. (U.S.), Jasper AI, Inc. (U.S.), Anthropic PBC (U.S.), Writesonic, Inc. (U.S.), Next IT & Systems LLC (UAE)..

AI Chatbots Industry Overview: Latest Developments from Key Industry Players

• In September 2024, Snap Inc. partnered with Google LLC to enhance generative AI experiences within Snapchat’s My AI chatbot. This collaboration will enable the chatbot to utilize Google’s Gemini AI, leveraging its multimodal capabilities to understand several types of information, including text, audio, images, and videos.
• In July 2024, Tonik Digital Bank Inc., the first digital-only neobank in the Philippines, partnered with Gupshup Inc., a leading conversational cloud provider, to develop a cutting-edge generative AI chatbot for Tonik’s mobile app. This solution is designed to provide customers with instant and accurate responses to frequently asked questions, transforming the way they interact with their bank.
• In July 2024, Xiao-I Corporation (China) partnered with a telecommunications provider to implement its advanced AI chatbot solution. This collaboration aims to transform the provider's customer service operations by improving service efficiency, reducing operational costs, and delivering 24/7 personalized support.

AI Chatbots Market Research Summary

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