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The Medium is the Message: The Future of AI-Enabled Text

April 18 2021
Written by Julia Klein

You open your inbox each morning and look through your messages. You spy a marketing email from a company that you have purchased from before. What do you do?

If you’re like me, you delete it. Or, there is a good chance you never saw it at all because you use an email client that segregates marketing messages into a separate folder.

As consumers, we are faced with an interesting paradox. We are inundated with messages from companies via multiple channels yet, when we need to communicate with those companies, we’re often told to email a general account and wait a day or more to get a generic response or call a customer service number and wait on hold.

Customers are beginning to demand more of the businesses with which they interact. They want meaningful communications, and they want them via the mediums that are most convenient. In fact, 89% of customers want to communicate with businesses via text, with those between the ages of 18-44 preferring it over any other medium.  While customer support is a core use case for text, it is not the only one. Customers are also open to using text to reply to order confirmations, give product or service feedback, reply to delivery status, learn about new products, and receive coupons or promotions. As the spending power of these cohorts increases over the next 5-10 years, businesses seeking to differentiate on customer experience will need to invest in messaging solutions. The gap between customer desires and business capabilities – 52% of businesses are not equipped to text – indicates that the messaging software segment is poised for an explosion, one that has already begun. The diagram below outlines some of the players in the messaging software market.

Messaging Software Market Map

When many think about messaging software, they think about an alternative channel to email for push marketing. Several sizable companies have been built on this functionality – the largest, Attentive is now worth ~$7B. However, the risk of channel saturation with push marketing as well as its limited scope has encouraged messaging to evolve beyond this use case.

Customer service software incumbents are recognizing the importance of messaging as a channel and adding their own solutions through in-house builds or acquisitions. Salesforce purchased mobile messaging focused HeyWire in 2016, customer experience management software provider Medallia acquired multi-channel mobile messaging company Zingle in 2019, and Zendesk bought omnichannel messaging company, Smooch (now rebranded as Zendesk Sunshine) in 2019.

While messaging is a critical component of a customer service suite, I believe the true potential in the category is in two-way, AI-enabled business communication with customers.

Customers want conversations to be authentic, interactive experiences. Fully autonomous chatbots are not yet able to deliver on the authenticity element, while human solutions are costly and time-consuming. Therefore, I predict the next big winner in the messaging space will be an AI-enabled two-way offering, with humans in the loop. Applications of such technology are broad and include digital sales (an area that has exploded with COVID), marketing, and operations. The extent to which a solution enables companies to provide individualized attention to customers, augment revenue through customer insights, and generate a positive ROI on technology investment will determine who emerges as a winner in the space. Delivering on these key value propositions will enable a company to gain traction in a crowded market and succeed as a large standalone player, rather than a tuck-in acquisition.

Two companies to watch in the space are Boston-based, seed-stage Tone and LA-based, Series B stage Emotive. In the future, instead of waking up to a generic email in our “Promotions” inbox, we may be asking questions, resolving concerns, and receiving personalized deals from our favorite companies all via real-time text.

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