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After Facebook Messenger opened its platform to chatbots in 2016, it became the era of chatbots — more than 12,000 of them were deployed on Messenger by the end of that year. One year later, the number has risen to 100,000.

Despite rising popularity of chatbots around the world, they didn’t take off as expected in Southeast Asia given the region’s affinity for texting through messaging apps. This was especially true in the region’s biggest market, Indonesia.

Talent remains one of the biggest hurdles for AI or any other type of tech development in Indonesia, however, it is the inconsistency of the Indonesian language that presents an even greater challenge in developing the Natural Language Processing (NLP), that powers the chatbot.

According to Irzan Raditya, co-founder and CEO of Kata.ai, an Indonesian B2B chatbot service provider that raised $3.5 million last year, more industry partnerships could be a solution to these challenges.

“We need more collaboration between the service providers, API providers, and more local developers studying AI,” says Raditya. “Without the human resource, it will be impossible to make this technology a reality.”

Launched in October 2016, Kata.ai actually evolved from a free text-based personal concierge service called YesBoss that recorded over 100,000 users at peak.

Before the startup’s pivot, the company struggled to keep up with customer demand and chose to move to a more sustainable business model by targeting a new segment – B2B.

ecommerceIQ speaks with Raditya to understand chatbots, his thoughts on its most promising applications and how his turbulent experience with YesBoss helped build Kata.ai to its present state.

Learning the ropes

Right from the start, the four founders of YesBoss were realistic about their venture.

“We understood that it wouldn’t be scalable (to provide a concierge service) without AI,” admits Raditya.

“And in order to build the algorithms, you need data and we collected tons of data from YesBoss.”

“We learned how to make people’s lives easier through conversations gleaned from our concierge service answering different kinds of customer requests, be it booking a plane ticket or shopping online. Along the way, we learned we wanted a business that was more impactful and scalable.”

With the man-power heavy B2C service provided by YesBoss no longer active, Raditya saw an emerging opportunity in the chatbot space in Indonesia.

Sitting on a bank of data, Kata.ai became the first chatbot provider in the local Indonesian language.

“By studying all the texts in Indonesian from YesBoss — the uniqueness of abbreviations, the slang, and complexity of certain phrases — we did the dirty work and spent over a year researching machine learning to build a comprehensive algorithm compatible with the needs of the Indonesian language NLP,” says Raditya.

Now equipped with a chatbot able to understand the local language, what was the team going to do with it?

Serving the enterprises

As a conversational AI platform targeted at enterprises, Kata.ai develops a chatbot for companies to easily handle incoming customer requests and facilitate ecommerce in Indonesia.

One of the brands that has developed a chatbot with the company is Unilever.

Using a female persona named Jemma, the chatbot on LINE acts as a virtual assistant that liaises with customers on behalf of Unilever where customers can chat about everyday things including entertainment news and/or ask for beauty recommendations.

Raditya says the chatbot is popular among female customers who like to ask for relationship and fashion tips.

“As of now, Jemma has befriended over 2 million users on LINE and recorded over 200 million conversations to date within a span of one year since its launch,” says Raditya. “The longest chat session actually lasted for four hours.”

Veronika is chatbot created by Kata.ai for Indonesia’s biggest telco company Telkomsel.

Another chatbot that Kata.ai helped build is Veronica, the legendary brand persona of Indonesia’s biggest telecommunications provider, Telkomsel.

By texting with Veronica on LINE, Facebook Messenger, and Telegram, customers can access product information, Telkomsel’s latest promotions, a live customer agent, as well as facilitate transactions such as phone credit top ups, buy data packages, make bill payments and reserve appointments with the company’s nearest offline customer service center.

Envisioning a platform for all

If the company’s enterprise solution provides brands with tailored chatbots, Kata’s newest venture released last month, Kata Bot Platform, hopes to provide developers with a enterprise-grade framework to help them create chatbots and reduce costs on tech development and research.

“By releasing our platform to the public, we want to solve the ecosystem problem. A lot of Indonesian developers aspire to incorporate chatbots into their businesses but face the daunting task of building it from the scratch because there’s almost no platform that caters to the Indonesian language,” says Raditya. “Kata.ai provides the infrastructure so they can focus on building a good customer experience for the business.”

NLS, one of the features available on Kata Bot Platform

He also encourages all businesses to use the platform as it can accommodate up to one billion messages and isn’t restricted to only startups.

Do chatbots live up to the hype?

“We believe improving the technology of chatbots is important to capture an opportunity that exists in Indonesia’s strong chat culture and major shift in the interaction between people and technology.”

This shift, according to Raditya, will see people utilizing less apps as it impedes the customer experience; from installing the app, registering for the service, learning how to use it, constantly having to update to new versions, etc.

Chatbots, on the other hand, provide a more efficient way for users to interact with the service provider without having to familiarize themselves with a new interface as most Indonesians already know how to use popular messaging apps.

“Chat is the new standard of user interface.”

The CEO himself has a favorite AI-powered personal assistant service he uses to save time from shuffling through email chains based in Singapore called Evie.ai.

“Engaging and intelligent chatbots allow businesses to turn these channels from information centers to profit centers, as shown with the case of Telkomsel. They can now monetize an audience of over 10 million connected to their social channels by selling data packages — something that they were unable to offer before,” shares Raditya.

“If you take a look at consumer technology, changes are usually predicted in ten year cycles. The dotcom boom in 1997 changed the way people conducted business with websites. In 2007, Apple changed the landscape with the launch of the iPhone and app store,” explains Raditya. “During these periods, we saw companies coming out as winners carrying high valuation and delivering high impact to the economy.”

“Indonesia is always left behind.”

“With analysts predicting AI to become the one the driving consumer technology on 2017 onwards, Kata.ai can spearhead the wave of incoming local entrepreneurs by being the breeding ground for a new generation of botpreneurs,” says Raditya.

His “big picture” approach was sparked during the Microsoft Accelerator program in Bangalore last year, in which all founders participated. The program provided 14 B2B startups with Microsoft’s resources and network to help accelerate their growth and Kata.ai was a finalist out of 1,500 applicants.

Kata’s founding team. (L-R) Wahyu Wrehasnaya (CFO), Reynir Fauzan (CMO), Irzan Raditya (CEO), Ahmad Rizqi Meydiarso (CTO).

“We learned to see things from right to left, which meant focusing on the goal first and working backwards to the process in order to achieve it,” says Raditya. “Another thing we learned is how to sustain innovation by being the Category Creator, Category Sustainer, and eventually the Category Destroyer.”

“The program also gave us experience with the technical side of things, such as how to scale our infrastructure effectively to serve millions of customers.”

Although the company’s focus is currently on Indonesia, Raditya isn’t counting out expansion to other countries.

“Right now, we’re focusing on building chatbot technology that can offer customers a next level of service that is personalized using historical data,” closes Raditya. “But who knows, in one or two years, I think voice could be an interesting medium as well.”

As the year closes, ecommerceIQ has reflected on  what has been achieved, and therefore we are sharing with you our most read stories of the year.

ecommerceIQ’s goal for the next year remains the same, to continue serving Southeast Asia’s ecommerce industry and to provide insightful market research so professionals around the world can take action to capture the region’s growing opportunity. We hope you come back in 2017!

#1 Indonesia’s Ecommerce Landscape: 6 Takeaways from Indonesia’s Online Battle Field

Indonesia is on track to become the biggest ecommerce market in Southeast Asia. The ecommerce boom has produced several start-up unicorns, such as the popular ride-hailing, food delivery and payments app Go-Jek, Indonesia’s most popular C2C marketplace Tokopedia and travel marketplace Traveloka. Yet, there are many more players in the ecommerce field in Indonesia, and that is what ecommerce landscape maps. This is our most read article of the year.

#2 The Evolution of Ecommerce Business Models in Southeast Asia

Ecommerce in Southeast Asia is still relatively young, with only 1% of total retail gross merchandise value being generated online compared to 7.1% and 15.9% in the US and China. However, the region is already widely being touted as the next frontier of ecommerce opportunity. As Southeast Asia’s ecommerce businesses have the opportunity to learn from the industry’s best, this article looks into how business models have evolved in the region and what’s to be expected next.

#3 Why Everyone is Wrong About Southeast Asia’s True Ecommerce Potential

Little data exists on the current and projected size of the ecommerce market in Southeast Asia, which is still a nascent, fragmented industry. As several reputable organizations have taken a stab at assessing the size of the ecommerce in the region, this article dives to explain why the actual potential of the market could much bigger.

#4 DHL Ecommerce CEO: What Today’s Southeast Asians Expect From Their Last Mile Experience

Southeast Asia is a hotbed for online trade as more than 480 million people in the region will be online by 2020 and there are high volumes of deliveries across the countries. Whilst it is a great time to be an e-tailer, the opportunity also comes with some challenges. DHL Ecommerce CEO Charles Brewer in this article explains what exactly Southeast Asian customers wants after they hit the ‘check-out’ button.

#5 Thailand’s Ecommerce Landscape: 5 Takeaways from Siam’s Online Gold Rush

Thailand, while not the most populous nor richest of the Southeast Asian nations, is currently the fourth largest ecommerce market in the region. Thailand’s ecommerce landscape sets to provide a quick snapshot of the the country’s ecommerce players and identify industries which provide opportunities for new businesses.

#6 ecommerceIQ SPARK 40 – Top Individuals Shaping Southeast Asian Ecommerce in 2016

“SPARK 40” is a compilation of the top ecommerce professionals who have contributed to shaping the industry in Southeast Asia. It’s not only about funding. These businesses are solving long-term problems and hoping to be the ‘spark’ needed to clear roadblocks that restrict ecommerce growth – whether that be serving the unbanked, evolving their business models to cater to customer demands or being the first to tackle a new sector.

#7 Philippines’ Ecommerce Landscape: 5 Key Takeaways From Philippines’ Online Runway

The Philippines, although part of Southeast Asia’s growing ecommerce family, is quite the odd cousin. With over 10 million overseas Filipino workers and 3 million of them in the United States, Philippines’ online shopping behavior has been heavily influenced by the US, paving the way for innovative cross-border logistics businesses and digital payments solutions. While the ecommerce market in the Philippines currently is the second smallest in the region, it is expected to lift off and this article explores where the opportunities lie.

#8 Singapore’s Ecommerce Landscape: 5 Key Takeaways from the Lion City’s Online Scene

With 83% of its population connected to the internet, Singapore holds the title as the most mature ecommerce market in Southeast Asia. Despite its small population, Singapore accounted for 25% of Southeast Asia’s 2013 online retail value, larger than the region’s largest market, Indonesia that contributed 20%. Singapore’s ecommerce landscape provides a quick overview of the most developed ecommerce market in Southeast Asia.

#9 After All the Chatter, the First Chatbot Finally Launches in Southeast Asia

Chat commerce or conversational commerce is the intersection of messaging apps and shopping and is already a very familiar concept in the West. Southeast Asia has largely mirrored the West and particularly China in development of its ecommerce maturity. Yet, current chatbot growth has been stuck at the ‘idea phase’ – a lot of chatter and buzz about its revolutionary importance but no product. This article tells the story of Sale Stock, the mobile first shopping platform widely popular among Indonesia’s young females, which has become SEA’s first company to launch a chatbot that can handle end-to-end transaction on Facebook’s Messenger Platform.

#10 The Impending Death of Traditional Retailers

Amazon’s dominance and stock value will only keep increasing with the ongoing global structural shift from offline retail towards ecommerce. Ecommerce penetration in the US today is “only” 7.7%. As ecommerce is booming not only in US, but also in Southeast Asia, traditional, offline retailers are lift with few choices when it comes to ecommerce adoption. This article explores those options for regional businesses.

 

Winding down from a crazy day? Why don’t you check out some of the top ecommerce stories of today?

1. Lalamove is expanding into food delivery, partners up with restaurants in Bangkok

Restaurants and food producers, who are invited to use Lalamove’s 24×7 dedicated courier service, will receive a stamp of approval with a ‘Lala Recommended’ graphic featured on Lalamove social media. Read the rest of the story here.

 

2. Naspers-owned PayU buys Indian fintech startup for $130m in one of the biggest M&A’s in Indian history

Naspers-owned PayU today confirmed its acquisition of Indian payment gateway CitrusPay. The deal was closed for $130 million, making it one of the largest M&As in Indian fintech history. Read the rest of the story here.

 

3. Post CEOs look to partner with ecommerce players

Indian Postal Services Board Chair Boyapati Venkat Sudhakar said the India Post’s reach in semi-urban and rural areas, where demand for ecommerce goods is high, made them an attractive partner to e-retailers. Read the rest of the story here.

 

4. How on-demand ridesharing can give e-commerce a necessary boost

Another advantage is lower cost of transporting bigger packages, as is the case with Deliveree. Most P2P courier services also offer an option for cash or card payment, which gives users some flexibility. Read the rest of the story here.

 

5. Facebook’s Chat Bot Will Soon Allow You To Book Flights and Hotels Within Messenger App

Users can scroll through a list of flights, consume and engage with different types of media and play basic games while still in the chat window. Read the rest of the story here.

With Facebook now trialing their new messenger-based payment system in Thailand, the Southeast Asian region is rapidly growing into its social commerce potential. As messaging begins to dominate social interactivity, it is no surprise that businesses are now turning to this platform to inform, understand and sell to their customers. The next stage of this technological revolution is clear: automated robots that can interact with customers to drive and facilitate sales, simulate human conversation and carry out repetitive tasks.

Need help finding shoes to match a outfit? Imagine typing in “what shoes will match this outfit?” followed by a photo of what you’re wearing, and then having the algorithm instantly analyse and respond with three different options that fit your criteria. Imagine being able to complete your purchase without leaving the messaging app. Businesses are providing their customers with a convenient, time-saving and easy to use service. Win win.

What chatbots are doing today

There are many different types of chatbots in the ecommerce sphere, made to serve different purposes such as answering customer queries, providing product recommendations, and simplifying online purchases. Here are a few examples of what is currently being done in the world wide web of chatbots:

Facebook Messenger

When Facebook announced the integration of ecommerce capabilities within its widely-popular Messenger app at the company’s F8 developer conference in April, CEO Mark Zuckerberg demonstrated how quick and easy it was to send flowers. With 1-800-Flowers, users are given suggestions for a variety of occasions (“Thank Yous”, “Birthdays”, and “Love & Romance”), and all details are obtained directly through the chat interface.

chatbot revolution in Southeast Asia

Businesses are already investing a notable portion of their marketing budgets in maintaining personable and engaging Facebook pages to complement their brands and drive traffic to their website, it is a logical transition for them to also adopt a chatbot within Facebook’s native messaging app.

Kik

Kik is another social media platform that has become increasingly popular in the US with more than 270 million users. Its chatbot service has drawn attention by many well known companies – one of them being makeup retailer Sephora. Not only has their chatbot service provided a method for users to purchase products, but also allows them to ask about anything regarding beauty, reviews, product recommendations and tips. The exchanges are sprinkled with emoji’s to make the automated reply appear like a true human brand representative at the other end.

chatbot revolution in Southeast Asia

Sephora chatbot on Kik. (source)

WeChat

With over 760 million monthly active users, WeChat has positioned itself as the dominant messaging app in China. However, its features extend way beyond chatting: without having to leave the app, users can order food, book a taxi, book doctors appointments, follow their favorite brands and pay their bills, just to name a few. Through WeChat, Nike created a chatbot that provides fans with news and updates on the company, and consistently communicates with the user.

chatbot revolution in Southeast Asia

The Nike chatbot on WeChat. (source)

Why chatbots? Why now?

Growing Internet Penetration

A primary factor currently driving ecommerce and soon the chatbot revolution in Southeast Asia is the growing number of people who are increasingly using the internet. The 199 million Internet users in 2014 is predicted to increase to 294 million users by 2017. Out of the 150 million digital consumers who search for products online, two-thirds of them proceed to make purchases there.

chatbot revolution in Southeast Asia

Internet penetration in selected Southeast Asian countries (source)

Mobile is King

chatbot revolution in Southeast Asia

Smartphone user penetration in selected Southeast Asian countries (source)

For users, traditional methods of ecommerce – opening browser, navigating through countless pages and items, and keying in details to check out – still feels tedious and unnatural on mobile thanks to small screen sizes and limited ability to multitask. Businesses need to come up with an alternative solution to ensure that the purchase process is as simple as possible on these devices. The chatbot interface takes advantage of what behavior people have adopted with mobile phones: carry out conversations, anywhere, anytime.

The App Bloodbath

Thanks to the introduction of the iPhone back in 2007, apps have played a huge role in shaping technology, contributing to the dependence on our phones. But the thing is, consumers are growing sick of trying new apps, coming to the realization that they simply don’t need so many. Not only are they costly to build setting you back anywhere from $50,000 to $1,000,000, but further efforts need to be invested into marketing the app, and getting users to download and regularly use it. With a saturation of apps in both the Apple and Android app stores, and limited app discovery tools, it’s becoming harder and harder for new players to cut through the noise.

Smartphone users spend most of their screen time on a single app, which means, as a business, that is where you have to be.

Messaging: The New Platform

Creating chatbots within existing messaging apps is attractive because someone else has already done a large chunk of the hard work for you. In Southeast Asia, there are over 73 million people on LINE. Integrated chatbots give businesses the opportunity to directly reach these large pools of users without forcing potential customers to download yet another application.

“Messaging apps are the platforms of the future, and bots will be how their users access all sorts of services.” — Peter Rojas, Entrepreneur in Residence at Betaworks

Furthermore, these companies are providing developers APIs so that it is easier for businesses to create their own bots since most don’t have the technical skills or resources needed to build a witty chatbot from scratch. And in return, the platform is loaded with customer data; a dream for any marketer. With the versatility evident through Facebook ads that allow businesses to target audiences based on anything from location to interests, imagine the degree of personalization and segmentation that could be made possible through their Messenger extension.

A Society of Social Commerce

The Southeast Asian economy already heavily engages in social commerce, a marketplace built within the walls of social media. According to a Bain & Company study released this year, more than 80% of digital consumers use social media or messaging apps to research products and connect with sellers. Moreover, social sales comprise of up to 30% of all transactions online. Thailand boasts the world’s largest C2C market, with over 50% of research respondents saying that they buy items found on social networks such as Facebook and Instagram.

chatbot revolution in Southeast Asia

A typical social transaction: users find items they are interested in, and get in touch with the seller who listed the item via chat.
Source: ecommerceIQ exclusive research

The magic of chatbots is that they are able to closely imitate the essence of conversational commerce. Set within the same interface, customers can talk with bots in a similar manner in which they would talk to human sellers through a series of questions and responses. In such a setting, algorithms may even be created to simulate the bargaining dialogue that occurs in everyday transactions.

Still some way to go

Through chatbots, businesses have the opportunity to initiate conversation directly with their target consumer that is highly personable. The brand-to-customer interaction is something that has not truly been scalable until now. While chatbots can not replace the feature-rich user interface provided by a website, they bridge the gap between functionality and convenience.

“Every brand is going to move into the mobile commerce space very quickly. In the next years, we will probably see 20-30% of the big brands having their own bots in chat apps, starting with Facebook’s messenger platform.” —  Pat Wattanavinit, Product Manager at aCommerce

The current state of chatbot functions are still quite linear and rigid, too early for companies to start replacing their customer representatives. Some users report conversations as being frustrating and slow due to the bot’s limited understanding and capabilities, think about your own interactions with Siri. Chatbots won’t truly be invaluable and gratifying until AI is able to achieve a human level of understanding but that’s another story in itself.

By Shirley Liu & Alexandre Henry

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