The Future of Retail: Exploring the Transformative Power of AI

In recent years, the use of artificial intelligence in the retail industry has become increasingly popular, with many big tech companies implementing the technology to enhance customer experiences and streamline operations. According to Yahoo Finance, the global AI retail market size is expected to reach $25.83 billion by 2028 from $5.19 billion in 2022.

Customer service stands out as the most prominent retail application for AI technology, with Amazon being one of the major investors in this domain. Amazon's Alexa Chat Bot is powered by a combination of natural language processing (NLP), machine learning (ML), and automatic speech recognition (ASR) technologies. When a user types a request into the chatbot, the ASR technology converts the text into a digital format that can be analyzed by the NLP algorithms. The NLP algorithms then analyze the syntax, grammar, and context of the user's request to determine the most appropriate response. In the meantime, the ML component enables the system to learn and improve over time based on users’ interactions: The more users interact with the chatbot, the better it becomes at understanding their needs and providing accurate responses.

Also, Alexa's AI-powered shopping assistant uses a combination of algorithms and data analysis to provide customers with product recommendations. In addition to that, the chatbot can also handle other types of requests, such as answering questions, placing orders, and providing customer with 24/7 support, meaning that they can to shop whenever they want without needing human assistance.

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AI is also being used by e-commerce companies to improve search results and product categorization. Alibaba, one of the largest e-commerce platforms in the world, uses AI-powered image recognition technology to automatically categorize products based on their visual characteristics, and uses NLP to analyze product descriptions and categorize them based on the words and phrases used. This allows the platform to identify product attributes and features even if they are not explicitly listed. Additionally, Alibaba has launched a virtual assistant, AliGenie, which uses AI to help customers with their shopping experience providing them with more personalized recommendations which are tailored on user’s preferences.

According to Yahoo Finance, AI market size was valued at $95.60 billion in 2021 and is projected to reach $1,847.50 billion by 2030, growing at a CAGR of 32.9% during that period. The use of AI in retail is becoming increasingly popular, and many big tech companies are developing new features to enhance customer experiences and streamline operations. Chatbots, virtual assistants, product recommendations, search optimization, and categorization are just some of the ways that AI is being used in ecommerce. As AI technology continues to evolve, we can expect even more innovative use cases to emerge, leading to improved customer experiences and increased efficiency in the ecommerce industry.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

Technology Innovation is Supporting the Digital Ad World

2021 so far is showing an acceleration of the strong growth trend in Digital Advertisement. As businesses re-open worldwide and previously canceled campaigns are resumed, advertisement budgets have been increasingly directed towards Digital Ad because the use of social media platforms and streaming services have risen almost everywhere.

Digital vs. Traditional Ad Spending (US)

Source: eMarketer

Not surprisingly, the main beneficiaries in the Digital Ad ecosystem are Alphabet, Facebook, and Amazon, which all reported strong growth in Ad revenue in 2020. Among these, Alphabet continues to dominate the Digital Ad market: In 2020, Google accounted for about 29% of the total Digital Ad revenue in the US, followed by Facebook and Amazon with 25.2% and 10.3% respectively.

US Digital Ad Revenue Share, By Company, 2019 & 2020

% of Total Digital Ad spending

Source: eMarketer

Google built its success in Digital Ad by leveraging AI software to collect and integrate data from users in a more sophisticated and faster way. While Google’s platforms connect businesses with billions of people every day through Search and YouTube, AI helps them to create highly tailored content based on consumers’ needs and preferences of the moment.

With an impressive 1.87 billion daily active users in 1Q21, Facebook can count on one of the largest and most diverse advertising audience ever and collect a huge amount of data for the benefit of advertisers. Facebook also introduced innovative features to its Ad service: The use of Machine Learning helps determine the likelihood that a given user will act as the advertiser wants, such as visiting the advertiser’s website, installing their app, or buy a product. And then, the algorithm will rank the quality of Ad content through an Ad quality score so that the advertiser can fix the campaign following the best way to achieve his goals.

In recent years, Amazon’s Ad business also experienced a tremendous growth, mainly fueled by the acceleration of online shopping: According to EMarketer, Amazon advertising revenue in the US will surpass $20B in 2021. To keep up with the competition, the e-commerce giant also implemented an AI driven algorithm which analyzes real-time data generated by shoppers’ behavior, allowing advertisers to provide specific content to a narrowly targeted audience.

Digitalization is changing consumers’ behavior and companies must be increasingly data-driven to be able to communicate with people who spend more time navigating through the Internet while scrolling social media, checking emails, or reading the news. Digital Ad is becoming mandatory for companies to attract new customers and build a relationship with their brand.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

From the Console to the Cloud: The Disruption of the Gaming Industry

With restrictions on travel and social interactions, people have started spending even more time in front of screens, seeking alternative forms of entertainment: A clear beneficiary is the Video Gaming Industry which reached $159.3 Billion during 2020, increasing by 9.3% from 2019 - Video Game Statistics.

This unprecedented boom in the Gaming industry was supported mainly by Cloud Gaming technology, a kind of "Netflix for gaming" which allows users to play a wide range of games which would usually require specific high-powered hardware. Thanks to the Cloud, users can play games remotely just by subscribing to the service, avoiding the need to download files into their devices or purchasing expensive consoles. This new business model is called Game-as-a-Service (GaaS) and it is completely changing how video games are consumed.

Video game company Activision Blizzard is one of the first major pioneers of this model. Its great success came from the blockbuster “Call of Duty” franchise: Whether the user is playing on a PS5, Xbox, PC, or smartphone, he can access the entire video game saga and engage with other players from any device just by subscribing to it. 2020 was a record year for Call of Duty, with more than 100 million monthly active players engaging with its free-to-play experience.

Another successful example is Epic Games and its popular video game Fortnite. Fortnite is a multi-platform and no-cost game whose first source of monetization comes from micro-transactions. Everyone can access the basic game experience, and monetization happens when gamers decided to buy additional features such as new costumes, weapons, and even special missions.

GaaS has been around for several years, but the growth and the engagement of users has been accelerated in recent years by the live streaming. Amazon-owned platform Twitch is a game streaming platform where people can truly live the social side of gaming. Through Twitch, top video game players can make money broadcasting games and monetizing fans’ views: In March 2018, Fortnite reached about 630,000 viewers, while in 2019 another event hosted by Fortnite attracted more than 7 million viewers. In 2020, Twitch had about 26.5 million daily users and 6.9 million streamers creators each month, and these numbers are continuously rising – Twitch Traker.

In 2020 Google has entered a media partnership with Activision to show the online format of The Call of Duty League through its own video-platform YouTube. The online event was the most watched CoD e-sports match in the game’s history: The Call of Duty League reached 1.1 million subscribers on YouTube, with a peak of 331,000 viewers - Forbes.

The GaaS business model is disrupting the game industry as never before: The main difference from traditional forms of gaming is that through the Cloud, games are streamed and not sold at once. Instead to purchasing a product, users must pay for a subscription service, and that is why game developers cannot stop updating their services: By introducing exclusive new content, users become more willing to spend money to enhance their gaming experience, generating a potentially unlimited stream of revenues. To maintain a competitive edge, Game developers must communicate and cooperate with users to generate a virtuous cycle of revenues and achieve a win-win situation.

As reported by Statista, the Video Games industry will reach more than $150 billion in 2021, attracting companies outside the gaming sector: The evolution of Cloud services, combined with advancements in 5G network globally, allow big technology companies such as Amazon, Google, and Tencent, to heavily invest in network infrastructures and technology innovation to be part of the future expansion of the industry.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.