Personal Finance

Facebook and Google Have the Same Problem

Google's new Home smart speaker. Image source: Google.

Chatbots won't just live in your favorite messaging app. Soon, you may be speaking with them through a smart speaker.

In December, Google launched a system for developers to build chatbots that work with Google Assistant -- the artificial intelligence (AI) that powers its Google Home smart speaker. Google's goal is to get people used to interacting with businesses through Google Assistant with simple-to-answer questions. Down the line, the Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) company is hoping users will start purchasing goods and booking reservations with the new chatbots.

If any of that sounds familiar, it's because it's the exact approach Facebook (NASDAQ: FB) is taking with its chatbots for Messenger. When it comes to monetizing its messaging app, Facebook CEO Mark Zuckerberg has stressed the importance of developing organic interactions between users and businesses on the platform before trying to monetize.

Ultimately, Facebook and Google are working on similar solutions to solve the same problem of monetizing some of their fastest-growing sources of engagement.

An engaging problem

Google and Facebook are seeing considerable increases in voice search and messaging, respectively. Google said voice searches have tripled over the past two years. Meanwhile, the number of Facebook Messenger users has climbed from just 200 million in April of 2014 to over 1 billion today. Facebook also says the average user spends 10 more minutes per day between Facebook, Instagram, and Messenger than it did in 2014, a 25% increase.

Both Google and Facebook are unable to take advantage of these growing sources of engagement the same way they've done with their other platforms. Display advertisements don't work nearly as well in a messaging app as compared to the Facebook News Feed. In the case of voice search, there may not even be a place to display ads at all. It'd be a bit off-putting if your Google Home suddenly lit up with a big "click here" banner (not that there's even a display).

The chatbot solution

The chatbot solution works for both platforms, as they're conversational in nature. Still, there are a couple of major hurdles for both Google and Facebook to overcome. First, they both need to attract a lot of developers. Facebook has already attracted 34,000 developers and has over 30,000 bots running on its platform. That's a strong start for a product that launched less than a year ago.

More importantly, however, is that users need to interact with chatbots. They need to be able to easily discover them, and there needs to be a compelling reason for them to use chatbots over another medium. Discovering chatbots on Messenger is relatively easy. Facebook is able to show popular bots when users search for someone to chat with. Finding new bots through the screenless Google Home is yet another challenge for Google to overcome.

Cutting out the middleman

There's not much Google or Facebook can do to get around their reliance on third parties to build bots for their platforms. Unfortunately for them, one competitor doesn't have to rely on third parties if it wants to sell goods and services. Amazon (NASDAQ: AMZN) can sell things directly to consumers through its Echo smart speakers.

Amazon also has a head start on both since it launched the first version of the Echo speaker in 2014. The company sold over 5 million units since the launch, according to a report from Consumer Intelligence Research Partners. And sales are growing fast. Amazon reported a ninefold increase in holiday sales of Alexa-powered devices this holiday season.

Amazon isn't just selling physical goods, either. It's recently started moving into services like house cleaning and car repairs. While Amazon doesn't sell everything directly, it already has a popular platform for buying and booking just about anything you could imagine. As Amazon continues to build out the functionality of Alexa on its Echo speakers, there'll be no need to seek out specific bots (even though Amazon supports its own version of chatbots as well).

That existing base of commerce makes Amazon the biggest threat to Facebook and Google's monetization efforts for their growing platforms. With investors expecting both Facebook's messaging apps and Google's voice searches to start throwing off significant revenue in the future, Amazon may play spoiler for both.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy owns shares of The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares),, and Facebook. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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