Battle of the Chat Bots: Waterloo-Based Kik Interactive Has Facebook in Its Crosshairs
A smiling gold plastic robot, about a foot high, hangs around Kik Interactive Inc.’s Waterloo, Ont., headquarters like a mascot or garden gnome.
The robot is no mere decoration. It’s the physical manifestation of the mobile messenger’s bot strategy, which the company considers key to making money from its 300 million users in the long term.
Bots, or chat bots, are software programs that could one day allow people to do everything from consulting a lawyer to ordering a hot dog by sending messages to automated accounts within the messenger apps they already use.
The use of bots may seem futuristic, but it’s already a daily reality in China. Users of the massively popular WeChat messenger — whose parent company Tencent has a US$50-million investment in Kik — can apply for a loan, book a doctor’s appointment or order dinner by chatting with bots.
The race is now on to see which messenger will become the WeChat of the West. In mid-April, Facebook Inc. announced it was launching a bot store, opening up Facebook Messenger to any developer who wants to code their own bot.
The news overshadowed the fact that Kik had already launched a bot store of its own a week earlier and had invited select brands to make bots two years before that.
Mike Roberts, Kik’s head of bots and messenger, said those early bots — called promoted chats — were a way to show companies what Kik can do for them. Brands such as MTV and Funny or Die made bots that responded to questions like “Got anything cool or weird to share?” with posts, news stories and images.
“Messaging was really starting to heat up,” Roberts said. “Brands didn’t really understand how they were going to engage with messaging. Promoted chats were the first example of how that relationship could evolve.”
That relationship between brands and messaging was equally important to Kik, whose young user base brings challenges as well as opportunities. The app is particularly popular among teenagers, with the company reporting that 40 per cent of U.S. teens are active users.
On one hand, companies are eager to meet teens on the mobile devices that they spend so much of their time on, since it’s getting harder and harder to reach them through traditional means such as television commercials and billboards.
On the other hand, as Forrester Research e-commerce analyst Sucharita Mulpuru-Kodali points out, teens don’t have their own credit cards, putting their spending in the hands of their parents and limiting their ability to actually make purchases through a bot.
“I don’t know that just because something has young people, there’s any value to that,” she said. “A lot of young people don’t have purchasing power. They don’t have the ability to buy.”
But make no mistake, bots are key to Kik’s strategy in coming out on top amidst some daunting competition such as Facebook, WhatsApp and Snapchat. To turn its cachet with teens into dollars, Kik has had to get creative.
For example, there’s a bot on Kik called @kikpoints, with a profile picture that looks a lot like the gold plastic robot hanging around the company’s headquarters. Start a conversation with it and it lets you know how it works: “Every day I give out offers that let you earn kp (Kik points) to spend on sweet stuff.”
Companies pay Kik to award points to users who watch their advertisements, play their games or chat with their own bots. Developers, in turn, are incentivized to make bots that encourage users to spend their Kik points on digital goods such as games, stickers and smilies — images that allow messenger users to convey emotions visually — through a revenue sharing arrangement.
Kik, the bot developers and the advertisers all win. Meanwhile, the user never has to spend any real-world money or enter credit card information.
“With any app monetization model, it’s, ‘Are they going to pay with their dollars or are they going to pay with their time?’ With Kik points, we have a good answer for how to pay with your time,” Roberts said. “Kids don’t have dollars in their pocket, but they have a way to earn on Kik. Kik can be their part-time job.”
Despite such creative thinking and coveted status as a “unicorn” with a US$1-billion valuation, Kik still has a long way to go to catch up with the juggernauts of social media.
Research firm PrivCo estimates Kik’s 2015 revenue at somewhere between US$26 million and US$34 million, compared to US$18 billion for Facebook, whose Messenger app also has a much larger base of 900 million active monthly users.
“To be brutal here, it’s going to be difficult to compete against Facebook,” said Jason Mander, a senior analyst at social media research firm GlobalWebIndex. “Facebook is so much more integral to daily behaviours.”
Kids don’t have dollars in their pocket, but they have a way to earn on Kik. Kik can be their part-time job.
Nevertheless, Kik has some big ambitions. Roberts said he hopes developers making bots for Kik’s bot store will help the messenger grow up along with its users.
Kik has been experimenting with bots that allow users to make real-world purchases at a local restaurant and on the University of Waterloo campus. For now, ordering food from a bot instead of a waiter is a novelty, but the company also champions the convenience of using them to, for example, order and pay for beer at a baseball game without the hassle of flagging down a vendor and passing change back and forth down a row of seats.
Of course, teens can’t order beer now, but Roberts said he hopes the ones who made Kik popular will stick with the app in the future.
“We’ve seen a shift from everyone being disconnected to everyone being connected,” he said. “We were part of that shift for that generation.”