The Evolution of Chat Apps for the Service Economy

by Sam Madden7/10/2017

Chat is evolving.

More and more technology is being developed (i.e., messaging apps, software, tools) to empower communication across a variety of channels.

Messaging apps for friends to chat with one another, for those who want to keep tabs on international pals, for enterprise teams to more easily work together, and just recently: for small businesses to talk to their customers.

Facebook and Apple (recently announced Business Chat) are now both vying for the same goal of owning the conversation between businesses and their clients. These conversations are so valuable because for the platform through which the communication is transmitted, incredible amounts of data and attention can be obtained not just of the consumer, but of the business as well. Data + attention = monetization.

For busy, service-based businesses in particular (e.g. beauticians, contractors, pet professionals, cleaners, etc.), 80% of all their conversations and interactions with clients are over traditional SMS text. That’s 24 million service business owners (in the U.S. alone) using a communication technology that was introduced in 1992 to handle all their customer onboarding, logistics, follow-ups and more – ripe for disruption.

Driving More Conversations

In order to motivate these busy professionals (“pros”) to migrate their customer conversations away from SMS text and onto a more professional messaging platform, value must be presented. And there is one valuable truth no matter what type of business you run – everyone wants to make more money.

Making more money starts (and ends) with solving for peak client happiness. The happier the client, the higher the likelihood they will return as a customer, and the higher the likelihood they will tell their friends about you. For most service businesses, there is a “service + experience” equation which solves for customer delight. Half of which is the overall quality of the service itself, the other half at its most fundamental level is all about communication.

Messaging Flow Chart

Both Facebook and Apple have planted their (v1.0) flags in the ground as to how they approach helping these pros making more money – through client happiness – with the hopes of bringing billions more client-pro conversations onto their respective platforms for life.

Facebook bots Facebook’s attempt to reinvent client-business chat comes with a focus on automation.

Most of their core offering to businesses (with “Messenger”) are bots replying to customer inquiries and sending automated responses. Even giving pros the ability to build custom bots themselves.

Value in automation is highest with larger businesses and brands where the sheer volume of incoming customer inquiries about store locations, products purchases and general support questions can be better addressed at scale with Messenger’s tools. Clients become happy because they get immediate gratification and response. They won’t need to wait around for a human to chat with, and they can get their questions answered and transactions immediately fulfilled.

Automation within the Service Economy

For skilled, service-based businesses, solving for customer happiness is not simply a black-and-white approach. The goal of happier clients is not necessarily reached by inserting a machine layer in between the pro and their customer.

As outlined in the flowchart above, there is the initial introduction to the business and client, and then there are multiple steps throughout the service cycle to ensure peak client happiness. These multiple steps demonstrate the idiosyncratic nature of each service job – limiting the potential for automation. An initial service inquiry comes with a lot of custom needs; 2-way scheduling must occur, and cancellations or rescheduling comes with context; payment timing and final amount can be dependent upon the service scope; and the timing of post-service follow-ups is case specific.

Unlike many other industries in which jobs are predicted to be replaced by machines (i.e., retail, airlines, machinery), skilled service professions are not. Just like how robots won’t be replacing service work anytime soon, bots cannot replace service relationships either (at least for the foreseeable future).

Meaningful Connections

“A better way to make meaningful connections with your clients” is Apple’s Business Chat tagline.

Rather than automation, Apple is more focused on fostering client connections with real humans, with more speed and less friction. That means giving the client a frictionless way to spark conversations with a business – like tapping on a message widget on the business’s profile in mobile search results and sending an inquiry through native text message (no need to download another messaging app or search for a ‘contact us’ form).

After all, 56% of consumers would rather send a text to a business than talk on the phone. And for pros, these conversations can sync to any customer service platform the business uses.

Long Tail of Businesses Still Ignored

The focus of the Business Chat (“Chat”) product is mainly larger organizations with development resources that can integrate Chat into their customer service organizations. Not to mention, types of large companies that extract the most value out of the Chat features deal with online purchases using Apple products such as Apple Pay.

For the 20 million independent service pros in the U.S. (independent service businesses make up 80% of the service industry), they do not have the resources to build in customer service integrations, nor do they have customer service departments. Business Chat could add value around the initial introduction of a new client and the pro – to help spark a frictionless dialogue – however the clear path towards complete client happiness is still unclear for this sector of the economy.

What Businesses Want

What service businesses want is more money.

The goal of messaging innovation is to maximize the pro’s chance of success by helping them form better relationships with their customers, which optimizes client happiness, thus driving more sales through retention and referrals. Communication is so core to building human rapport, so no surprise that two platforms (Apple and Facebook) totally $1.2 trillion in enterprise value are going after this huge opportunity.

As chat technology continues to develop, I suspect there will be a delicate balance between communication automation and direct human connection when it comes to empowering service pros, especially for the smaller players. Regarding human connections, Stan Chudnovsky (Facebook) recently stated: “Certain things about humans are never going to change…Our need to have one-on-one conversations have stayed constant.”

To get top scores by clients in dependability, capability, organization and care (see flowchart above), pros needs to ensure those human connections with their clients indeed stay constant. Empowering the human connection will lead to more money made by the pro and conversation ownership by the messaging platform.




  • Sam Madden

    Sam is a cofounder of PocketSuite (YC W16).