28 December 2016
When artificial intelligence (AI) last had a revival as a research and development area in its own right back in the 1980s, the reaction was mixed. Claims that robots would alleviate the drudge jobs from our lives and free up plentiful leisure time were balanced against fears of a Terminator-style cyborg uprising, where humans became enslaved by their robotic overlords. Perhaps fortunately, neither result proved correct, but the failure of such ambitious claims led to an ‘AI winter’, from which the science and technology industry has only just emerged.
AI research has had some breakthroughs in recent years, with computers beating humans at complex games like chess and Go. But this time round the big developments are focused around specific goals, which are more likely to have subtle impacts and stay largely behind the scenes from a consumer perspective.
Machine learning is one of the more prominent sub-sets of the AI universe, and has been the main sector for a lot of the breakthrough developments. Part of the machine-learning spectrum is ‘deep learning’ – a method that layers data to create neural networks, not unlike the way the brain learns, sparking excitement within the investment community. Why? This is the technology that allows Google to filter your emails and for Netflix to deliver viewing recommendations that you might actually want to watch. While these might sound rather trivial applications, they are big wins for the consumer engagement and brand loyalty.
The ability to offer a customised service that gives the user a richer experience with increased engagement (which can lead to increased sales), is the real value in the technology. Heavy-hitters Google, Facebook, Amazon and Microsoft have all embraced machine learning to ensure they remain the go-to brands with the easiest, most helpful and efficient platforms.
Amazon enjoyed an AI double whammy on Black Friday. First, one of its best-selling items was Amazon Echo – a Bluetooth speaker designed to function as a digital butler, using AI and an internet connection to answer its owner’s queries through intelligent voice server Alexa, building on the popularity of Apple’s Siri. Second, the company has embraced AI as a service tool to refine its ‘you might also like’ suggestions, hinting at future purchasing options.
Amazon, alongside other internet retailers, has enlisted the French digital marketing specialist Criteo to help carve out its market share. Criteo offers intelligent AI-led ‘retargeting’ technology; they are the company behind the side-bar ads that follow you around the internet to remind you of items you browsed but didn’t end up buying. It also suggests smart options for other choices you may wish to consider. They employ AI to deliver the most suitable suggestions, and their success has led to heavy adoption, hence the reason it has become such a prominent feature when browsing.
Such AI-based strategies are working: Amazon’s Black Friday 2016 revenues doubled those of a normal day, while Cyber Monday’s numbers across the internet are set to have climbed even higher.
So while the early AI hype focused on human-performed jobs being replaced by robot operatives, the more subtle adoptions of the technology that focus on specific goals have proved more effective. AI systems that enhance the user experience, whether that be shopping, social media (do you know…have you seen…?), virtual assistants or bespoke health analysis, are hotly being adopted.
AI has undergone a turbulent evolution from its first mention in Greek mythology, where the blacksmith Hephaestus makes himself mechanical assistants. In terms of the Gartner Hype Cycle – which represents the maturity, adoption and social application of technologies – AI is close to its peak and the sector may need to pause to digest all the developments of recent years. For investors looking to capitalise, the savviest options are likely to be the indirect investments. Rather than buying into the heart of AI development, exciting opportunities currently look to be in the heavy adopters of the technology. Companies that have access to the large data sets that are required for training and system optimisation are having particular success from the integration of AI, which is fuelling growth. Amazon, Facebook, Google and Microsoft are proving the pioneers in utilising the benefits of AI to enhance the consumer experience and keep customers loyal to their offerings.
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