Forget social. Forget mobile. Overall venture capital funding is slowing as the industry undergoes a reboot.
That reboot is all about the bots.
What's a bot? It's an app that talks to you. Rather than spending your time looking at your phone and tapping at it, you will soon be chatting away through your Bluetooth earpiece at co-workers, virtual assistants and the marketplace. Slack alone has put $80 million into the space.
To the casual investor, bots are a joke. Microsoft's (NASDAQ:MSFT) Tay bot was turned into a racist in a day after it was put on Twitter (NYSE:TWTR). The story overshadowed the work Microsoft had carefully done to get developers into bots during its Build conference. One analyst has compared bots to Clippy, the failed Microsoft Word interface.
Interfaces like Apple's (NASDAQ:AAPL) Siri or Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Voice are just starting their evolution into bot platforms. They do indeed seem less efficient than what they replaced. I'm still tapping. Amazon's (NASDAQ:AMZN) Alexa is an effort to build a bot interface into products you use around your home.
Facebook (NASDAQ:FB) is all-in with bots. At its F8 tech conference the company launched a new version of its Messenger platform aimed at helping companies create bots around the software. Facebook's pitch is that a bot can break through the clutter of trying to push an app, although it's easy to see bots becoming their own form of clutter, very quickly.
While apps can be built by a small team and deployed quickly to scale on the Amazon.Com cloud, bots will require more intelligent back-end infrastructure. Facebook sees messenger providing that infrastructure, which coincidentally could mean vast amounts of new traffic running through Facebook's own cloud. Yes, Facebook and Amazon are going to become direct competitors.
While the bot game is afoot, it's also in its earliest stages. The simplest bots will handle customer service and are now being rolled out. The big money will go into bots that make group interactions easier, especially in corporate environments where people now waste hours each day in meetings. Imagine asking what co-workers are doing through a bot interface tied to their workflow, and having that delivered to you without having to call people around a table, for instance.
Bots, even in their current incarnation, thus have the potential to both increase productivity and bring a lot of work back from operators standing by into software. Bot stores are quickly replacing app stores in the development community,
What investors need to know, now, is that bots are the next iteration of the "great game," as cloud, mobile and social were earlier this decade. Success with bot stores, bot interfaces, and cloud platforms will determine the relative values of the largest tech companies going forward.
My own guess is that bots are the best opportunity Facebook is going to get to dethrone Apple and Google atop the technology pile. Both need to be ready for a long bot war.
Disclosure: I am/we are long AAPL, AMZN, MSFT, GOOGL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.