Kik Messenger may have the edge as bots power the internet

Kik Messenger is a huge hit with teens—and a sudden threat to Facebook in the race to create the world's mobile operating system. The company's 28-year-old founder thinks his bots give him the edge

Published: Mar 15, 2016 06:03:36 AM IST
Updated: Mar 11, 2016 03:32:20 PM IST
Kik Messenger may have the edge as bots power the internet
Image: Michelle Gibson for Forbes
It’s easy to dismiss Ted Livingston and his Kik messaging app, a fraction of the size of Facebook Messenger, but he’s been out front on all the big ideas in the chat wars

In one of the classier restaurants of Waterloo, Ontario, a university town covered in piles of snow one January afternoon, I open Kik Messenger, one of the most popular chat apps in North America among teenagers, and scan a code on the wall. A new conversation pops up in the app. “Welcome to the Bauer Kitchen! What can I get you?” Suggested answers hover over my keyboard, and I tap, “Order drinks.” It writes back: “Please type your drink order below.” “Diet Coke,” I type, dropping the pleasantries I’d normally use with a human server. Minutes later, a waitress comes by, and instead of asking what I want, puts down a tall, dark glass of fizz and ice.

It felt a bit like the first time I tapped a button and an Uber car appeared three minutes later—the magic of what many in the tech industry call online-to-off­line, the ability to order physical products or ser­vices from an app. Except now you don’t even need a new app—you can just chat your way to a richer life.

The golden era of mobile apps is already over. Americans have been downloading zero of them per month on average. Most of us have all the apps we need and have narrowed our use down to a few messaging and social networking ser­vices. So, instead of wasting thousands of dollars pushing an app on an unwilling public, businesses like Bauer Kitchen are taking their business to ser­vices such as Kik, Facebook Messenger and WhatsApp that their customers are already using to text.

In China, millions of businesses already take payments and advertise through so-called official accounts on WeChat, or Weixin in Mandarin, the country’s biggest messaging app, with 650 million active monthly users. WeChat may have grossed as much as $3.8 billion last year, most of it from selling games and video ads on official accounts, but transaction fees will likely take up a bigger portion as more businesses sell goods and services through the app. More official accounts are reportedly set up on WeChat each day than on ­traditional sites on the web, a testament to China’s leap toward a mobile­-first or, more precisely, a messenger-­first internet.

The big question for businesses: Who on their end is going to handle all this chatting? They can hire humans or train their existing customer service people to do it, but a new option is emerging: Go with robots. Many of WeChat’s 10 million official accounts have a mixture of humans and bots. Go to the account for Beijing’s Dian DouDe restaurant and you’ll see a colourful web page with prices and photos of steamed dumplings you can order from your table via the app. Want to order a flight from one Chinese city to another? Text “Jan 22, 2016, Guangzhou, Beijing” on the China Southern Airlines WeChat account and you’ll get a list of options you can tap and pay for. At a vending machine in Beijing, you can scan a QR code with WeChat and pay for a milky Vitasoy drink with Weixin Pay.

Facebook Messenger is also going down the ­humans-and-bots path. More than two dozen companies have begun using Facebook’s Business on Messenger since it launched in March 2015, according to Frerk-Malte Feller, who runs the programme for Facebook. Clothing retailer Everlane has a couple of customer service agents chatting with as many as 200 customers each day about their shipments, using software from Zen­desk. You can order an Uber on Messenger by tapping an address and requesting a ride, before a bot texts your driver’s ETA. As these businesses add customers beyond what humans can handle, “bots will play an important role,” says Feller.

Bots are a fancy way to describe automated messages. They’re a cheap alternative to customer service agents and descend from artificial intelligence research going back to Joseph Weizenbaum, the MIT professor who built a computer program in 1964 called ELIZA that could uncannily play the part of a psychotherapist by asking people open-ended questions and responding with things like, “Does that question interest you?” Chat bots have come far since then. Tel Aviv startup Imperson has built a Miss Piggy bot that chats with people on Facebook Messenger on behalf of ­Disney, promoting The Muppets TV show in ersatz French while asking for online dating advice.

“Thirty years ago if you liked someone, you hung the poster from the magazine on your bedroom wall,” says Imperson’s co-founder Eyal Pfeifel. “Today fans expect a more direct interaction with their idols.” Bots will eventually go beyond fictional characters to real-life celebrities, whose perfectly coiffed digital identities are already outsourced to teams of social media experts. Pfeifel recently experimented with bots masquerading online as famous actors and says people who chatted with them “had great conversations” and were happiest, weirdly enough, when the celeb-bot admitted that it was a bot. Says Pfeifel: “The most common response after that is, ‘I love you’.”

Kik Messenger may have the edge as bots power the internetChat bots have already been popping up everywhere, from Apple’s Siri to Microsoft’s Cortana to digital assistant startups like Magic,, Digital Genius and Operator. Facebook launched a digital assistant called M in August 2015, using a secret combination of human agents and bot software that learnt from the human responses, and may act as a showcase for what businesses could do on Messenger. The restaurant recommendation app Luka is fully automated, and its Russian co-founder, Eugenia Kuyda, says giving the bot personality is paramount to making it successful. “You don’t have to pass a Turing test to create a meaningful connection with people,” she says, referring to the threshold beyond which people cannot distinguish between machine and human. Kuyda is testing bots that hold emotional conversations on the chat app Telegram, which is teeming with tens of thousands of chat bots that can tell you the weather, play a poker game or help you choose a gift on Chinese ecommerce site AliExpress, a division of Alibaba Group. Telegram founder Pavel Durov says he’ll finally make it possible for these bots to process payments this year, which developers say will open the floodgates to the kind of money they used to be able to make from apps.

Kik, sequestered in remote Waterloo, is taking a unique and maybe prescient approach to bots. Unlike Telegram, it is working with more than a dozen businesses and developers to build bots. Unlike with Facebook, businesses on Kik’s platform will use only fully automated functional bots, and not very smart ones at that. “On the spectrum of all-knowing to superdumb, we’re very much at the end of superdumb,” says Kik’s founder, Ted Livingston, in a voice that often sounds like a surfer-dude drawl. It’s easy to dismiss Kik, with an estimated 8 million active users in the US (a number he claims is “wildly” low) versus Facebook Messenger’s 60 million, WhatsApp’s 12 million and Snapchat’s 20 million. But Livingston’s earlier bets turned out to be spot-on with trends that were picked up by his competitors. In 2011, he was the first to turn his chat app into a platform for other services like games and browsing, preceding WeChat and Facebook Messenger by years. In July 2014, he was the first in the West to launch chat bots for advertisers. Today around 80 big brands, such as MTV, SkullCandy and The Washington Post, hold stilted conversations through bots on Kik. This year, it’s testing chat bots you can activate in fast-food joints by scanning a code to order a meal—a cheaper alternative to the large, digital kiosks installed in some outlets that cost around $150,000 each.

Kik isn’t profitable, and research firm Privco estimates it brought in sales of about $30 million in 2015 (Privco estimates $52 million for Snapchat). Livingston won’t comment on revenue. He makes some money from selling games and stickers, but the lion’s share comes from ads. The 80 companies that have set up chat bots on Kik bid on how many people, ages and genders they want to target, paying, say, 15 cents a user, similar to the way advertising works on Twitter. Though Kik doesn’t have the scale of Facebook, it’s well ahead in selling bots as a marketing service. That’s an advantage at a time when chat apps are growing in users and engagement time while searches on Google have been steadily declining since early 2013 and the growth of Facebook’s core users has plateaued. More than 2.1 billion people in the world now regularly use a messaging app, according to Portio Research.

“Some people refer to messaging as the future of the web,” says Eric Setton, CEO of the messaging app Tango, which has 350 million registered users. In February, he spun out Tango’s games and chat rooms to focus solely on developing his original messaging service. “It’s a universal interface. It can replace anything you do connected to the internet. We never would have predicted that something like that was even possible.”

Kik’s big advantage is the demographics of its user base: Fifty percent are teens, representing four out of ten teenagers in the US, many of whom think Facebook is uncool. Livingston’s “trust and safety” team has to keep a lid on the high levels of porn, bullying and underage hookups that occur on the app, he says, adding that Snapchat is “way worse”. Teens are the most hotly desired dem­o­graph­ic on mobile and act the most like the cutting-edge Chinese. They’ve never experienced buying on a desktop website. They first browsed the web on a smartphone. And they’ll be the first to use bots to power the world around them, says Livingston. “In China, bots power their society,” he says. “We’re trying to build the operating system for society.” His other big advantage is a partner in China: In August, WeChat’s parent, Tencent, bought 5 percent of Kik for $50 million, valuing the startup at $1 billion and starting the tall, chuckling Livingston on what he calls a journey to becoming the WeChat of the West.

To build the technology that could run the new mobile society, Livingston, 28, and an alum of the Forbes 30 Under 30, is staying put in the town where he’s the new big fish. He stares up at a brick building of the University of Waterloo, his alma mater, one hand keeping warm in the –10°C cold by holding a cup of coffee, the other stuffed into a light puffer jacket pulled over a black hoodie (a purple T-shirt, jeans and white tennis shoes that defy the slush puddles complete the ensemble). The Soviet-style block once belonged to his ex-employer, BlackBerry. Two years ago, the struggling company sold off 2.8 million square feet of empty office space. Five of the 16 buildings went to the university.

Livingston doesn’t want Kik to end up like BlackBerry. The pride of Waterloo and Canada peaked in 2009, when it dominated smartphone sales, before spiralling into insignificance as the iPhone and Samsung swallowed up the market. The CEOs who ran BlackBerry let their egos blind them to their platform’s eroding base. Livingston doesn’t want ego to get in his way: He refuses to pose for photos and has banned his staff from doing the same. Forbes’s photographer has to dart around Livingston, snapping shots whenever he happens to look in her direction. “Kik could disappear tomorrow, and I wouldn’t change my lifestyle,” Liv­ing­ston says. “I keep low expectations.”

Kik’s offices are in the same single-storey block of shops where it started, tucked behind a tax accounting firm and a massage clinic. Livingston doesn’t want millions of square feet of office space he might one day be forced to sell. He also doesn’t want to think about anything but the job ahead. Standing at 6-foot-2, he wears the same outfit every day and has for years to save time in the mornings. He’s got 40 purple T-shirts at home, drives a three-year-old Subaru and lives in an unassuming high-rise apartment next to the Bauer Kitchen with his wife, who’s 28.

Livingston upholds these quirks partly out of guilt. He was brought up the middle of four boys an hour’s drive away in Toronto. His father was a financier on Bay Street (Canada’s Wall Street), and his mother was an artist who got an MBA. In the midst of his high-achieving family was youngest brother Jack, born with cerebral palsy and unable to walk or talk when he died at the age of 19 in 2013. “We had a one-in-four chance that we would have been Jack,” he says of himself and his brothers. “When you look at that, you feel guilty. Like, why did Jack get the hand he was dealt?” The question doesn’t eat away at him, Livingston insists. “It’s a productive guilt. It’s a driver.”

The realisation hit Livingston while studying at the University of Waterloo, Canada’s MIT. Then he got an internship at BlackBerry managing a team of people ten years older than he and was about to take on a coveted permanent job at the company in late 2008 when his manager, Sanjay Kalyanasundaram, took him aside at a bar one night and told him BlackBerry was in trouble. “You should start your own company. Don’t be one of these product managers trying to compete for budget.” Livingston believed him. He dropped out of college six months before graduating, having joined the brand-new VeloCity incubator on campus with 60 other college kids. One earlier member was Eric Migicovsky, the founder of the Pebble smartwatch.

“That’s my room,” he whispers, as he walks through the corridors of the dorm-workspace (what friends back then dubbed the dorkubator) for the first time in six years. A small brass plate on the wall next to the door proudly reads, “Ted Livingston, Room 213, 2009.” “That’s a little weird,” he says.

Kik started out as a music player for BlackBerry, but Livingston split off that app’s chat feature into a free texting app in April 2010, when BlackBerry refused to make its own BBM chat app work on platforms like Apple’s iOS and Google’s Android. Within three weeks in October 2010, Kik Messenger was downloaded more than 2 million times, topping the charts for all platforms. Steve Jobs was apparently an early user, under the screen name “sjobs”.

Disaster struck a month later. BlackBerry sued Kik for copyright infringement, insinuating that Liv­ing­ston had stolen ideas from BBM. Livingston claims an associate was in the room when Jim Balsillie, BlackBerry’s then co-CEO, told his legal counsel to “crush” Kik. BlackBerry disabled the app on its servers and all at once one-third of Kik’s users were gone, followed by almost all the rest. “So what does everybody do? They go on WhatsApp!” Livingston cries, visibly seething as he drives his Subaru through the snowy streets. “We were the first Whats­App, and that all got taken away.”

Though Kik settled with BlackBerry in 2013 and went on to amass more than 275 million registered users worldwide, the lawsuit still stings. “We never went back on BlackBerry,” he says. When his old bosses tried to invite Kik back onto BlackBerry’s app store to help promote their ill-fated BB10 operating system, he declined. “Sorry, we’re not building for you, for the same reason Instagram isn’t,” he told the company. “You’re not relevant anymore.”

Livingston is avoiding irrelevance by making radical bets on future trends, hence his work on chat bots and his partnership with WeChat, which he instigated. In early 2015, he made a list of 20 tech companies that Kik could sell a slice of equity to, and Tencent was at the top. But being a pioneer doesn’t make you a winner. “[Kik] is going to have to work really hard to compete with the bigger players like Facebook,” says Jason Mander, senior analyst at social media research firm GlobalWeb­Index, pointing to the critical-mass problem. “You can introduce all the cool features in the world, but it’s difficult when all your friends aren’t using them.” Case in point: Ello was a new social network that went viral last year for being ad-free, then flamed out when nobody could be bothered to make it their permanent alternative to Facebook.

Livingston concedes that Facebook Messenger has a “gargantuan” user base of 800 million monthly active users (Kik won’t release active user numbers). “But this race is just getting started, and underdogs have won in the past,” he says. Then he hedges a little: “[Other companies] can stake out meaningful ground in the new world order.”

Staying isolated in distant Waterloo could be limiting. In early 2014 Facebook investor Peter Thiel told Livingston he wanted to arrange for him to have lunch with Mark Zuckerberg. Livingston declined and shrugs and smiles as he remembers it now. Zuckerberg is the person he admires the most in Silicon Valley, “so maybe I felt intimidated”.

Weeks later, Zuckerberg met with another hermitlike founder, Jan Koum of globally popular WhatsApp. Then he bought the company for $16 billion. Whats­App said in January that it would start inviting businesses onto its network. It might not have taken that step without the tutelage of Facebook and David Marcus, the former head of PayPal, who’s now helping businesses set up shop on Zuckerberg’s two big messaging services.

In this new war between messaging platforms, the big players are drawing battle lines around the fresh new startups building cool and interesting bots. One example is 200 Labs, a San Francisco startup run by 29-year-old Russian developer Dmitry Dumik, whose Storebot for Telegram has directed around 1.5 million people to 30,000 different bots on the platform. Dumik launched the company with a staff of four in July 2015, and just a few months later, Google tried to buy it. “Everyone wants to get closer to users,” he explains, and with app downloads a dud, the next best route is through messaging apps. Once people can store their credit card details on Telegram, for instance, publishers could send exclusive article links to users, which they could read for a nominal fee. And with messaging apps so deeply ingrained in people’s address books, there’s always the creepy potential for bots to mine data from social connections.

Messaging bots could be a big threat to Google once people start going to them regularly to ask questions about the weather or where to buy a certain shirt. “Google gives you all these results, but they still expect you to do all the work,” says Josh Elman, a partner at venture capital firm Greylock who has invested in a messaging app called Operator, which uses bots and humans to connect shoppers with goods they want directly through the app.

The hard part for Kik will be getting us more comfortable with bots. Bots could struggle if they feel too spammy, and there’s an unusually high number of spam bots on Kik, often using profile photos of pretty women to try to lure users to click a link to a cam site and enter their credit card details, says Cathal McDaid of ­mobile-security firm Adaptive Mobile. “The rationale between spam bots and legitimate chat bots isn’t that different,” he notes. They both want something from you, ultimately. People may grudgingly accept bots as they evolve, but it will take lots of experimenting to see what works, at the risk of putting people off. “Like the first websites on the internet, with their ugly colors,” says Livingston. “I think bots are going to be the same way.” Scan the code, pay with your thumbprint and a waitress appears with your drinks. “I’m, like, controlling the world by chatting to it?” he says, grinning. “It’s so simple, it’s magical.”

(This story appears in the 18 March, 2016 issue of Forbes India. To visit our Archives, click here.)

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