In this episode of Industry Focus: Wildcard, Jason Moser chats with the Founder and CEO of LivePerson (NASDAQ:LPSN), Rob LoCascio, about the latest developments in AI chatbot technologies being developed and deployed today. Rob talks about how their technologies are being used by consumers, and how they have helped companies and consumers alike during this pandemic, in particular. They also talk about their latest partnership and how it will further augment LivePerson's capabilities and much more.

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This video was recorded on August 5, 2020.

Jason Moser: It's Wednesday, August 5th. I'm your host Jason Moser. Today, on our Wild Card Wednesday episode, we're chatting with the Founder and CEO of LivePerson, Mr. Rob LoCascio. LivePerson makes life easier for people and brands everywhere through its trusted conversational AI, over 18,000 customers use its conversational solutions to create a conversational relationship with their millions of consumers. In fact, LivePerson was named to Fast Company's World's Most Innovative Companies list in 2020. Rob has been the CEO of the company since its founding in 1995, and joins us this week to talk more about LivePerson's business during the pandemic, how its Conversational Cloud platform is changing the consumer experience and much more.

I hope you enjoy our conversation.

[...]

Rob, thanks so much for taking the time to join us today. It's been a little while since we last spoke, I think it was about a year-and-a-half ago we spoke on the show, and at the time it was neat to see LivePerson, you know, your business was starting to really gain some traction in the face of this digital economy that's been forming. And I think now we're really seeing the benefits of what businesses like yours can do to help us as consumers do business a little bit differently, to help your customers who are all of those businesses out there, that we interact with every day, helping them do business differently.

Before we get to that, I want to just get to -- you know, hey, let's talk about the elephant in the room here, the market is giving you guys some love today. You just turned in a really nice quarter 29% revenue growth from the previous year, raising your 2020 revenue profit outlook. I mean, things seem to be going very well, you should be in a pretty good mood, right?

Rob LoCascio: Yeah, after 20 years being public, it was one of our best quarters, if not the best quarter in the history of the company. So, I think it's a testament to a strategy we put in place a few years ago, and have been executing on and COVID definitely accelerated our go to market, and it showed up in our numbers this quarter.

Moser: Yeah, absolutely. And we're going to dig into that a little bit, but before we do, could you help our listeners just understand, for those who don't know, what exactly LivePerson does? I mean, it's technology that's really helping us converse with all of these businesses, right. I mean, it's taking things maybe out of the call center and really utilizing the technology that's out there today to help brands manage interactions with their customers.

LoCascio: Yeah. You know, I originally, over 20 years ago, invented chatting on the web. So, if you see chatting on the web, I invented this technology. So, I've always had this perspective around the idea of conversations powering commerce. And I never saw the internet and e-commerce as an automaton, where you show up and there's pictures and text and you put your credit card and you go. I always felt that there are many times you have to ask questions, especially with more complex transactions.

And so, fast forward about four years ago, we launched a totally new platform which was really focused around, not chat, but really around what consumers do every day, 80% on their devices, which is messaging. So, you're messaging your friends and family on WhatsApp, on iMessage. And we basically had this perspective that that consumer experience that you do with your friends and family, could be done with businesses. So, we launched one of the first platforms in this area, and then we worked with Apple and Facebook with their front-end messaging applications and we tied all that together. So, now you can message brands like T-Mobile and Delta Airlines and Chipotle, if you want to order a burrito, now you can actually create the burrito on your mobile device, messaging Pepper, this bot called Pepper, and it's pretty cool, and we're doing stuff like that. So, we're doing north of 70 million conversations a month happen on our platform between our thousands of brands and their millions of consumers.

Moser: Yeah. And you talk about helping out big brands like Chipotle, and we'll get to that in a minute, but I think it's really interesting, the dynamic, when we hear about how your technology is interfacing and working with other technologies like Facebook Messenger, like Apple's messaging technology. I mean, you built something that really -- it seems to me, at least, maybe that consumers might not necessarily know in fact they're working with LivePerson, because that might not be the brand that they see, but really, you are the technology that's helping all of this stuff come together and work. I mean, that to me, is what I find so fascinating about the business.

And sometimes it just takes a little bit of a catalyst, and you know, I mean, what this ultimately is, this pandemic, has been a catalyst for a lot of businesses. Talk a little bit about that. I mean, talk a little bit about the opportunity to work with all of these big names, Apple, Facebook and the like, and how those relationships, along with this period of time right now, this pandemic, how that's accelerating your business, what do you see coming down the pike here?

LoCascio: Yeah, so the first thing is, you know, those frontends that we use with our friends and family, they're not really usable with businesses if there's no platform like ours. You can't message in, you know, a Delta Airlines to an individual person there, it needs to go through a platform that enables the brand to handle tens of thousands of messages a day or maybe millions a month, and they come to a platform and then those messages, those questions that you have as a consumer, get routed to either a live agent or an automation. And now, more times than none, it's going toward automation, but we provide all the plumbing and all the platform that enables the brands to scale the conversational commerce and care experiences. And that's what we really do there.

So, the interesting thing is, I've always been against voice calls, like, I can't stand a 1-800 number call, I just, I can't even tell you, like, it drives me nuts. My bank right now, which is Chase, [JPMorgan Chase] for five months has been over an hour wait to do anything with them. And sometimes they force you to call them and then they're like, we can't handle your call, because now what's happened is, they've shut down the contact centers, just not them, but all the contact centers got shut down because of the social distancing. The agents were sent home, and a lot of these agents can't take voice calls in their home. So, that's what you're experiencing right now is busy signals and don't call us. And so, I believe all of that should just be replaced by your message, a question, and you get an automation that says I can help you, and that's really, that's the present future of the way a customer experience will be with brands.

Moser: Yeah. And I couldn't agree with you more. I think certainly us, we see the merits in that. I think that younger generations coming up are looking at doing customer service interactions through voice interaction on the phone as antiquated, as like, why would I bother doing that? I mean, we live in an on-demand future now. And really, what your technology, with all of these platforms enables is that on-demand customer service, right? You get your question out there and if it's an automated assistant, that's great, and if it needs to go to the next level, it can go to the next level, but you're not sitting there hanging for an hour for them to just say, oh, you know what, it turns out we can't really help you, leave us a message and we'll call you back when we have someone available.

LoCascio: Yeah. And I think the coolest part is that when we went live, and this is a little over three years ago, T-Mobile was our first customer, and they're very customer care focused. And they said, you know, we had a vision too, like we did, about why can't a consumer message on their time, you know, they message in, and then they go about their day, and they're not sitting there tied to a phone on hold. And when we launched -- I remember when we launched that first day it was amazing that consumers were just so happy that they can message in and multitask, that's all we're asking for, we want to multitask and do things, and then we get a response back.

The funniest thing that happened within the first week was, one of the agents who is on messaging, messaged to the consumer and said, I've got to go on a lunch break, do you mind if I get back to you in, like, an hour. And the consumer was like, enjoy your lunch break. And I remember we read the transcript [laughs] and like, are you kidding? Because the consumer's perspective was, they weren't going to lose you, you are in the device, so you're literally using the messaging platform, you're connected, you know, like you are with your friends and family, you don't disappear like a voice call or chat, you don't have to call back, they were right there. So, the person who went to lunch, came right back with the message, hey, I figured out your problem, the person was like, no, great, enjoy your day.

So, we know now that most questions are not in this stressful real-time mode, voice makes everything stressful and real-time, because if you don't get the question answered, you know you're going to have to call back, but in messaging, like, things just happen. Customer satisfaction, consumers love it. So, this is what's really changing the game.

Moser: I love that. I mean the consumer satisfaction, the customer satisfaction, and I guess maybe that boils down to honesty and certainty, right? I mean, someone saying, hey, I've got to go on my lunch break, can I get right back to you? It's like, hey, you're being honest with me, everybody has got to eat lunch, I appreciate you letting me know that. And I know you're not going to disappear off the radar, enjoy your lunch and you get back to me when you can. And while I'm waiting, I can do other stuff. And the multitasking dynamic, I do that all the time personally. So, I'm glad that you mentioned that, because to me, that feels like one of the keys to the success of your business, frankly, in giving the customer more freedom.

We spoke a little bit earlier about different concepts that are using your technology benefiting, whether it's airlines, or banks, or restaurants. Can you talk a little bit, just what consumer categories are you finding the most traction right now?

LoCascio: The categories. It's very interesting, retail right now is obviously going through a massive transformation, and most of it looks really bad. So, it looks like, you know, there's a lot of bankruptcies, every week there's a bankruptcy of a big one. But you know, there's a lot of retailers that are rethinking the business in this, I'll call it contactless commerce perspective, which is, does a person really have to walk in a store and I have to be face-to-face with them? How do we power different consumer experiences?

So, I gave you the Chipotle example, where now you can, through Facebook Messenger, you can basically build your own burrito and then when you show up at the store they just hand it to you, you don't have to come in. And so, we're also doing this with, like, we're working with another, one of the big home improvement companies in the U.S. And we've tested a store over the last four months with virtualized agents. So, when you walk in the store now, next to every product there's a QR code, you pull out your phone, you put the photo on, it launches iMessage or SMS and then you're messaging with a human who's not in the store or you're messaging with an automation. And like, in that case, we got this thing called Grill Master, it's a bot that's been built, and you converse with Grill Master, and Grill Master ask you like, do you like to cook steaks, or fish, and depending on that will tell you what type of grill you should buy and it's fully automated. And you're able to get in and ask questions and then leave.

And so, this is really, I think, the way commerce will go, is not this idea that you've got to find someone in the store and ask questions, and it's just not going to work. So, that's where we're seeing a big, big shift right now in the use of our platform.

Moser: And you know, what that makes me think of, and I was talking with someone earlier about this, you've seen the advent of telemedicine, and you know that's getting a lot of traction in the market right now given the pandemic. And the argument there with telemedicine was always that, it's not meant to replace healthcare, it's essentially just a better first step, right? It's the front door to getting into your healthcare transaction, whatever that may ultimately be, and it seems like, what you just described there, you're really building what seems like the more sensible front door to initiate your transaction, whatever it may be, and in retail that could certainly be a big shift for sure.

LoCascio: Yeah, and we're also seeing a lot of action right now in the healthcare space, another area that has a fair amount of conversations happen in it every year. By the way, there's about 57 billion conversations that happen every year around the world in contact centers, it's just extraordinary. $1.2 trillion is spent on voice calls to contact centers globally. So, when you think of that, that says, consumers need to speak to someone, whether it's healthcare or retail. And especially healthcare, they've got a bunch of questions they want to ask. And right now, you know, they don't want to -- I mean, the only reason there's humans in the process, and by the way, you know, the company's name is LivePerson, and I work with contact center agents my whole life, and I admire them. So, this is nothing, not a technology coming in recently and I'm like, hey, we got to get rid of people. But the only reason that people exist in these roles is because the backend systems need manual processing. You can have a conversation with an automation today that would answer and ask the same questions that a human would, they just need an access to backends. And a lot of times those legacy systems, they're so bad that there needs to be a human accessing, because there's no way for a machine to access them.

So, what we're seeing is, with COVID is, it's just amazing, like, big telcos and banks, and insurance companies are all like, boy, this crisis and now that we have agents working at home and that's not working out too great, we got to open up our backends, we've got to now get machines connecting to those backends and then we've got to create conversational experiences, so that the consumers can have a very frictionless way to get things done with brands. So, that's what's really shifted.

Right now, we went from, like, 50% of our conversations had some automation in them pre-COVID and now we're up to over 70%. And our large enterprise, it's 100% of those customers in the enterprise, the largest brands have automation in the conversations. So, it's a massive shift.

Moser: Yeah, that makes a lot of sense. One thing I wanted to ask about the Conversational Cloud platform, but before I do, I wanted to go back to the last time we spoke, because I remembered when we spoke last year, you were telling me about how your cloud server, you actually went through -- you know, a lot of companies will say they depend on cloud server, right, maybe they get their services from Amazon or they're working with Microsoft or Google [Alphabet] or whatever. But you actually, for your business, you built your own cloud infrastructure, right, and that ultimately, I mean, you're less dependent on those big providers, it gives you more control, more security, which I think particularly in today's day and age, I mean, security alone is going to be a massive driver. But I mean, just giving you the -- is that still the case, is it still the strategy is to continue out with your own infrastructure?

LoCascio: So, we do maintain our -- globally, we have facilities in clouds in Asia, Europe and the United States; North America. And we've done that because the largest banks, insurance companies, they need their data secured in a way, and this is conversational data, which then usually has transactional data connected to it, account data. So, the public clouds have not been able to give us the security we need. With that said, because of the demand in our business, we went up 40% in usage between March and April.

Moser: It's totally believable.

LoCascio: That's right. And it was just this rush through the door, you know, to get on our platform because the voice agents were shut down. And then a bunch of automations have been built on top of that right now, and that continues, the volume keeps increasing each week. We need the flexibility of public cloud, so we are going to add part public cloud into our cloud services and we will do special things with that to make sure it's secure, but we need the flexibility to ramp up with demand, because we're seeing demand in very, what we'll say, unnatural ways, and they continue to happen and I don't know when they're going to stop, and we need to support our customers.

Moser: Yeah, I mean, you know, we call that, one of those nice problems to have.

LoCascio: It's a nice problem, yeah. [laughs]

Moser: [laughs] So, I mean, leading them into the Conversational Cloud platform. I mean, how do you see the Conversational Cloud platform disrupting the consumer experience in the coming years? I mean, what are some of the plans, the visions that you have?

LoCascio: So, I always like to say, start with the intent, like, I'll start with my end goal. I funnel believe that we will be speaking to machines like the movie Her. So, we saw that movie seven years ago, and it was like really interesting, you know, Joaquin Phoenix talking to Scarlett Johansson's voice, and then he falls in love with this machine. And we're all like, that's kind of weird and interesting, but the reality is, that's where it's all going to go.

So, the conversational commerce space is all about talking to machines. We have Alexa right now in the world, you have Facebook with Facebook Messenger now, and they have the business aspect, you have iMessage with businesses can be there. Everyone is throwing their hat in the ring around the idea of conversational commerce. And I would say Amazon and Alexa is the greatest leader in this today. The problem is, like, most big brands don't want to be on Amazon Alexa, because they're competing with Amazon or they think one day I'm going to compete with Amazon. We're building the platform and that's the Conversational Cloud. This is a new platform for us which took all of our AI services, plus a bunch of new ones we built, and it gives the power of, like, an Alexa to every brand in the world. So, everyone can create their own Alexa with technology that we're not going to compete with our brands.

And so, we've been working on this for many years, some of the components, and then we have some that are very new. But during COVID, we had a lot of our customers, sort of, testing it, and we brought together all those AI services, which is about looking at the intents of the consumer, how do you build automated conversations and how then how do you connect those automated conversations to backend systems. And that's what's in the conversational cloud, and that's something that I think is the future of our business.

AI is our business; it is what will make us continue to have these great quarters.

Moser: Yeah. That's really exciting, because ultimately, it sounds like what you're saying is, you're forming more or less that white label technology that brands can then take and make their own to whatever extent, and you continue to offer the support all along the way.

LoCascio: Yeah. And, you know, we've taken a different approach in -- first of all, I think conversational commerce will be highly disruptive to big tech, and so if everyone's wondering, at least this is my perspective, if everyone's wondering, how big tech gets disrupted, because today there's a perspective that, they are just going to be big forever and they're going to dominate and they're going to buy companies and then compete and do what they do. But the thing is, this massive shift nobody owns.

And even Apple, with their devices, being one of the largest, if not the largest market cap company in the world, now they're closing in on $2 trillion. I mean, no one could ever think there's a $2 trillion business in the world. But it's amazing, right? But I was talking, I was on another interview about this, and I was talking to the person, I am saying, what could disrupt Apple is, one day I'll just talk to something -- I'll have an earbud and I'll talk to it. Now, they have earbuds and they've got Siri, but Siri is not that great, and I'll just talk to a machine, I don't need to have a phone that I download apps to. I should be able to say, like, hey, I'd like to get an Uber and an Uber shows up. And I'd like to get tickets to a movie tonight, great. I'd like to order a flight to Rome, great. These are things that are possible today. And we're building these in a messaging format, not voice yet. But I can see a world that radically shifts from mobile devices to spoken devices. I'll call them IoT devices, but you're speaking to something that's in your ear and that you're giving intents, and it's helping you with your life, like, Her. And that's going to be coming around, and I want our company to be the company powering Her, the real Her, not the Her from the movie.

Moser: No, I mean, I can definitely see that happen. I mean, you see companies out there today that are focusing on, you know, you mentioned, obviously, the IoT, all of the different connections in the world, we see 5G rolling out, so many devices that are going to be connected here in the coming decade. You know, one of the places I always just keep my eye out is inside the automobile, simply because inside the automobile, that's where voice really shines, right? I mean, you don't want to be typing something or looking at something, I mean, voice really shines in the automobile.

But, yeah, I think that's really fascinating. And I'm glad you said that, Siri wasn't all that great. I'm an Apple guy, I love my iPhone, but I never used Siri, I just don't find that all that helpful really.

LoCascio: And I'll tell you the thing that we know doesn't make that helpful, and even Alexa, Alexa is more command based, it's "play music," it does commands. But a conversational, it's called a turn, like, turning the conversation which is a back-and-forth turn, is very hard to do. And the reason we're able to do it is we have a billion conversations in storage. So, in the world of digital and tech, data is your moat, data gives you your competitive advantage. Our competitive advantage is we have a billion conversations in storage from all these large brands in the world. All use cases you can think about, booking a flight, paying your bill at a telco, to your insurance, to whatever. And we have that data.

Then we generated another 70 million or so -- actually, we generated 100 million last quarter, a month of this data. So, when you look at that level of data, we can build machines that converse, because we have the dataset of how humans ask a machine to do things, and we can replicate that with a very large dataset. That's why we're kind of in a pole position to take a shot at leading this conversational commerce revolution versus even Amazon, which has its own dataset and it's mostly command-based or Siri.

Moser: Yeah, I mean, command-based, I'm glad you made that difference there, that you noted the difference there between command-based and conversational, because we have some of those Amazon Echos in our house. And it does seem like once you go beyond, like, what's the weather or play this song, then it starts -- it's not fluid, it's not intuitive, it's not always on. But having those conversations, I mean, that's great that you put it that way, your competitive advantage is that library of that data, those conversations, that must help in that AI determining intent and intuiting what follow-up questions to ask, I mean, that's really exciting to see.

Now, AI, obviously something that is playing a big role in many businesses out there today. I wanted to ask you about another technology starting to gain a little bit more traction here. You know, I saw this headline back at the end of last year. You know, I've enjoyed following your company, to me, it's a fascinating one. And when I saw this relationship with NexTech AR, that's when I thought, OK, man, this is exciting for me, personally. Because one of the services I run here at work is a service based on investing in augmented reality and immersive technology and virtual reality, things like that. And when I saw that you guys were partnering up with NexTech AR to bring augmented reality into the experience, I thought, well, boom! there's my in. Now, I can get LivePerson on my watchlist, at least for this service.

Once I found out that we were going to be able to speak, I had to at least bring this up, see if you could talk to me a little bit about the benefits here. What excites you about this potential with augmented reality and how you feel like that might even be able to take this conversational commerce to the next level? I mean, tell me a little bit about this relationship.

LoCascio: It's really important, because, especially now with what's happening with retail. Your ability to really be able to understand the product you're buying, you know, whether it's a shoe or whatever you're buying. We did a whole thing with Tamara Mellon using this technology, and that's a luxury shoe brand, it's like a couple hundred dollars per shoe. Like, $900 you spend online to buy a shoe, you may never try it on. But you can use augmented reality to really look at how that shoe looks with this stress. Let me look at it from different dimensions and three dimensions.

So, this I think is more important than ever when it comes to what's happening with retail. Retail cannot rely on the physical interaction with goods. And even if we go back to stores, I think even retailers that thought people wouldn't buy if they couldn't come to a store, are seeing that people are buying. If they're able to converse about a product and then they can also experience the product, in a certain way.

And I think AR has more importance now than ever in the retail world. It was kind of gimmicky, I think, because people were like, oh, people are going to come in try it or we'll ship the shoes over and they can always send it back or whatever product it is, but I think AR has a different place.

I've seen, obviously, some of the home improvement companies we work with are using it for DIY, I see it being done very well there. So, there's also stuff around a lot in the real estate area, so it's being used, I think, in many different ways. And especially with what's happening with COVID, you just can't connect on a physical level with people and you don't want to. So, this is a way for you to experience those products or services.

Moser: And do you feel that immersive technology is going to have a role in your world and your business going forward, I mean, is that something where you have to see more relationships build as time goes on?

LoCascio: Absolutely. Because I go back to it, there's two technologies that I think are really going to drive massive change in retail. One is, streaming video, if you look in China now, streaming video shopping is like the rage. And so, it's amazing. There will be an influencer, like, an influencer who's, let's say, she's in her room and has, like, a thousand dresses and tries them on, while people are messaging them in real time and saying, like, can you try that dress and put that hat on? And it's amazing, people are buying this way, seeing an influencer actually try on clothing and talk about the clothing. And it's all streaming video. So, I think this is really big.

And then the other part of it is also, augmented reality, and how do you bring those products then into a spatial dynamic with the consumer that then they can feel like they're trying it on or they can see it in their home or they can have interaction with it. So, I just think these are technologies that are going to -- I mean, streaming video is not a new technology, but the use in retail is, especially you can't go into a store, you still want to see someone try something on or you want to think you're trying it on. So, AR, but also streaming video, I think, are the two parts we can deliver this experience with.

Moser: Yeah, it's amazing to me how much progress [laughs] has been made in such a short time in this consumer experience. And you know, it's really exciting to see, I was really excited to see the results you guys turned in this quarter, I mean, the market obviously receiving the news well. Stock is up better than 20% now today. And that's no accident, based on those numbers you chalked up there.

And in it sounds like, based on what you are doing, that there may be plenty of road ahead for you. So, I was really excited to have the chance to catch back up with you today. I was really excited to be able to ask you directly about the NexTech AR deal, because now I can tell you officially, LivePerson is on my watchlist in our AR and Beyond service. And you know, based on everything I'm seeing, I could see that being a part of our universe in short order.

But regardless, congratulations on the success, Rob, thank you again for taking the time to speak with us today. Best luck to you in everything that you're doing. And I hope we get to catch up again soon.

LoCascio: Same here, Jason. Thank you very much for having me on the show.

Moser: And that's going to do it for us this week, folks. Remember you can always reach out to us on Twitter @MFIndustryFocus or drop us an email at IndustryFocus@Fool.com. Let us know what you thought of this interview there. Big thanks to Mr. Rob LoCascio, again, for coming and joining us this week.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

A big thanks to Tim Sparks for all his work behind the glass. I'm Jason Moser, thanks for listening, and we'll see you next week.