Google (NASDAQ:GOOG) (NASDAQ:GOOGL) recently announced that it will open up the application program interface, or API, for its personal assistant Google Now to developers, which will allow third-party companies to create interactive "cards" for the app.
The business of digital assistants
The intelligent virtual agent, or IVA, market is expected to grow from $352 million in 2012 to $2.1 billion by 2019, according to Transparency Market Research. But for Google, Apple, and Microsoft, the IVA market is less about generating revenue and more about locking in users since their assistants are bundled with their respective products.
When Apple launched Siri in 2011, it sparked mainstream interest in the IVA market. Google responded the following year with Google Now, a voice assistant that mined users' search and locations histories to display relevant cards. The iOS version of Google Now lacked voice commands, which were eventually added in late 2013.
In response to Siri and Now, Microsoft launched Cortana last year. Cortana is exclusive to Windows Phones, but Microsoft reportedly plans to launch the service as an app for iOS and Android devices.
Google wants Google Now to be everywhere
Last year, Google delivered Google Now cards on users' wrists with Android Wear, its slimmed-down OS for smartwatches. In January, it launched a pilot program that enabled about 40 companies -- including Pandora, Duolingo, eBay, Zillow, and Lyft -- to create cards.
For example, the Pandora card can add music recommendations to Now, and the Duolingo card can remind users to take their daily Spanish lesson. When placed on Android Wear, these cards become miniature smartwatch apps.
Opening up the Google Now API to all developers was the inevitable next step. If more companies hop aboard, Google Now will receive more third party-data to scour through with voice search. This could make Google Now a more powerful voice search assistant than Siri or Cortana.
By comparison, Apple hasn't provided developers with an official open API for Siri. Microsoft opened up Cortana's API to other companies last year, but interest could remain low until it launches on other platforms such as iOS, Android, and Windows 10.
Plans for ecosystem growth
Google and Microsoft share a common goal with IVAs: to tether more users to their search and advertising ecosystems.
Google is still the king of search, with an 88% market share worldwide, according to StatCounter's January 2015 numbers. But Microsoft Bing (which also includes Yahoo! results) controls nearly 9%. Advertising accounts for the majority of Google's top line, but it's not a meaningful source of revenue for Microsoft. However, that might change after Microsoft consolidates the mobile and PC markets with Windows 10, which will use Cortana to synchronize both offline and online search data to the cloud.
Apple's plans aren't as well defined. It doesn't generate meaningful revenue from advertising, and its cloud ecosystem is much smaller than Google's or Microsoft's. Since Apple doesn't have its own search ecosystem, Siri queries a mix of apps and sites, such as Bing, Yahoo!, Google, Wolfram Alpha, Rotten Tomatoes, The New York Times, and Yelp. To reduce Google's influence over Siri, Apple made Bing Siri's default search engine in iOS 7.
Unlike Google Now and Cortana, there's no clear way to monetize Siri. It certainly felt like a "killer app" in 2011, but today all three major mobile platforms have their own digital assistants.
Benefits and drawbacks
Google Now excels at showcasing Google's ability to track users' activities across its ecosystem. It uses those strengths to widen its defensive moat against Siri and Cortana, and helps Google retain a presence on iOS devices.
However, opening up Google Now to other companies could clutter up its carefully curated feed with spam. If that spam spills over to Android Wear devices, it could reduce demand for the company's OEMs' smartwatches, which only shipped 720,000 units last year, according to research firm Canalys.
Google is clearly serious about evolving its search engine beyond a search bar. With voice search and interest-based cards, Google Now has become the public face of the company's sprawling ecosystem. Opening up Now's API to third-party developers is certainly risky, but it could quickly expand its ecosystem beyond its own borders and leave Siri and Cortana in the dust.
Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), Pandora Media, Yelp, and Zillow Group. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), Pandora Media, and Zillow Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.