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Global Recommendation Engine Market Size and Share Analysis 2023-2028
The Recommendation Engine Market is projected to experience substantial growth, increasing from USD 5,172 million in 2023 to USD 21,574 million by 2028, at a CAGR of 33.06% during the forecast period (2023-2028).
Recommendation engines serve as data filtering tools that employ various algorithms and data to suggest the most relevant items to individual customers. They achieve this by analyzing a customer’s past behavior and offering product recommendations based on their likely preferences. These integrated software systems analyze available data to present website users with items or services that may pique their interest, commonly found in e-commerce, social media platforms, and content-based websites.
|No. of Pages||
USD 4.1 billion in 2021
Deployment Mode, Type, End User, and Geography
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As the number of enterprises increases and competition intensifies, many companies are striving to integrate technologies like artificial intelligence (AI) into their applications, businesses, analytics, and services. A global trend towards digital transformation is taking place, focusing on enhancing the experiences of both customers and employees, a trend which automation solutions are leveraging.
The rapid digitalization in emerging economies, coupled with the expansion of the e-commerce market, has fueled the demand for recommendation engines. Integrating machine learning models into AI-based cloud platforms drives automation across various end-user industries.
Traditional consumer purchase decisions typically occurred at the store shelf, enabling brick-and-mortar retailers to gain insights into and influence consumer behavior and preferences significantly. However, the retail industry is undergoing a transformation with the rise of internet penetration and the emergence of new sales channels through e-commerce, mobile shopping, and smart technologies. Retailers are now embracing new technologies, such as smart point-of-sale solutions and self-checkout kiosks, to evolve into omnichannel stores. According to ZDNet, around 70% of companies either have a digital transformation strategy or are actively developing one. This shift provides retailers with opportunities to acquire new customers, enhance engagement with existing customers, reduce operational costs, and improve employee motivation, ultimately impacting revenue and margins positively. This favorable environment presents significant prospects for adopting recommendation engines in the forecast period.
One of the ongoing challenges in the recommendation engine market is incorrect labeling due to changing user preferences. However, developers are continuously working to enhance the accuracy and relevance of recommendations, and advancements in technology are expected to yield more effective solutions to this challenge in the future.
The Agents of Transformation Report from AppDynamics, a part of Cisco, revealed that during the COVID-19 pandemic, technology priorities shifted within 95% of organizations, with 88% emphasizing digital customer experience. Customers turned to self-service tools like chats, messaging, and conversational bots, prompting companies to enable these tools to maintain a high level of customer experience while reducing reliance on brick-and-mortar stores and live events, which were less feasible during social distancing measures. This increased adoption of technologies is expected to further boost the benefits derived from recommendation engines in these companies.
The market is segmented based on various factors, including deployment mode, type, end user, and geography.
Segmentation by Deployment Mode
Segmentation by Types
Hybrid Recommendation Systems
Segmentation by End-user Industry
IT and Telecommunication
Media and Entertainment
Other End-user Industries
Segmentation by Geography
Middle East and Africa
Enterprises are increasingly seeking ways and technologies to provide highly personalized customer experiences that are difficult for their competitors to imitate. These experiences leverage proprietary data to offer tailored interactions to millions of individual customers. When executed effectively, personalized customer experiences can set businesses apart, foster customer loyalty, and establish a sustainable competitive advantage, which is crucial in the current business landscape.
Customer decisions are no longer confined to physical stores; they now occur online, on web browsers, and mobile phones, in front of the digital shelf. For retail enterprises, the comparison of product price, place, and promotion extends beyond neighboring shelves to include alternative products from retailers worldwide. In this context, technologies like recommendation engines, powered by AI and ML, ensure that customers’ requirements are met and that their needs align with the offerings, giving businesses an edge over their competitors.
In response to growing customer demand, marketing professionals across organizations have been increasingly focused on enhancing customer experience. Robust omnichannel customer engagement strategies have been shown to yield positive results, including a 10% YoY growth, a 10% increase in average order value, and a 25% increase in close rates, according to Adobe. Brands with effective omnichannel strategies and consumer service enhancement programs also retain 89% of their customers, compared to 33% for brands with weak omnichannel engagement.
As the number of channels expands, technologies play a vital role in ensuring consistent messaging about brands’ offerings across all channels. The increasing demand for superior customer service is expected to drive demand and positively impact the recommendation engine market during the forecast period.
The growing demand for personalized digital commerce experiences is a key driver of the recommendation engine market. The banking and financial sector, as well as healthcare providers, are considered trustworthy in safeguarding consumers’ information. Businesses are leveraging AI technology to deliver targeted customer recommendations, drive sales, and improve customer satisfaction.
The Asia-Pacific region, led by countries like Australia, India, China, and South Korea, is expected to witness the fastest growth in the recommendation engine market. China, in particular, stands out in the Asia-Pacific region due to its rapid technological adoption, strong e-commerce players like Alibaba, and a strict regulatory environment that limits international players’ operations. This situation provides ample opportunities for domestic players and leads to moderate growth compared to the United States.
Alibaba, a prominent e-commerce giant in China, utilizes AI and machine learning to drive its recommendations. For instance, the AI OS online platform developed by the Alibaba search engineering team integrates personalized search, recommendation, and advertising to enhance user experience and drive business growth.
The recommendation engine market is characterized by its fragmentation, with the prominent presence of key players such as IBM Corporation, Google LLC (Alphabet Inc.), Amazon Web Services Inc. (Amazon.com Inc.), Microsoft Corporation, and Salesforce Inc. These market players are adopting various strategies, including partnerships, mergers, and acquisitions, to enhance their product offerings and gain a sustainable competitive advantage.
In January 2023, Coveo made an announcement about the debut of the New Coveo Merchandising Hub. This Hub offers a comprehensive feature set that enables companies to deliver highly relevant shopping journeys, thereby fostering customer loyalty and boosting profitability. Designed to empower merchandisers, the Hub allows the creation of tailored experiences that effectively drive conversions. It is worth noting that Coveo had previously acquired Qubit, a London-based start-up providing AI-powered customization technology for fashion companies and retailers, in October 2021.
In October 2022, Algonomy unveiled the availability of two significant connectors for Shopify and Commercetools. These connectors facilitate seamless and automatic data interchange between Algonomy’s products and e-commerce stores. By integrating online shops with Shopify or Commercetools, Algonomy Connectors enable real-time collection of product data. Consequently, businesses using these connectors gain improved control and insights over the catalog integration process, eliminating the need to rely on external organizations and resources for regular catalog data updates.
Key companies profiled in this report include IBM Corporation, Google LLC (Alphabet Inc.), Amazon Web Services Inc. (Amazon.com, Inc.), Microsoft Corporation, Salesforce Inc., Unbxd Inc., Oracle Corporation, Intel Corporation, SAP SE, Hewlett Packard Enterprise Development LP, Qubit Digital Ltd (COVEO), Algonomy Software Pvt. Ltd, Recolize GmbH, Adobe Inc., Dynamic Yield Inc., Kibo Commerce, Netflix Inc.
Recent Industry Developments
In January 2023, Coveo Solutions Inc. inaugurated a new office in London, England, with the primary objective of supporting its expansion in the European market. The newly established office will cater to the needs of various European clients, including esteemed companies such as Philips, SWIFT, Vestas, Nestlé, Kurt Geiger, River Island, MandM Direct, Halfords, and Healthspan. These companies have opted for Coveo AI to enhance the experiences of their customers, employees, and overall workplace environment. To further extend its reach, Coveo has engaged in collaborative efforts with system integrators, referral partners, and strategic allies in other regions. Through these partnerships, Coveo aims to provide advanced search capabilities, personalized recommendations, and efficient merchandising solutions to major corporations seeking to significantly elevate customer satisfaction, employee productivity, and overall profitability.
In August 2022, Google unveiled its plans to establish three new Google Cloud regions in Malaysia, Thailand, and New Zealand. These new regions will supplement the six regions previously announced in Berlin, Dammam, Doha, Mexico, Tel Aviv, and Turin. This strategic expansion reflects Google’s commitment to offering enhanced cloud services to businesses and organizations in these regions, enabling them to leverage cutting-edge technology and infrastructure to meet their diverse computing needs.
Key Questions Answered
What is the projected size of the Recommendation Engine Market?
The Recommendation Engine Market is anticipated to reach USD 5,172 million in 2023, and it is expected to grow at a Compound Annual Growth Rate (CAGR) of 33.06% during the forecast period, reaching USD 21,574 million by 2028.
What is the current size of the Recommendation Engine Market?
As of 2023, the Recommendation Engine Market is estimated to be USD 5,172 million.
Who are the major players in the Recommendation Engine Market?
The key players operating in the Recommendation Engine Market include IBM Corporation, Google LLC (Alphabet Inc.), Amazon Web Services Inc., Microsoft Corporation, and Salesforce Inc.
Which region is experiencing the highest growth rate in the Recommendation Engine Market?
The Asia-Pacific region is projected to have the highest Compound Annual Growth Rate (CAGR) over the forecast period (2023-2028) in the Recommendation Engine Market.
Which region holds the largest market share in the Recommendation Engine Market?
In 2023, the Asia-Pacific region accounts for the largest market share in the Recommendation Engine Market.