Conversational AI was a big deal—until ChatGPT turned it into a low-hanging fruit.

“Go up to any conversational-AI company today and ask them, ‘How would you define yourself?’. That should give you a clue as to how confused they are,” said an executive who previously worked at one such firm.

Take Yellow.ai, for instance. The nine-year-old firm, now based in the US but with roots in Bengaluru, was seen as the gold standard in conversational AI. It has over 1,300 clients globally, including pizza-restaurant chain Domino’s, multinational conglomerates Sony and the Lulu group, and automaker Hyundai, among others. Its products—voicebot and chatbot—have worked wonders; to the extent that Yellow.ai raised nearly $102 million in funding so far, from the likes of Westbridge Capital, Sapphire Venture, Salesforce Ventures, and Lightspeed Venture Partners.

The last fundraise, though—of over $78 million—was way back in 2021. Of late, the tides are shifting.

Until 2022, every company in this space had different approaches to natural language processingNatural language processingA subfield of artificial intelligence, it's a technology that gives computers the ability to understand and process the human language, the executive quoted above said. ChatGPT then came in and raised the stakes. There’s suddenly competition from all corners, including Big Tech.

Earlier in July, Meta acquiredBestTechieMeta's AI Ambitions: Voice Cloning and Elon Musk's AI Bot Shenanigans voice-replication startup PlayAI. In May, Microsoft partnered with TwilioBusinesswireTwilio Announces Multi-Year Strategic Partnership With Microsoft to Accelerate Conversational AI Initiatives, an American cloud-communications company, for its conversational-AI platform. IT-services giant Accenture went shopping in late 2024 to buy Cresta, an AI-agentAI agentA system that allows users to build and manage independent AI agents that can perform tasks with minimal human intervention platform for customer service. Google and Amazon, too, revamped their customer-experience platforms to improve AI functionalities.

“In the last year and a half, we’ve seen much lower demand from clients for Yellow.ai’s solutions as compared to the larger players,” said a pre-sales consultant at IT-services firm Wipro. Another from Cognizant Technology reported similar findings.