Five9’s acquisition of Level AI is another sign of the rapid consolidation underway in the conversational AI space. Following a briefing by Five9, here are my takeaways on the deal and thoughts on the broader market dynamics.
Level AI is a $20M ARR company, growing 50% year over year, that Five9 is acquiring for $325M. Like Cresta, which is being acquired by Salesforce, Level AI has been part of Five9’s partner ecosystem and resale portfolio since 2022.
I primarily knew Level AI for its Quality Management (QM) and coaching capabilities. What I hadn’t fully appreciated was how much it had expanded its portfolio into a broader AI suite spanning conversation intelligence, Voice of the Customer (VoC), and AI agents. Five9 CEO Amit Mathradas highlighted two notable customers, Zillow (jointly with Five9) and a large unnamed APAC airline, that have adopted the full suite.
Five9 intends to leverage Level AI in three ways:
Participate in the market for AI platforms that businesses can overlay on their existing CCaaS infrastructure.
Address the on-premises contact center opportunity. Level AI has a solution for these environments, supported by its proprietary models.
Accelerate Five9’s AI roadmap. This aspect couldn’t be discussed in detail, as the acquisition has yet to close.
These three objectives align with some key market trends I have been discussing for a while.
1. Businesses prefer best-of-breed AI solutions for now
Businesses are favoring best-of-breed, customer-facing agentic solutions that can be layered over their existing contact center infrastructure.
2. Consolidation in the conversational AI market
The conversational AI (CAI) ecosystem is becoming increasingly crowded and competitive. Last October, I counted 650 participants. I now estimate that number at around 800.
More importantly, a handful of players have crossed the $100M ARR threshold. The emergence of these “Chimps”, to borrow Geoffrey Moore’s terminology, is putting increasing pressure on the long tail and driving consolidation.
In less than five weeks, we have seen four significant acquisitions announced: Boost AI by Automation Anywhere, Cresta by Salesforce, Ada by Dialpad, and Level AI by Five9.
3. AI adoption is taking precedence over cloud migration
Businesses have shifted their priorities from migrating to the cloud to deploying AI. At the same time, geopolitical instability is prompting enterprises outside the US to consider sovereign solutions or retain their on-premises infrastructure.
This creates an opportunity for AI solutions that can accommodate such infrastructures, including on-premises deployments, without requiring businesses to undertake a broader platform migration.
The next couple of quarters will be critical for players in the conversational AI platform space to build the scale needed to compete in this rapidly expanding market or pivot to a more focused strategy.