Brief:

• Facebook is developing a voice-powered virtual assistant similar to Apple's Siri, Amazon Alexa and Google Assistant, a spokesperson confirmed to Reuters.
• The social media giant's new voice and artificial intelligence (AI) technology will reportedly work with its augmented and virtual reality (AR/VR) products including Portal smart display, Oculus headsets and future products.
• A team based in Redmond, Washington, is leading the effort to build the new AI assistant, two former Facebook employees told CNBC, which first reported the news. Current director of AR/VR and Facebook Assistant Ira Snyder oversees the team, which has contacted vendors in the smart speaker supply chain, two people familiar with the matter told CNBC.

Insight:

Facebook's development of a voice-powered virtual assistant is a necessary step for the social media company to keep apace with rivals that are working to transform how consumers interact with cutting-edge technology. While Apple helped to popularize voice assistants with the introduction of Siri for the iPhone in 2011, Amazon and Google are boosting their adoption as smart speakers have gained traction among consumers in recent years.

Their popularity has created another marketing channel for advertisers that encompasses podcasts, product searches, voice commerce and apps, such as branded "skills" for Amazon Alexa or "actions" for Google Assistant. The number of voice assistants in use will jump threefold to 8 billion by 2023 from 2.5 billion at the end of last year, per a forecast from Juniper Research, suggesting that Facebook now wants to get in on the action and diversify its tech offerings.

Facebook has previously experimented with AI-powered chat technology, such as its M assistant for Messenger that was released in 2015 as a limited beta test. The company ended the experimental project last year after studying how people use virtual assistants on their smartphones and using the insights to inform future AI projects within Facebook's ecosystem.

The social media giant's bigger challenge is creating a widely accepted hardware platform for a new virtual assistant. The company’s effort to market a smartphone fizzled six years ago, and its Oculus virtual reality (VR) headsets haven’t grown beyond a niche market. It's unclear how many Portal smart displays the company has sold since introducing the product last year. Amazon and Google are the market leaders for smart speakers, but they also face growing competition from Apple and soon Facebook.

Like Google, Facebook makes most of its money from advertising, which could be boosted further by using its new voice assistant in creative ways. The key challenge is serving people ads that aren't perceived as intrusive while consumers perform daily tasks with a smart speaker, such as asking for a weather forecast, searching for online information or placing a grocery order. It would also have to convince marketers buy into the idea of building voice-based applications on yet another platform.

Google this month updated its Assistant app for Android with features that include showing search ads, the first time that the search giant has added ads to its virtual assistant experience. Amazon has a rapidly growing digital ad business, but has said that it doesn't have plans to sell ads on Alexa devices. Facebook, however, could use its new voice assistant as an ad channel that brings in more revenue and furthers its place in the advertising duopoly.