AI-Based Recommendation System Market Report 2025

This report covers market characteristics, size and growth, segmentation, regional and country breakdowns, competitive landscape, market shares, trends and strategies for this market. It traces the market’s historic and forecast market growth by geography.

The AI-based recommendation system market size has grown rapidly in recent years. It will grow from $2.21 billion in 2024 to $2.44 billion in 2025 at a compound annual growth rate (CAGR) of 10.5%. The growth in the historic period can be attributed to increasing demand for personalized recommendations, increasing data availability, demand for efficient workforce management, growth in e-commerce, demand for cross-selling and upselling, application in education and e-learning.

The AI-based recommendation system market size is expected to see rapid growth in the next few years. It will grow to $3.62 billion in 2029 at a compound annual growth rate (CAGR) of 10.3%. The growth in the forecast period can be attributed to rising adoption of streaming services, expansion of recommendation systems in healthcare, compliance and regulatory requirements, expansion of digital advertising, optimization of content delivery networks (CDNS). Major trends in the forecast period include personalization dominance, real-time recommendations, adaptive learning models, multi-modal recommendations, enhanced user feedback mechanisms, social influence analysis.

The increasing adoption of smart devices is projected to drive the growth of the AI-based recommendation system market in the future. Digital advertising encompasses marketing through online platforms, such as websites and streaming content, and includes various media formats like text, images, audio, and video. The growth of digital advertising is fueled by its ability to reach audiences, provide targeting capabilities, deliver measurable results, maintain cost-effectiveness, and offer personalization. AI-based recommendation systems play a crucial role in digital advertising by enhancing targeting, personalization, and overall campaign effectiveness, which in turn boosts user engagement and conversion rates. For instance, in August 2024, Kochava Inc., a US-based technology company, reported that US advertisers are anticipated to spend $3.1 billion on digital out-of-home (DOOH) advertising in 2024, representing a 28% increase from the previous year. Therefore, the rising adoption of smart devices is contributing to the growth of the AI-based recommendation system market.

Prominent players in the AI-based recommendation system market are actively innovating technologies such as recommender system support to elevate the efficiency and efficacy of recommendation engines. These systems, powered by algorithms or software tools, analyze user data and preferences to generate tailored recommendations for products, services, content, or other items of interest. An illustration of such innovation is the January 2024 launch of recommender system support by Arthur, a US-based AI performance platform, heralding a significant advancement in AI technology. This novel technology aims to revolutionize the utilization of recommender systems in online businesses, elevating customer satisfaction levels and driving revenue growth. Leveraging AI capabilities, this solution enhances recommendation engines' accuracy and customization, featuring functionalities such as model overview page, metrics dashboard, data drift monitoring, advanced querying, and filtering, thereby enhancing the overall user experience through personalized recommendations.

The increasing adoption of smart devices is anticipated to drive the growth of the AI-based recommendation system market in the future. Smart devices are electronic gadgets connected to the internet that enable users to remotely control, monitor, and automate tasks, significantly enhancing convenience and efficiency in daily life. Several factors contribute to the rising adoption of smart devices, including improved connectivity, convenience, and cost savings. AI systems engage users by offering personalized content and suggestions, enhancing their overall experience and encouraging them to explore and adopt additional smart devices. For example, in October 2024, Demandsage, a US-based automated reporting platform that utilizes data science to provide real insights, reported that by 2022, the percentage of smartphone users in the United States reached 76.5%, marking a 3.8% increase compared to the previous year. Thus, the rising adoption of smart devices is fueling the growth of the AI-based recommendation system market.

Major companies operating in the AI-based recommendation system market are Alphabet Inc., Microsoft Corporation, Alibaba Group Holding Limited (Alibaba), Meta Platforms Inc., Amazon Web Services, Huawei Technologies Co. Ltd., Tencent Holdings Limited, Intel Corporation, International Business Machines Corporation, Oracle Corp, SAP SE, Netflix, Hewlett Packard Enterprise (HPE), Salesforce Inc., Adobe Inc., Sentient Technologies, RecomTech, Kibo Commerce, SmartRecs, AIRecom, IntelliChoice, Unbxd Inc., Coveo Solutions Inc., Algonomy Software Pvt. Ltd., Recolize GmbH, Dynamic Yield Inc., IntelliSuggest, RecomAId, SuggestAI, AIAdvise.

North America was the largest region in the AI-based recommendation system market in 2024. Asia-Pacific is expected to be the fastest-growing region in the forecast period. The regions covered in the ai-based recommendation system market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East and Africa. The countries covered in the ai-based recommendation system market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

The AI-based recommendation system market consists of revenues earned by entities by providing services such as data collection, data preprocessing, machine learning models, algorithm training and tuning, feedback collection and analysis, monitoring, and maintenance. The market value includes the value of related goods sold by the service provider or included within the service offering. The AI-based recommendation system market also includes sales of data storage systems, data processing tools, user interfaces, feedback loops, ranking and filtering, and feature extraction. Values in this market are ‘factory gate’ values, that is, the value of goods sold by the manufacturers or creators of the goods, whether to other entities (including downstream manufacturers, wholesalers, distributors, and retailers) or directly to end customers. The value of goods in this market includes related services sold by the creators of the goods.

The market value is defined as the revenues that enterprises gain from the sale of goods and/or services within the specified market and geography through sales, grants, or donations in terms of the currency (in USD, unless otherwise specified).

An AI-based recommendation system refers to a technology leveraging artificial intelligence (AI) algorithms and machine learning techniques to analyze extensive datasets, user preferences, and behavioral patterns. Its objective is to furnish personalized recommendations and suggestions to users. By tailoring suggestions to individual preferences, interests, and needs, these systems amplify user experiences, boost engagement, and elevate customer satisfaction levels across diverse industries and applications.

The primary types of AI-based recommendation systems include collaborative filtering, content-based filtering, and hybrid recommendation approaches. Collaborative filtering, a pivotal technique in recommendation systems, predicts a user's preference for an item by analyzing the preferences or behaviors of other users. Its deployments span across on-premise and cloud environments, with applications extending to diverse sectors such as e-commerce platforms, online education, social networking, finance, news and media, healthcare, among others.

The AI-based recommendation system market research report is one of a series of new reports that provides AI-based recommendation system market statistics, including AI-based recommendation system industry global market size, regional shares, competitors with a AI-based recommendation system market share, detailed AI-based recommendation system market segments, market trends and opportunities, and any further data you may need to thrive in the AI-based recommendation system industry. This AI-based recommendation system market research report delivers a complete perspective of everything you need, with an in-depth analysis of the current and future scenario of the industry.

The revenues for a specified geography are consumption values that are revenues generated by organizations in the specified geography within the market, irrespective of where they are produced. It does not include revenues from resales along the supply chain, either further along the supply chain or as part of other products.

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