AI Companions Will Be Everywhere

🎤 Setting The Stage:

• AI companion apps have seen wild adoption numbers

• Popular apps such as CharaterAI have millions of active users

• Engagement numbers are staggering (up to 300 sessions per user per month and an average of 20 minutes spent on the site.

• People (me included) used to wave off AI companions as sexting apps for minors.

• In a recent study published in Nature, 30 participants reported that talking to an AI companion was the only thing that stopped them from committing suicide

• People reported the constant availability and lack of judgment as a great advantage of AI companions over humans

🤷🏼 Problem:

• One in four adults experience loneliness worldwide

• Vulnerable groups such as the elderly, single parents, and people with disabilities are also at high risk of feeling lonely

• Loneliness is linked to impaired sleep, symptoms of depression, and poorer general health

• Britain has gone as far as appointing a Loneliness Minister

• The problem might be similar or even worse in countries like India and China

• Many people have niche interests such as Poker, or Basketball that most of their social circle is not into

🔧 Solution:

• Niche AI companions for entertainment, to give company, or to learn from.

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🎲 Key Players:

• Character AI (270 M visitors in May alone with an average duration of 12 minutes according to Similarweb, $16.7M ARR; 57% of users are 18 to 24)

• Replika (Super users are late 30s and up, <20% of users are in romantic relationships with AI, >50% are in an IRL relationship)

• Pi

• Kindroid 

• Nomi

• Meta AI Characters (28 different characters users can chat with on FB, IG, and WhatsApp)

🙌 What Sets Top Companies Apart:

• People want to be heard. Often, it’s less important what the AI itself says. However, being a good listener is equally important for the bot.

• Emotional intelligence is often more important than raw intelligence. The model should never act as a know-it-all.

• The AI should not always be in the same (great) mood. Emotional variety makes the interaction more realistic.

🎯 Opportunities:

Idea 1) AI Companions For Poker (or other niche interests)

• Problem: People with niche interests such as Basketball or Poker often struggle to find like-minded people.

• Solution: An AI companion is there for the most excessive of online Poker sessions

• What We Like: 

  • Being better at online Poker can lead users to make money. This makes it easy to justify paying for the companion

  • People with a passion e.g. Poker might be into the hobby for years. If done correctly, they might remain a loyal customer for long

  • Niche interests allow for targeted user acquisition

• What we don’t like:

  • Requires a deep understanding of Poker or any other niche we go into

  • Churn could become a problem unless the companion solves a sustaining problem, alleviates a reoccurring pain, or helps the users to make money.

Idea 2) Companion For People With Chronic Diseases

• Problem: Upon being diagnosed with a chronic disease, patients seek to learn as much as they can about it. Especially, with rarer diseases, it is hard for them to find people in a similar situation.

• Solution: Create an AI companion for people with rare or chronic diseases

• What we like:

  • The companion can actually help people in dire situations

  • Niche groups congregate in certain spots and their members tend to share information. Hence, the app could spread via word of mouth

  • People are likely to have a high willingness to pay

• What we don’t like:

⚡️ Potential Risks:

• Data privacy, security, emotional dependence, bias, and manipulation

• Content moderation. Imagine the bot striking up a sexually charged conversation with a minor

• Business model can create adverse incentives not to help alleviate loneliness because that would mean the loss of a paying customer

💡 Takeaways:

• AI companion users don’t skew male. The ratio is about 50-50.

• The users skew around 30 years old and up

• There are many circumstances in which companion apps can provide relief or simply just an open ear. Examples I came across during research are:

  • Girl with Down syndrome who lives in a small rural town and has very few social contacts

  • Widower with a small child who does not have time to go out and does not feel ready to meet someone new

  • A person who just got out of an abusive relationship and now uses the AI to talk through her

• The general AI companions will probably be built by incumbents such as Replika, Character, and Meta. However, there are tons of niches to be filled

📚 Additional Resources:

• Nature study on chatbots and loneliness

• Blog post on AI companions

• The Innovation of Loneliness: The Risk and Potential of AI Companions

• Breakdown of Character AI’s numbers

• This week in startups episode with Eugenia Kuyda of Replika

FEEDBACK

Lots of love and see you next time!

Thanks for reading!

- Gregor

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