How Big is Character AI, the Companion App That's Getting Sued Right Now?

Character AI is one of the biggest companion AI apps right now. In fact, our App Intelligence shows it's 4th in downloads and 6th in revenue in the micro category of companion AI apps on the App Store right now and 2nd/14th on Google Play, respectively.

AI apps, especially the LLM kind, operate in somewhat of a gray area. It's all simple and nice when all it's being asked are technical questions or help with homework or recipes, but things get really dicey when you ask an LLM to be your friend.

That's the core of last week's sad news involving the app and a new lawsuit filed against it.

In case you aren't familiar, Character AI lets users customize chatbots they can interact with for entertainment purposes.

How many people do that? Quite a few...

We estimate that Character AI saw 35M downloads since it was released back in May of 2023. The majority of those downloads, roughly 71%, came from Google Play (but not the revenue, more on that below), while the App Store was responsible for 29%.

Looking at the trend, it seems that excitement for the app has risen sharply in the last few months, resulting in monthly downloads rising from roughly 1.1M during the first half of this year to more than 4M every month during the summer. An indication kids are a big part of its demographics.

With summer gone and school starting, downloads dropped again in September.

Revenue, unlike downloads, is led by the App Store, which was responsible for 65% of its $3.7M estimated net revenue since release. And just like downloads, revenue rose after being pretty flat, during the summer months, growing by as much as 50% between May and June.

At $9.99/mo, the only tier the app offers, and $400K of estimated gross revenue (before store fees) the app saw in September, we can estimate its got a little over 40K paying users. Our data further shows the majority of those paying users are based in the US.

I hate thinking about it this way, but that's a lot of potential lawsuits.

Setting a Precedent

I believe that the ethics of AI, especially unmoderated like that, will be the main focus for the next few years as the technology evolves and makes its way into everyday life, and this case could set a precedent.

On the one hand, it's hard to fault an LLM for not understanding subtexts that some humans wouldn't have understood in the same way. On the other hand, should LLMs be allowed to penetrate that deeply into our daily lives?

Character AI has added a new head of trust and safety to its ranks to prevent future incidents, a not-so-enviable position right now if you ask me, but a move I expect other larger competitors will follow before the year ends and in a weird way, a moat that will prevent smaller companies from entering this space.