Report: Chatbot pioneer considers collaborating with competitors Google and Meta

AI startup Character.AI's first-mover advantage has gradually weakened and faces increasing competitive pressure. To cope with the increasingly fierce competitive environment, on Monday, July 1st, Eastern Time, according to media reports, Character.AI has begun preliminary discussions with competitors such as Google, Musk's xAI company, Meta, and others for potential cooperation opportunities.

These collaboration agreements may include Character.AI leveraging partners' computing resources to enhance research and development capabilities. In exchange, Character.AI will provide a certain level of intellectual property sharing.

Public information shows that the AI startup Character.AI was founded by two former Google AI technology experts in November 2021, causing a sensation in the tech industry with its highly "entertaining" AI chatbot technology. The chatbot provides users with a unique experience of engaging in surreal role-playing conversations with anime characters, TV celebrities, and historical figures, attracting the attention of millions of users.

The pressure on AI startups is increasing, facing high operating costs, strong competitors, and talent poaching

Currently, AI startups are facing increasing pressure. Like other AI startups, Character.AI not only faces high costs of training and running AI models but also faces fierce competition from tech giants and large competitors in the industry.

With tech giants like Meta and Google intensively developing new personalized chatbots and the novelty of personalized chatbots gradually fading, Character.AI's first-mover advantage has gradually weakened. The company is now facing a fate similar to other AI startups, which is being potentially acquired by larger tech companies.

Moreover, AI startups also face talent poaching from tech giants. These companies are usually founded by scientists who have made significant contributions in AI research. For example, Character.AI's CEO Noam Shazeer and co-founder Daniel De Freitas have pioneering contributions in the AI field, which is also a key attraction for investors.

Competitors are also eyeing Character's talent, especially the company's dozens of researchers, many of whom were outstanding talents at tech giants like Meta and Google.

Meta has shown a strong interest in Character.AI's talent, with CEO Zuckerberg directly contacting potential talents from competitors. According to LinkedIn profiles, in recent months, Character researchers Alexei Baevski and Vinay Rao have joined Meta. Additionally, sources revealed that researcher Wendy Shang has also moved to Mistral, an open-source software company based in Paris. Baevski had previously worked at Meta; Rao and Shang previously worked in Google's AI lab.

Character.AI's Relationship with Google

For the founders of Character.AI, establishing any form of partnership with Google first requires addressing the "legacy issues" that led them to initially leave Google.

Shazeer and De Freitas publicly stated that they founded Character.AI because Google delayed the release of their jointly developed large language model LaMDA. They believed that advancing this technology through a startup company would be more efficient. Shazeer envisioned that Character.AI's robots could serve as "billion-hour experienced" educators or therapists, providing professional and in-depth services.

Despite past disagreements with Google, Google was still willing to provide financial support last year. Media reports indicated that Google showed support for Character.AI through convertible bonds. According to sources familiar with the company's leadership, these bonds will convert into company equity once Character.AI completes a new round of venture capital financing and secures a lead investor.

However, Character.AI seems to be facing some difficulties in raising new funds. Over the past year, the company has held multiple discussions with investors including Sequoia Capital, but according to sources familiar with the company's leadership, the company has not completed a new round of fundraising. When asked for comments by the media, Sequoia Capital chose to remain silent. Currently, Character.AI's financial situation relies mainly on its existing cash reserves and stable income generated by a $9.99 monthly subscription service.

According to Similarweb's data analysis, Character.AI's growth rate appears to be slowing down. In May of this year, the website had 12.6 million monthly unique visitors, a decrease from 14.8 million in the same period last year. Meanwhile, Google's AI assistant Gemini (formerly known as Bard) has shown strong growth, with monthly unique visitors increasing from 35 million a year ago to 51 million.

Thanks to Google's strong support, the company is not at immediate risk of a funding chain rupture. However, in order to further enhance brand attractiveness and create conditions for potential future advertising placements, Character.AI still needs to continuously attract new user groups, especially young users who may be willing to pay for subscription services.

Currently, the company is attracting and expanding its user base by introducing new features, such as allowing users to engage in two-way conversations with chatbots, providing interactive experiences similar to phone calls. The company's leadership is focused on growth strategies and exploring revenue sources beyond the subscription model, such as opening up model usage rights to developers through application programming interfaces to create new profit points Character.AI is actively developing the next generation of large-scale language models to further enhance the performance of its chatbots. It is reported that the company has applied Mistral's model to internal projects. In addition, Character.AI maintains a high level of attractiveness and activity among users. There is a dedicated forum on Reddit for discussing Character.AI, attracting 1.4 million members. Users on the forum exchange tips on creating characters and share how to achieve personalized fantasy experiences through characters