The early advantages of AI start-up company Character.AI have gradually weakened and faced increasing competitive pressure. In response to the increasingly fierce competitive environment, according to media reports on the morning of Monday, July 1, Eastern Time, Character.AI has begun preliminary discussions on potential cooperation opportunities with competitors such as Google and Musk's xAI company and Meta.

These cooperation agreements may include Character.AI utilizing the partner's computing resources to enhance R&D capabilities and in exchange, Character.AI will provide a certain degree of intellectual property sharing.

Public information shows that Character.AI was founded by two former Google AI technical giants in November 2021. Its highly "entertaining" AI chatbot technology has caused a sensation in the technology industry. The chatbot provides users with a unique experience of super-surreal role-playing communication with anime characters, TV celebrities, and historical figures, attracting the attention of millions of users.

The pressure on AI start-up companies is increasing, not only high operating costs and strong competitors, but also being "dug in the corner".

Currently, AI start-up companies are facing increasing pressure. Character.AI and other AI start-up companies not only face high costs of training and operating AI models, but also face fierce competition from technology giants and large competitors in the industry.

As Metas and Google and other technology giants develop new personalized chatbots intensively, and the novelty of personalized chatbots gradually fades, Character.AI's early advantages have gradually weakened, and the company is currently facing a similar fate as other AI start-up companies, which may be acquired by larger technology companies.

Moreover, AI start-up companies also face the "digging in the corner" of technology giants. Because these companies are usually founded by scientists who have made significant contributions in AI research. For example, the CEO of Character.AI, Noam Shazeer, and co-founder Daniel De Freitas, both have a pioneering contribution to the AI ​​field, which is also an important reason for attracting investors.

Competitors are also eyeing Character's talents, especially dozens of the company's researchers, many of whom are outstanding talents from technology giants such as Meta and Google.

Meta has shown a strong interest in Character.AI's talents. Its CEO, Zuckerberg, has directly contacted potential competitors for talent. According to LinkedIn personal information, research scientists Alexei Baevski and Vinay Rao joined Meta in the past few months. At the same time, according to insiders, researcher Wendy Shang has also transferred to Mistral, an open source software company based in Paris. It is reported that Baevski had previously worked at Meta; Rao and Shang had previously worked at Google's AI lab.

The "relationship" between Character.AI and Google

For the founders of Character.AI, to establish any form of partnership with Google, they first need to solve the "legacy problem" that caused them to leave Google in the first place.

Shazeer and De Freitas have publicly stated that the reason they founded Character.AI is because Google postponed the release of their jointly developed LaMDA, a large-scale language model. They believe that it is more efficient to promote this technology by establishing a start-up company. Shazeer once anticipated that in the future, Character.AI's robots can act as educators or psychotherapists with "one billion hours of experience", providing professional and in-depth services.

Despite disagreements with Google, Google was still willing to provide financial support last year. It is reported that Google expressed support to Character.AI in the form of convertible bonds. According to two insiders who have had communication with the company's leadership, this bond will be converted into company equity when Character.AI completes a new round of risk capital financing and finds a leading investor.

However, it seems that Character.AI has encountered some difficulties in raising new funds. In the past year, the company has held multiple discussions with investors, including Sequoia Capital, but according to two insiders who have had communication with the company's leadership, the company has not yet completed a new round of risk capital fundraising. In response to media requests for comments, Sequoia Capital chose to remain silent. Currently, Character.AI's financial situation relies mainly on its existing fund reserves and a stable income brought by a $9.99 monthly subscription service.

According to Similarweb's data analysis, Character.AI's growth rate seems to be slowing down. In May of this year, the monthly independent visitors to its website decreased from 14.8 million in the same period of last year to 12.6 million. At the same time, Google's AI assistant Gemini (formerly known as Bard) has shown strong growth momentum, and its monthly independent visitors have grown from 35 million a year ago to 51 million.

Thanks to Google's strong support, the company does not face the risk of a broken capital chain in the short term. However, in order to further enhance its brand appeal and create conditions for possible future advertising placement, Character.AI still needs to constantly attract new user groups, especially young users who may pay for subscription services.

Currently, the company is attracting and expanding its user base by launching new functions, such as allowing users to have two-way conversations with chatbots and providing interactive experiences similar to phone calls. The company's top executives are focusing on growth strategies and exploring sources of income other than subscription models, such as opening model usage rights to developers through APIs to create new profit points.

Character.AI is still 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 models to internal projects. In addition, Character.AI maintains a high level of attraction and activity among users. There is a forum on Reddit specifically for discussing Character.AI, which has attracted 1.4 million members. Users on the forum exchange tips on creating characters and share how to achieve personalized fantasy experiences through them.