Google in Negotiation to Invest in AI Startup Character.AI

Google, the tech giant under Alphabet, is reported to be in talks to invest hundreds of millions of dollars in AI chatbot startup, Character.AI. The proposed investment could be structured as convertible notes, which is anticipated to strengthen the existing partnership between the two companies.

Character.AI’s Growth and Offerings

Character.AI is an AI chatbot startup, founded by ex-Google employees Noam Shazeer and Daniel De Freitas. The company’s chatbots allow users to converse with virtual versions of celebrities, such as Billie Eilish, or anime characters. Users have the option to create their own chatbots and AI assistants. The service is free, but a subscription model is available for users who wish to bypass the virtual queue to access a chatbot, priced at $9.99 per month.

Character.AI’s chatbots, which offer a variety of roles and tones, have proven popular with users aged 18 to 24. This demographic has generated around 60% of the company’s website traffic, according to data from Similarweb. The popularity of the service among this age group is helping Character.AI to position itself as a provider of engaging personal AI companions, a contrast to other AI chatbots like OpenAI’s ChatGPT and Google’s Bard.

Investment Details and Potential Impacts

The AI startup reported 100 million monthly visits to its website within the first six months of its launch. Currently, Character.AI is also in discussions to secure equity funding from venture capital investors. This could potentially place the company’s value at over $5 billion.

Previously, in March, Character.AI raised $150 million in a funding round led by Andreessen Horowitz, reaching a valuation of $1 billion. As the negotiations with Google continue, the terms of the deal are subject to change.

Google’s potential investment in Character.AI aligns with its previous investments in AI startups, including a $2 billion investment in model maker Anthropic in the form of convertible notes.

Regulatory Oversight of AI Investments

This trend of large tech cloud service providers investing in AI companies has caught the attention of the U.S. Federal Trade Commission. Its chair, Lina Khan, recently stated that the agency is scrutinizing these investments to identify any anti-competitive behaviors. The outcome of this review could have implications on the planned investment by Google in Character.AI.