Character.ai: The Rising AI App Closing the Gap on ChatGPT in the US

Character.ai Surges in Mobile Usage, Approaching ChatGPT Popularity

Character.ai, the innovative AI app that allows users to create personalized AI characters, is rapidly gaining traction in mobile app usage, now nearing the popularity of ChatGPT. According to a recent analysis by market intelligence firm Similarweb, Character.ai's mobile applications—backed by a16z—boast 4.2 million monthly active users in the U.S., compared to nearly 6 million active users for ChatGPT's app.

This represents significant growth since Character.ai's launch in May 2023, when the startup announced over 1.7 million installs within its first week. However, it's important to note that installations don't directly translate to active users. A typical mobile app experiences a 30-day retention rate of only 3% to 4%, with uninstall rates exceeding 40% within the same period, based on data from Appsflyer. This indicates that Character.ai has successfully retained a portion of its initial users and increased engagement since its introduction.

While Character.ai shows promising mobile app usage, ChatGPT maintains a lead in web engagement. Many Character.ai users seem to favor building and interacting with their AI chatbots on mobile devices rather than through a web platform. Globally, ChatGPT is far ahead on Android as well, recording 22.5 million monthly active users compared to Character.ai’s 5.27 million.

Interestingly, Character.ai is appealing to a significantly younger audience. On desktop platforms, approximately 60% of its user base consists of individuals aged 18 to 24, a demographic that remained stable over the summer, even as ChatGPT's website traffic dipped. In July, young users constituted only 27% of ChatGPT’s web traffic, down from 30% in April.

Other AI platforms also show lower numbers among the 18 to 24 age group. In contrast to Character.ai's impressive 60%, Perplexity.ai, Midjourney, Anthropic, and Bard had significantly lower percentages at 22.7%, 22.3%, 25.3%, and 18.46%, respectively.

As for ChatGPT, it has experienced a 3.2% decline in global web visits for three consecutive months, totaling 1.43 billion in August, following notable 10% drops in both June and July, as reported by Reuters and Similarweb. Additionally, the average time spent on the ChatGPT site decreased from 8.7 minutes in March to just 7 minutes by August.

Similarweb speculates that Character.ai's retention rate remained resilient during the summer because the app is primarily designed for entertainment rather than serving as a research or homework tool. While its website traffic saw a slight decline over the summer, this was offset by a rise in mobile app users.

Fortunately for ChatGPT, it has begun to recover, with traffic rebounding in the U.S. as the school year commenced. In August, web visits increased by 0.4%, and there was a 3% month-over-month rise in unique visitors domestically, alongside a 0.3% increase globally.

Character.ai has considerable room for further growth, especially following its impressive $150 million in Series A funding earlier this year, which propelled its valuation to $1 billion. Despite the increasing competition from other AI character generators, investors are optimistic about Character.ai's founders—Noam Shazeer and Daniel De Freitas—both of whom previously led a team at Google that developed LaMDA (Language Model for Dialogue Applications), a significant language model for conversational AI.

During a16z’s investment announcement, GP Sarah Wang praised the founders as “trailblazers in AI for nearly two decades.” She noted, “They’ve created a powerful platform that integrates both model and application, enabling Character.ai to continuously enhance its product as more users engage with its characters.”

The real question remains: will young users continue to adopt Character.ai, or will it prove to be merely another fleeting AI trend? While Character.ai has yet to respond to inquiries regarding Similarweb’s findings, updates will be provided if a statement is made.