Character.AI, once a billion-dollar startup promising to bring personalized superintelligence to everyone, has implemented a significant strategic shift. Karandeep Anand, appointed as the company's CEO in June 2025, announced that the firm has abandoned its founders' Noam Shazeer and Daniel de Freitas' aspirations to develop artificial general intelligence (AGI). As part of the new direction, the company has moved away from developing its own language models and instead relies on open-source models such as Deepseek and Meta's Llama, while focusing its attention on AI entertainment.
The strategic change is partly driven by Google's agreement in August 2024 to license Character.AI's technology for approximately $2.7 billion, with the two founders departing to join Google's AI division. Anand, who previously served as Meta's VP of business products, claims that the company's revenue exceeds $30 million annually and is expected to reach $50 million by the end of 2025, while the number of paid subscribers has increased by 250 percent over the past six months. In addition to the $10 monthly subscription, the company recently introduced advertisements, including reward ads, to monetize in countries where subscriptions are not feasible. Currently, the platform has 20 million monthly active users who spend an average of 75 minutes per day conversing with chatbots.
This pivot comes at a particularly critical time for Character.AI as the company is at the centre of a child welfare lawsuit over the suicide of a 14-year-old user who took his life following extensive interactions with the platform's chatbots. According to Anand, the company has invested a disproportionate amount of resources over the past six months to serve under-18 users differently than adults, with more than 10 of its 70 employees working full-time on trust and safety. The company introduced a model for users under 18 last December, which provides narrower search options, and has implemented new features such as parental insights that allow parents to see how their children are using the application. Anand emphasizes that Character.AI is primarily a role-play application, not a companion app, and making the platform safe is a partnership between regulators, the company, and parents.
Sources:
Maggie Harrison Dupré
Kylie Robison
