Character.ai: the chatbot Google would not ship
Character.ai is an AI chatbot platform where users create characters and talk to them by text or voice. It is run by Character Technologies, Inc. of Menlo Park, California, and was founded in 2021 by Noam Shazeer and Daniel De Freitas. It is privately held and has been led by CEO Karandeep Anand since June 2025. In 2025 the company reported about 20 million monthly users and a revenue run rate above $30 million.
Founding
Shazeer joined Google in 2000 and was one of the authors of the 2017 paper Attention Is All You Need, which introduced the Transformer. De Freitas started an open-domain chatbot project at Google that became Meena and then LaMDA. When Google would not release the chatbot to the public, the two left in 2021. Character.ai's beta opened on September 16, 2022, two months before ChatGPT, and the iOS and Android apps arrived in May 2023.
Funding and the Google deal
Character.ai raised a $43 million seed round and then, in March 2023, a $150 million Series A led by Andreessen Horowitz at a $1 billion valuation. Training and serving its own models was expensive. In August 2024 Google agreed to pay about $2.7 billion for a non-exclusive licence to Character.ai's models and rehired both founders and part of the research team. Investors were bought out at a price implying a valuation of roughly $2.5 billion. Google did not buy the company, and general counsel Dominic Perella became interim CEO.
How Character.ai makes money
Chatting is free. Revenue comes from c.ai+, a $9.99-a-month subscription launched in 2023 that gives priority access, faster replies and early features, and from advertising added since 2025. The main cost is computing: the company said in June 2024 that it served more than 20,000 inference queries per second and had cut serving cost about 33-fold since late 2022. After the Google deal it stopped training frontier models and moved to adapting open-source models.
New CEO, new direction
Karandeep Anand, previously VP of business products at Meta, became CEO in June 2025. He dropped the founders' aim of personalised superintelligence and recast Character.ai as an AI entertainment platform, adding a social feed, Scenes, Streams, Stories and the AvatarFX video model alongside chat.
Teen safety and lawsuits
In October 2024 Megan Garcia sued Character.ai and Google over the death of her 14-year-old son, and other families in Colorado, New York and Texas followed. In May 2025 a federal judge declined to dismiss the Garcia case on First Amendment grounds. Character.ai added a separate model for teens, parental insights and suicide-prevention prompts, and from November 25, 2025 it ended open-ended chat for users under 18. In January 2026 the companies agreed to settle five cases on confidential terms. The FTC opened an inquiry into AI companion bots in September 2025, and Pennsylvania sued in May 2026, alleging bots posed as licensed psychiatrists.
Competitors
Character.ai competes with general assistants that can role-play, including ChatGPT, Gemini, Claude and Meta AI, and with companion apps such as Replika and Talkie. Its distinctive asset is a library of millions of characters made by its users.
What to watch
Key questions for 2026 and beyond are whether ads and subscriptions can grow revenue from adult users after the teen restrictions, how the remaining lawsuits and the Pennsylvania case end, and how new AI-companion rules for minors are enforced. Co-founder Noam Shazeer's move from Google to OpenAI in June 2026 is a reminder that the people who built the original technology are no longer part of the company.
