As technology continues to evolve, a new frontier is emerging at the intersection of LLM and emotional companionship. During a recent seminar hosted by FutureX, industry experts delved into how large language models (LLMs) are not just enhancing technological capabilities but are also poised to unlock vast investment opportunities in a sector that could soon be worth billions. This seminar, driven by a year of comprehensive research, showcased the transformative potential of AI in meeting deep human emotional needs, predicting significant social and business impacts. Below are the key insights from this illuminating session."

1. Where does the greatest potential application opportunity for LLM lie?

The core of generational technological transformation lies in enhancing human well-being and meeting unfulfilled needs. From a perspective of sustainability and long-term business value, revolutionary technology should transcend material aspects and delve into improving all facets of human life quality. Historical technological revolutions, such as the industrial revolution and the rise of the mobile internet, primarily focused on optimizing material production and distribution, significantly enriching material resources and improving access to information. However, according to the annual World Happiness Report by the United Nations, factors influencing happiness are much more complex than just material wealth. The three critical factors include GDP per capita, social support, and the freedom to make life choices.

Technological advancements have historically contributed to GDP per capita growth but have not adequately addressed needs related to social support and personal freedom. Over the past decade, even in major economies like the US and China, there has been a significant mismatch between overall happiness, GDP growth, and the pace of technological advancement. In this context, LLMs may find their most significant application potential—providing more personalized, in-depth products and services that engage with human emotions and spiritual realms, thereby fulfilling a deeper quest for quality of life.

2. Current Technological Limitations in Meeting Emotional and Social Needs

Despite notable advancements at the material level, technology still falls short in addressing deeper emotional and social needs. This gap is evident through several key social phenomena and data points:

(a) Increasing Ubiquity of Loneliness: Statistics reveal that over 50% of Americans report feeling lonely, a significant increase from 3% in 1990 to 12% in 2020—a fourfold rise. This growth is driven by complex factors such as industrialization, urbanization, and population mobility, which have contributed to smaller work and family groups.

(b) Cultural Pursuit of Independence: The cultural emphasis on individual independence and mobility has further intensified feelings of loneliness, underscoring a societal shift that often prioritizes personal freedom at the expense of communal ties.

(c) Limitations of the Internet and Mobile Internet: While these technologies provide connectivity on a material level, their applications are lacking when it comes to addressing spiritual needs. Current offerings, such as games, videos, and social platforms, tend to stimulate short-term pleasure rather than fostering long-term emotional connections.

(d) Superficial Social Media Relationships: Platforms such as Facebook and WeChat have historically promoted shallow social interactions, focusing on increasing followers and garnering likes rather than cultivating deep, meaningful relationships.

(e) Lack of Genuine Social Relationships: Research estimates that only about 28% of friends on Facebook are genuine, with up to 40% being completely unknown "friends". The situation on WeChat is possibly even more dire, reflecting the superficial nature of connections formed on these platforms.

These limitations highlight the need for technological solutions that can bridge the gap between material connectivity and genuine emotional and social fulfillment.

3. Generation Z (born between 1995 and 2010) is Becoming the New Opinion Leaders

Generation Z, born between 1995 and 2010, is increasingly shaping cultural and societal norms as the new opinion leaders, particularly noticeable in the tech sector and consumer-facing platforms. As individuals between the ages of 13 and 25, Gen Z is navigating crucial stages of mental development, value formation, and integration into the workforce. Known as "digital natives," Gen Z exhibits several unique cultural traits:

(a) Intense Loneliness: Gen Z reports higher levels of loneliness compared to other age groups, with over 80% feeling isolated. This is often linked to social conditions and pervasive internet usage.

(b) High Expectations for Spiritual Fulfillment: This generation values personalization and self-expression highly, striving to align themselves with groups that reflect their values of diversity and equality, indicating a mature value system focused on belonging.

(c) Blurring Lines Between Digital and Real Worlds: Gen Z seamlessly integrates digital and real-world interactions. They are comfortable making friends online through platforms like Discord or following recommendations from bloggers for purchases. Their strong engagement with virtual idols and anime culture underscores their comfort with digital relationships and has significantly influenced related markets.

In summary, Gen Z places a high priority on self-actualization and belonging, as outlined in Maslow's hierarchy of needs. With their comfort in digital environments and their strong demand for personalization and community, we may see the rise of hybrid social platforms in the future. These platforms would blend AI-driven digital companionship with real-world interactions, evolving into what is commonly referred to as "metaverse" social platforms.

4. Unlocking Commercial Potential Through Emotional Value

As major investment funds, large corporations, and startups intensify their focus on developing fundamental AGI (Artificial General Intelligence) models to boost business efficiency, the importance of addressing emotional value escalates. This strategic emphasis is unlocking vast commercial opportunities for platforms and products designed to meet complex emotional needs.

In environments where emotional support is paramount, the adaptability and broad applicability of large language models (LLMs) shine. By prioritizing the development of AI systems with enhanced personification and emotional intelligence, these technologies offer personalized care and emotional support, often exceeding human capabilities. This progress is paving the way for innovative, emotion-centric platforms, including new forms of social media.

The connection between commercial viability and cultural demands is unmistakable. As basic safety and physiological needs are met, individuals increasingly seek fulfillment in areas like belonging, esteem, and self-actualization. Addressing these needs through emotional value is crucial. The commercial potential of leveraging emotional engagement is manifest. For instance, in China, content-driven commerce has reached a turnover of 3 trillion RMB, while in the U.S., platforms like TikTok are driving rapid growth in the e-commerce sector, projected to reach 1 trillion USD. These platforms harness emotional engagement to transition young consumers from traditional need-based purchasing to content-driven and recommendation-led consumption.

The market currently features a spectrum of AI-powered solutions that cater to emotional needs, which can be segmented into three main tiers:

(a) Entertainment Extension: This fundamental level meets users' affinity for idols or animated characters, typically involving superficial interactions. Early versions of Character.ai utilized LLM personification techniques to foster continuous interaction with digital idols.

(b) General Stress-Free Companionship: The second tier includes more extensive companionship functions, such as romance simulations and casual chatting, acting as a confidant. These products provide emotional support but typically establish only weak emotional connections.

(c) Deep Emotional Communication: The most advanced tier requires AI models to engage in meaningful, heartfelt interactions, forging strong emotional bonds with users. This level of engagement depends on a profound understanding of human emotions and the ability to effectively address and alleviate them. Character.ai stands out in this tier, distinguished by its significant user engagement and its ability to deeply resonate with its audience.

In conclusion, as AI technology continues to evolve, the market for products offering emotional companionship is progressively moving from mere entertainment to fostering deeper emotional connections.

5. Insights into Character.ai's Performance

Character.ai has gained notable traction, matching the operational efficiency of tools like ChatGPT in terms of web traffic. Impressively, users typically engage with the platform for over 30 minutes per session, significantly surpassing the average 6 to 7 minutes seen in similar GenAI products. This underscores Character.ai’s exceptional user engagement and solidifies its leadership in the companion AI sector across several metrics, including traffic, user satisfaction, design ethos, and technological sophistication.

Character.ai at a Glance:

(a) Generic Chatbot Communication Platform: Character.ai offers an extensive platform where users can interact with a diverse array of over 18 million user-generated characters, ranging from anime personas to philosophers, across more than 60 categories.

(b) Personalized Character Creation: Users have the flexibility to create and customize their characters, adjusting attributes like identity, language style, and personality traits to craft personal companions. These characters can also be shared on community platforms such as Discord and Reddit.

(c) Enhanced Social Features: The introduction of a group chat feature enables interactions between up to 10 virtual characters and 10 real users simultaneously, enriching the platform's social dynamics.

Key Features of Character.ai:

(a) High User Retention: Character.ai boasts the highest retention rates in the GenAI sector for both 7-day and 30-day metrics, reflecting a deep understanding of user preferences.

(b) High Usage Frequency: The platform's daily active user (DAU) to monthly active user (MAU) ratio stands at 42%, comparable to mature social platforms.

(c) Immersive User Experience: Users typically spend up to 30 minutes per session, indicating a deeply immersive user experience.

(d) Deep Emotional Engagement: Character.ai goes beyond mere entertainment, with engagement times rivaling TikTok and surpassing Instagram. Its active presence in online communities like Reddit and Discord highlights the strong emotional bonds users form with their virtual characters, often seeking companionship and professional advice. The recent addition of group chats further enhances its social features.

(e) Organic Growth: Character.ai exhibits robust growth organically, without relying on traditional advertising, with its web-based monthly active users exceeding 14 million and mobile users reaching approximately 30 million.

(f) High User Engagement: The platform facilitates active user participation in character creation, with user-generated content amassing over 18 million characters and daily interactions numbering in the billions. This extensive interaction data supports ongoing model refinement.

(g) Vibrant Community Participation: With 160,000 members on Discord and 800,000 on Reddit, Character.ai nurtures one of the most active communities on these platforms, essential for feedback and organic promotion.

(h) Youth-Dominated User Base: A significant portion of users are under 35, with 40% under 24, showcasing broad interests in gaming, art, and technology—critical for positioning Character.ai as a mainstream platform for the new generation.

Further analysis reveals a predominant presence of users under 18 on Discord, making up 70% of this subgroup, with nearly all users being under 25. Character.ai enjoys a global user base, split approximately evenly across the U.S., Europe, and Asia, with over 90% of communication in English. The platform's users display diverse and enthusiastic interests, particularly in social activities related to gaming, art, and technology.

Since 2017, the social and content platform landscape has been dominated by established giants like Facebook, YouTube, and Instagram, but these platforms are beginning to show signs of aging, particularly with declining engagement among younger users. Despite their continued use, this is largely due to the lack of viable alternatives. Although the user numbers for new entrants like Character.ai and other generative AI (GenAI) products still lag behind these industry titans, Character.ai has quickly proven its mettle by matching these giants in terms of user session length, even though it was launched less than a year ago. This positions it as a promising contender for the next-generation platform.

The success of a platform can often be attributed to the founding team's vision and dedication. Character.ai benefits from a founding team that is not only technically adept—one of the founders helped develop the transformer model—but is also deeply committed to addressing the needs for companionship and emotional connection through AI. This focus is reflected in Character.ai's product offerings and business strategies. With a compact and highly skilled team of fewer than 40 people, primarily drawn from tech leaders like Google and Meta, Character.ai combines efficiency with execution prowess.

Currently, the GenAI sector focused on emotional value is still in its infancy, hosting roughly 30 companies nationwide. Despite this, Character.ai stands out due to its breadth of offerings and developmental maturity. Its approach to universal applicability sets it apart from other products that may target niche areas like AI companions or specific types of chatbots.

The application of AI in the emotional value sphere demands robust model capabilities, as the challenge lies in creating simulations that closely mimic human interaction—more demanding than mere operational efficiency. Although the market has yet to fully appreciate the potential of firms excelling in these capabilities, the significance of generative AI in this domain cannot be overstated, given its social impact, commercial viability, and attractiveness to investors. As a leading example in this field, Character.ai demonstrates the extensive possibilities of AI in enhancing human experiences. Its growing influence and the unfolding potential are expected to attract wider recognition and achieve a higher valuation in the future.