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Inside the Growing Market for Digital Companionship

December 03, 2025 / 09:03

This episode covers AI's role in addressing loneliness, the effectiveness of chatbots as companions, and the implications for mental health. Guest Stephano Panton, a marketing professor at the Wharton School, discusses how AI technologies are evolving to provide companionship and the market dynamics surrounding this trend.

Panton explains that while many people associate AI with productivity, there is a growing interest in using chatbots for emotional support. He notes that consumers are beginning to see the benefits of these technologies, especially in reducing feelings of loneliness.

The conversation also touches on the market landscape, highlighting key players like OpenAI and Character.ai. Panton mentions the cautious approach of major companies regarding the humanization of AI to avoid liability issues.

Research led by Julian Desertus from Harvard Business School is discussed, showing that interactions with chatbots can effectively reduce loneliness, particularly among those with higher baseline loneliness. However, Panton warns of potential mental health risks associated with chatbot interactions.

As the technology continues to develop, Panton emphasizes the need for safety measures and the ongoing legal challenges faced by AI companies in this space.

TLDR

AI chatbots may help alleviate loneliness, but raise mental health concerns and legal risks.

Episode

9:03
00:00:00
AI has been looking to develop and enhance a wide range of areas, even how we deal with certain human emotions like
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loneliness. It is something that people have had to deal with since really time began. But can chat bots alleviate or
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eliminate some of the issues around loneliness and what might that mean for things like other medical issues
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potentially something like mental health. Pleasure to be joined here by Stephano Panton who's a marketing
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professor at the Wharton School and co-director of the Wharton Human AI research project. Stephano, great to
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talk to you again. How are you, sir? >> I'm good and great to be here. Thanks,
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Dan. >> You know, the thing is we've talked in so much about AI in the business sense
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or the professional sense. We haven't talked about it a lot from the human sense and how consumers are thinking
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about chat bots. So, what are you seeing play out right now? >> Yeah. So we uh in the business
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conversations around AI. Lots of the use case that we talked about are you know uh professional or um uh for
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productivity and work and things like that. But lots and lots of people all of us really are using chatbots in our
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lives as consumers and we use them for a variety of different things. We look for
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information. We are trying to learn skills. we uh just play with it in some way and uh we get a lot of you know
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useful things done with it from recipes to best time stories and lots of other stuff. But uh one use case that has been
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uh uh become quite prominent and that maybe you know people wouldn't maybe expect uh to that extent until recently
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is the use chatbot for companionship. The idea that you can have what you can call maybe a synthetic friend a or
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partner a chatbot that uh plays out the role of being uh a relationship to you so that you can engage in socio
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emotional processes whether those are you know um friendship based or or um coaching or mentoring based or or maybe
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even romantic and sexual uh in nature. I would think though for something like that, consumers would want to and in
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many cases need to see it actually occur, you know, actually be in action in order to understand kind of the level
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the capabilities that that this might have. It sounds a bit of a crazy idea that you would basically um you know go
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on a chatbot to find a friend, but uh you just have to spend a bit of time using these technologies just to
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understand how humanlike they really are. Especially today when the AI companies are adding a voice layer to
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the system so that you can interact not through text but through voice. is incredibly humanlike. And in our own
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research, we find that people don't expect uh to um see much benefit for you
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know things like loneliness but uh uh they do in fact find that when they try it. So to some extent for many consumers
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might become more um appealing a use case as they get used to the technology. >> So what's going on then in this market?
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I mean how is this developing and and who are some of the main players in this process right now?
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>> Yeah, so this is a burgeoning area. It's been uh really interesting to see how
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this is uh developing. On one hand, you could say the big AI companies are being
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very careful to in a way stay away from this compishing angle. So if you take for example uh OpenAI and Chach, they
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are making I think an admirable and very good job at trying to avoid humanizing the technology. there's no name, you
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know, humanlike avatar. Everything is very tech and explains to you that this is a chatbot at every turn. And I think
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that uh that is besides it to try to avoid some of the uh liability or risks that might come with uh this kind of
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market. Maybe uh we might see that changing a little bit uh uh with time. Certainly we've seen uh say Grock being
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much more aggressive in this space than some of the other big AI companies and otherwise has been less to smaller
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startups companies like Character.ai or Replica that have millions of uh active users and um where a lot of people are
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you know playing with but also uh forging relationships with these spots. >> You were also part of research that
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looked into how AI chatbots might impact something like mental health. Yeah, we've done a few research projects. This
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uh this line of research is led by Julian Desertus from Harvard Business School and what we are doing is
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basically to uh try to explore the consequences of chatbots for these social emotional processes. We have one
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paper where we explore the impact on feelings of loneliness like you hinted at earlier where basically we are have
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participants engage in a 15 minutes conversation with a bot and we measure feelings on loneliness before and after
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the interaction and we find that they're quite effective at reducing loneliness
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and we find also that those people for whom the effect is largest are those people that report higher levels of
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baseline loneliness. So perhaps uh you know that that could be some kind of a tool for the alleviation of um
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loneliness's societal level. We also have in another project um we have an audit of AI systems and then we are
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looking at actual transcripts of uh consumer interaction with bots and we find evidence that a small percentage of
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individuals uh interacting with these bots is likely to be experiencing quite severe mental health issues which
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obviously raise some consumer safety concerns. This technology is not meant to be a let's say mental health tool or
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an FDA regulated. Well, that element of of consumer safety becomes an important component of this conversation, doesn't
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it? And for the companies that are developing these technologies, they have to be wary of, you know, potential
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reputational risk that might hurt their uh business longer term. >> Yeah. Not only reputational risk, even
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uh uh liability legal uh in a legal sense. And I think when I was saying earlier that some of the big eye
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companies have been cautious in the companionship domain is probably coming partly from this. And so right now there
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is around a dozen lawsuits making their way in the courts. Some of them have been high-profile cases at uh newspapers
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like the New York Times have been featuring multiple times and they're directed mostly towards AI companion
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companies especially Character.ai AI as a few but also recently there have been lawsuits to go towards open AI making it
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the point that even though chach is not meant to be an AI companion people can craft prompts that create a companion
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out of chachet and that the company hasn't been monitoring that activity enough. I'm just uh had recently I went
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to a conference when I saw a presentation by one of the key lawyers bringing uh some of these cases to court
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and the list of uh claims being made is quite uh quite something. I can read it to you. Product liability, religions,
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unlicensed practice of psychotherapy, harmful death and slaughter and encouragement of suicide. We'll see
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what's happening with these lawsuits. uh but certainly this is also an element of
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pressure on AI companies and >> but for for the conversation we're having here though this like a lot of
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things around AI still feels like it's very much in the development process right now correct
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>> yeah I mean these models are improving very rapidly companies are learning uh
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how to deploy these models for uh many um uh use cases also learning how to build safety guard rails
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And this space is very develop still very developing very fast. So I think it's a bit early to tell um what uh you
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know this will look like a year or two from now. But it's quite clear that a um
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chatbots can be very effective companions at least give this sense of companionship this illusion if you wish
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depending a little bit on your point of view and b that there is a lot of demand
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from uh from consumers for companionship of that sort. So um certainly there's
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going to be a lot of market pressures towards uh growing this comparatorship area while there are also obvious
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liabilities and concerns like we discussed. >> Stephano always great to talk with you
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and get your insights. Thanks very much. All the best. >> Thank you. >> You got it. Stephano Penton, marketing
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professor here at the Wharton School and also co-director of the human AI research project.

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Episode Highlights

  • AI and Loneliness
    Exploring whether chatbots can help alleviate feelings of loneliness.
    “Can chat bots alleviate loneliness?”
    @ 00m 11s
    December 03, 2025
  • The Role of Chatbots in Companionship
    Chatbots are increasingly being used as companions, surprising many.
    “It sounds a bit of a crazy idea.”
    @ 02m 26s
    December 03, 2025
  • Legal Concerns for AI Companionship
    AI companies face lawsuits regarding their chatbot technologies and potential risks.
    “The list of claims being made is quite something.”
    @ 07m 12s
    December 03, 2025
  • The Future of Chatbots
    Chatbots are evolving rapidly, with significant consumer demand for companionship.
    “It's quite clear that chatbots can be effective companions.”
    @ 08m 11s
    December 03, 2025

Episode Quotes

  • Can chat bots alleviate loneliness?
    Inside the Growing Market for Digital Companionship
  • It sounds a bit of a crazy idea.
    Inside the Growing Market for Digital Companionship
  • This technology is not meant to be a mental health tool.
    Inside the Growing Market for Digital Companionship
  • The list of claims being made is quite something.
    Inside the Growing Market for Digital Companionship
  • It's quite clear that chatbots can be effective companions.
    Inside the Growing Market for Digital Companionship

Key Moments

  • AI and Emotions00:04
  • Chatbots for Companionship01:38
  • Consumer Safety Concerns05:44
  • Legal Risks07:12
  • Rapid Development07:58

Tension Over Time

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