WSJ Learned That Google Paid $2.7 Billion to AI Startup Character.AI for a License

Google which is part of Alphabet Inc., paid the AI startup Character.AI approximately $2.7 billion for a license to use its technologies within an announced deal in August, according to The Wall Street Journal citing informed sources.

Meanwhile, the main reason behind such a payment is considered by many at Google to be the return of its former employee and one of the founders of Character.AI, Noam Shazeer, who agreed to join Google along with the second founder of the startup, Daniel De Freitas, and several other specialists.

Google's AI experts do not know what the company will do with the licensed technologies from Character.AI, The Wall Street Journal notes.

According to one of the sources cited by the newspaper, Shazeer received hundreds of millions of dollars for his share in Character.AI as part of the August deal. Usually, such large sums are paid to founders who sell their entire company or list it on a stock exchange.

The transaction took place during a difficult moment for the startup, according to the publication. Character.AI experienced financial difficulties due to high development costs without good sources of income.

Shazeer was appointed vice president at Google and is among the three lead developers working on a new version of its most powerful AI technology, Gemini. He was one of the first few hundred employees who initially joined Google in 2000.

Shortly after this, Shazeer asked Eric Schmidt, then leading the company, to provide him with thousands of computer chips for developing an artificial intelligence comparable to human intelligence. Although that project failed, Schmidt gradually gained confidence that Shazeer could handle this task. "If anyone in the world has a chance to do it, it's him," Schmidt said in 2015.

In 2017, Shazeer and seven other Google specialists published a paper called "Attention is All You Need" about a computer system capable of predicting the next word in a sequence upon request. The work formed the basis for generating AI (used to create content like ChatGPT - IF), according to The Wall Street Journal.

Together with De Freitas, who also worked at Google, Shazeer set out to create a chatbot Meena capable of holding light conversations on various topics. Shazeer believed it could replace Google's search engine and bring in trillions of dollars.

However, the company leadership refused to release the chatbot due to safety and authenticity concerns.

In 2021, Shazeer and De Freitas left Google and launched Character.AI, which raised $150 million with a valuation of $1 billion in March last year.

Shazeer and his colleagues hoped that people would pay for communication with chatbots capable of giving practical advice and imitating celebrities like Elon Musk. "This will be very, very beneficial to many lonely people and those who are depressed," Shazeer claimed last year.

This year, he tried to raise additional funds for Character.AI and explored the interest of potential buyers including Meta.

The number of monthly active users (MAU) on Character.AI exceeds 20 million.

The Wall Street Journal calls Shazeer an AI genius and notes that one of the key roles in his return to Google was played by co-founder Sergey Brin.

At one recent conference, Brin stated that Google had been too cautious about releasing AI applications but now is developing and deploying them as fast as it can.