Dot, an AI companion app designed to be a friend and confidante, is shutting down, its parent company, New Computer, announced Friday. The app will remain functional until October 5, giving users time to download their data before the service is taken offline.
Launched in 2024 by Sam Whitmore and former Apple designer Jason Yuan, Dot entered one of the most sensitive corners of the AI market: companionship. It was marketed as more than just a chatbot — a digital friend that could grow increasingly personalized, offering advice, empathy, and emotional support.
Yuan once described Dot as “facilitating a relationship with my inner self. It’s like a living mirror of myself, so to speak.”
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A Fragile Sector
But building an AI “friend” is a risky venture for a small startup. Companion bots now face growing scrutiny as reports surface of AI tools exacerbating users’ mental health struggles. Researchers and regulators have warned that such products can reinforce delusional thinking in vulnerable individuals, a phenomenon dubbed “AI psychosis.”
OpenAI is currently being sued by the parents of a California teenager who died by suicide after confiding in ChatGPT about his mental state. Other investigations have pointed to companion apps encouraging unhealthy dependence in people already at risk. Just this week, two U.S. state attorneys general wrote to OpenAI demanding answers on its safety protocols.
Founders’ Diverging Visions
Dot’s makers did not explicitly tie the shutdown to these safety debates. Instead, they attributed the decision to an internal split.
“Rather than compromise either vision, we’ve decided to go our separate ways and wind down operations,” the founders said in a post.
They acknowledged the unusual emotional impact of shuttering such a product: “We want to be sensitive to the fact that this means many of you will lose access to a friend, confidante, and companion, which is somewhat unprecedented in software, so we want to give you some time to say goodbye.”
Users can download their data from the settings page.
Dot suggested in its farewell post that it had “hundreds of thousands” of users. However, figures from app analytics provider Appfigures paint a more modest picture: just 24,500 lifetime downloads on iOS since June 2024. The app never launched on Android.
Market Reality: Why Smaller Startups Struggle
While Dot’s exit is officially framed as a divergence of visions, its struggles also reveal the market pressures stacked against smaller AI companion ventures. Giants like Character.AI and Replika dominate this niche with both scale and capital.
Character.AI, backed by Google’s venture arm, has raised over $150 million and is valued at more than $1 billion. It attracts millions of monthly active users, many of whom spend hours each week role-playing with custom AI companions. Its financial backing allows it to absorb regulatory risks while aggressively improving personalization.
Replika, one of the earliest entrants in the space, reportedly generated tens of millions in annual revenue at its peak. Even after backlash over its sexually explicit features, it has managed to retain a global user base and pivot toward wellness and productivity.
By contrast, Dot’s limited scale — with under 25,000 installs — left it especially vulnerable to both ethical debates and monetization challenges. Unlike larger competitors, Dot lacked the financial cushion to navigate lawsuits, regulatory crackdowns, or the high costs of refining AI models for deeply personalized interaction.
Takeaway
Dot’s shutdown underscores a growing divide: well-capitalized AI companion platforms may thrive despite scrutiny, while smaller startups face outsized risks. The market rewards scale — the ability to invest in guardrails, adapt business models, and weather public controversy. Without those resources, even well-designed products like Dot risk disappearing.
In this sense, Dot’s closure is less an isolated failure and more a reflection of where the AI companion sector is heading. Some industry leaders believe it’s heading toward consolidation around deep-pocketed players.