AI is Taking over: How Some AI Powered Apps are Finding Success in Unproven Territory

In 2023, the mobile app market is witnessing a surge in AI-powered apps, particularly in photo and video editing apps that offer advanced effects previously only seen in high-budget productions. These apps are thriving due to the popularity of social media platforms like Instagram and TikTok. Another growing trend is relationship-driven chatbot apps that allow users to establish lasting connections with human-like chatbots. While not matching the user metrics of photo and video apps, these chatbots exhibit high retention rates, suggesting promising long-term growth. Sensor Tower's State of AI Apps report provides insights into trends and strategies for AI app success, helping developers navigate the rapidly evolving landscape and make informed monetization decisions.

Key Takeaways:

• The top AI powered apps by revenue, downloads, and monthly active users are those that allow for sophisticated image and video editing

• “Relationship” chatbots are a growing sub-trend and are demonstrating a stunning, largely organic, growth trajectory through unusually high user retention

2023 has seen explosive growth in apps touting AI related functionality and none are doing better than those that provide features allowing users to edit photos and videos. Among apps that prominently tout AI features, AI photo and Video Editor apps top the charts by revenue, downloads, and monthly active users. 7 of the top 10 AI-powered apps, by monthly active users, are Photo and Video Editor apps. Driven by the popularity of social media platforms such as Instagram and TikTok, these apps allow users to generate sophisticated video and image effects that were previously only seen in high budget productions. The demand for this subset of AI apps is considerable and growing, with 69M downloads in July 2023, alone. 

Another kind of AI app is growing in popularity, alongside AI powered photo and video apps - chatbot apps that serve as a humanlike conversational partner. These apps are a distinct sub-category from typical chatbot apps such as ChatGPT in that they allow for forming long term, continuous relationships with the chatbot, complete with personalities, preferences, and an uncanny ability to reason about complex social and cultural concerns. Though these apps are not achieving the level of monthly active users and downloads that photo and video apps are, their long term growth is very promising. Looking at the popular relationship-driven chatbot app, Character AI, we see extraordinarily high levels of retention, with the app seeing nearly 60% of all users opening the app on the day of install, and a full 33% of them still using the app 29 days later - rarified air when it comes to app retention that long after the app was installed. High retention rates are common among these unique “relationship” chatbots, which bodes well for the long term viability of the category.

As the AI powered app landscape forms, in real time, it is crucial to keep apprised of what is working and what is not. The decision to invest in AI functionality is not one to be taken lightly, and requires significant resources that ultimately will impact app monetization strategy. Sensor Tower’s State of AI Apps report reveals the biggest trends in this emerging category, shining a light on how these features may be best leveraged to generate retention, revenue, and long term viability. The report also reveals which apps are on a sustainable, long term trajectory, and which are unlikely to survive the hype as some users lose interest and move on. 

For a deeper dive into the data and analysis presented in this post, read the full report.