Consumer AI丨2024 Recap & 2025 Prediction

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As we look toward 2025, Consumer AI applications are poised to redefine how we interact with technology and each other, creating unprecedented opportunities for innovation and growth.

We maintain a consistent focus on how transformative technology platforms empower both consumer and enterprise applications across different innovation cycles - whether it was the mobile internet, cloud computing, or now, generative AI. The paradigm remains unchanged: new technology fundamentally reshape how value is delivered to users.

We believe consumer applications broadly fall into two groups:

1. Direct-to-consumer: applications like social media, e-commerce, and local lifestyle platforms that directly engage end-users, shaping daily interactions and experiences.

2. Consumer-impacting: AI-driven tools, such as customer service solutions, sold to enterprises but designed to elevate end-user experiences.

In this wave of AI innovation, enterprise efficiency applications dominate, representing 80-90% of new developments. However, history suggests that consumer-focused innovation often has the greatest long-term impact.

Looking back, among the Top 15 global tech companies by market cap, 9 originated as consumer-facing (To C) products. Furthermore, according to Forerunner, companies with To C models are 10% more likely to achieve $10 billion valuations at IPO compared to their To B counterparts.

While enterprise efficiency dominated the early phases of AI adoption, the second half of 2024 marked a pivotal shift, with Consumer AI applications gaining momentum across startups and capital markets.

• The proportion of ToC AI startups in YC’s second-half cohort doubled compared to the first half. In the recently announced Fall batch, consumer AI applications gained even more momentum.

• Capital markets have sharpened their focus on Consumer AI opportunities, signaling a broader shift in attention.

As we move into 2025, we expect Consumer AI applications to evolve mainly around three key dimensions.

1. New ways of capturing consumer attention: AI is redefining how people interact with each other and information, creating novel engagement channels.

2. Content creation explosion: Generative AI empowers both PGC and UGC, enriching content diversity and consumption experiences.

3. Revolutionizing distribution: AI-driven search and recommendations are transforming information flow, unlocking new business models.

As generative AI continues to evolve, its transformative impact will extend across industries - reshaping not just how businesses operate, but how they connect with consumers in profoundly human ways. The opportunities in e-commerce, music, social media, gaming, travel, and education are only the beginning of this exciting journey.

Consider travel: Wanderboat exemplifies how AI is revolutionizing distribution by offering personalized, real-time travel planning through its AI chatbot. This innovation captures attention with tailored recommendations, harnesses content diversity, and reimagines how travelers engage with their journeys.

To dive deeper:

1. New ways of capturing consumer attention:

   Generative AI is fundamentally transforming how people interact with information and one another, creating entirely new avenues for online traffic. This shift is particularly evident in the evolution of search, which has long been stagnant but is now experiencing a renaissance driven by AI innovation.

   

   1/ Generative AI native search innovations

   • Perplexity: Reached a $9B valuation within two years, signaling strong market validation.

   • Meta’s Strategy: Developing AI-powered search to reduce reliance on Google and Bing.

   • You.com: Raised $50M, valued at $700M, offering a unique generative AI search experience.

   • OpenAI’s SearchGPT: Introduced an AI search tool for its paid users, emphasizing customization and enhanced user experience.

   2/ Emerging vertical AI search engines

   • Generative AI is enabling specialized, domain-specific search tools, capturing attention from traditional engines like Google.

   • Enterprise knowledge search: Glean ($4.6B valuation) focuses on internal enterprise data retrieval with doubling ARR over two years.

   • E-commerce Search:

     • DayDream: Raised $50M to connect 2,000+ brands using LLMs.

     • Encore: Specializes in second-hand goods search, leveraging LLMs for seamless multi-platform integration.

   • Scientific research search: Consensus is transforming academic research discovery, with 400K MAUs and $2M ARR after 600% revenue growth in 2024.

   AI-powered search engines are not just improving existing workflows; they are redefining how users discover information. By prioritizing customization, domain-specific expertise, and seamless integration, these tools are transforming traffic entry points into dynamic, user-centric ecosystems.

2. Content creation explosion:

AI is unlocking a new era of creativity, enabling individuals and businesses to produce diverse, interactive, and deeply personalized content that resonates on an emotional level.

1/ Multimodal AI Marketing

AI marketing extends beyond text to include audio and video, evolving from simple chatbots to operational agents.

• AI Voice and Video Marketing

  • Para: Generates personalized voice calls to activate users and boost engagement.

  • HeyGen: Growing ARR beyond $20M with AI-driven video marketing, reaching a $500M valuation.

• Simple chatbots → Agents

  • GigaML: Reduced error rates from 70% to 5% and resolved 80% of customer service edge cases by optimizing the o1-preview foundation model. With o1 full model release, GenAI's penetration in customer service may grow significantly.

  • Proactive (an UpHonest portfolio company): Enhances emotionally intelligent AI interactions for physical chain businesses like gyms and restaurants. Moving customer service from mechanical to emotionally intuitive interactions.

  With improved reasoning and edge-case handling, foundation models like o1 drives innovation in sales and customer service.

• End-to-End AI Marketing Solutions

  • AdsGency: Provides full-stack marketing solutions, from content ideation to deployment and analytics. Reflects the trend toward automated GTM solutions.

The Consumer AI landscape is on the cusp of a transformation, driven by innovations that redefine attention, content creation, and distribution. At UpHonest, we believe that the companies leading this charge will share three defining characteristics: the ability to create intuitive and emotionally intelligent interactions, the capacity to scale personalized experiences, and the vision to unlock entirely new business models. The next wave of Consumer AI startups will go beyond improving efficiencies—they will build tools and platforms that empower consumers, inspire creativity, and spark new forms of community and connection.