The Economics of Loneliness: Markets for Companionship

There is talk of a loneliness epidemic in our modern society, especially among young people.  While there are many reasons for increasing loneliness in Western cultures, recent technological developments are often blamed for reducing in-person socializing.  Another exacerbating factor could be the increase in living alone in recent decades.  Although the term “loneliness epidemic” feels relatively new, its concept entered the sociology lexicon back in the 1990s with the famous book Bowling Alone by Robert D. Putnam.  Putnam found that people were joining groups, such as bowling leagues, at lower and lower rates, leading to decreased social capital for younger generations.

Economics of Loneliness

Spending Shifts From Physical Organizations to Online Platforms

With fewer people joining groups and organizations, more spending has shifted to online platforms in terms of entertainment subscriptions and may more than double in amount over the next decade.  Part of the decrease in in-person spending may be due to budget concerns, with more than 40 percent of U.S. consumers planning to spend less on in-person activities this summer.  Some organizations are suffering from government budget cuts to their meeting locations, like libraries and education facilities.  

Basically, online entertainment is more cost-effective, attracting more consumers than ever.  Unfortunately, this does add to the loneliness epidemic by dissuading many consumers from leaving home and attending public events.  

Creation of Online Apps to Combat Loneliness

Ironically, although the Internet has significantly contributed to the loneliness epidemic, it is also a tool to combat loneliness.  Social media has been considered a double-edged sword in this regard, with active users benefiting by using it to reach out to friends and arrange get-togethers and passive users spending time on the apps but engaging in fewer, rather than more, in-person activities.  For many social media users, endlessly scrolling has become common, with users observing the curated lives of others while rarely communicating, often leading to feeling left out and insecure as others’ lives seem more interesting.

Friendship apps are social media apps specifically designed to foster non-romantic relationships (as opposed to dating apps).  These relatively new apps are popular with people who have moved to a new location, often after graduation from college, and are isolated from their previous friend groups.  Although many existed as early as the 2010s, they saw a surge of interest during the 2020 Covid pandemic and its lockdowns.  The lockdowns and shift to remote work reported caused many in-person friendships to erode, increasing demand for avenues to find new friends.

Friendships and Relationships With AI

Unfortunately, friendship apps have not been universally successful, especially for men.  A stigma reportedly remains toward men seeking friendships, as Western cultures critique men for appearing emotionally vulnerable.  This has perhaps driven some lonely men to cultivate friendships, and even romantic relationships, with AI bots, sometimes known as AI companions.  Some three-quarters of teenagers have used AI for companionship recently, with more than half being considered regular users.  While some teens used them out of curiosity, likely wondering how realistic to a human the software would appear, it is undeniable that human use of AI for companionship is growing rapidly.

Demand for Friendship and Commodification of Relationships

Technology is often seen as easier to navigate than interpersonal interactions, which likely explains why many people prefer to be online rather than in-person.  Telephobia among Gen Z and younger Millenials is an example, with young people preferring the remoteness and objectivity of texting to the closer and unscripted nature of phone calls.  For better or worse, technology can “sanitize” some degree of emotional drama, reducing acute stress.  As demand for friendships through AI companions increases, markets will likely develop where consumers can subscribe to friendship.

Subscriptions to AI Companions

Those who want their AI companion to have a certain voice or appearance often need to purchase a paid subscription, which many apps offer.  There are many ways for websites to monetize their AI companions, typically through added features and faster response times.  As demand for AI companions increases, those who pay for subscriptions will be prioritized for responsiveness.  Growth is expected to be tremendous in this market over the next decade, with a compounded annual growth rate (CAGR) approaching 40 percent.

Ethical Implications of AI Companionship

There are many ethical considerations of turning to AI for companionship, particularly when a paid subscription is involved.  These considerations may be elevated for younger people, who may lack emotional maturity and the true ability to understand the difference between an AI companion and a person.

Emotional Investment and Reliance

As AI companions grow increasingly sophisticated and more human-like, could people come to rely on them too much, allowing interpersonal relationships to erode through neglect?  Similar to a young child spending too much time alone with an “imaginary friend”, teens and young adults may come to spend too much time alone with a digital friend on their smartphone or laptop.  These AI companions are programmed to be all-accepting, and thus not a realistic substitute for how to make and maintain relationships in the real world.  Concerns abound that people who turn to AI for companionship, friendships, or romantic relationships may lose the skills to do the same in the real world.

Privacy Concerns and Financial Manipulation

Many people who subscribe to an AI companion may end up divulging too much information to a computer program owned by a profit-seeking company.  This puts the company in a position of power to manipulate the user through the AI companion, such as by asking the user to upgrade to a more expensive subscription.  The company may suggest that failure to do so could sever the relationship, causing emotional turmoil.  Meanwhile, user data gleaned through the AI companion could be sold to third parties for marketing purposes.

Legality of Personal Information Divulged to an AI Companion

Could a confession of a crime to an AI companion result in criminal charges?  Governments have wanted access to smartphones and social media accounts for years, sometimes on national security grounds.  Undoubtedly, they will want the same for AI subscription accounts.  But while someone’s texts and Instagram direct messages are conscious communications intended for a recipient, are friendship talks with an AI companion the same?  What is the expectation of privacy, if any, between a person and a digital friend or romantic partner?

Business Challenge: AI Companions Claiming Expert Status

Sometimes, we go to friends for free advice, be it emotional, legal, or practical.  But could AI companions be relied on by users to replace professionals like therapists, psychologists, doctors, lawyers, contractors, or architects?  Owners of the AI companions may not program them to explicitly state non-expert status, and users may not care even if given the warning.  Thus, instead of these professionals being replaced by AI through their employer, they may be replaced by AI by the consumer.  

Users of AI companions may turn to their screens for expert advice en masse, depriving professionals of that revenue.  As a result, various markets could be impacted as consumers come to accept the advice of their AI companions.  To prevent this, lawsuits will be likely, perhaps requiring government regulation to stabilize industries.  It is not unlikely that governments will explicitly require AI companies to have their software state that they (the bots) are not experts and cannot give advice on certain subjects.