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FTC to AI Companies: Tell Us How You Protect Teens and Kids Who Use AI Companions

As more teens turn to AI for companionship, the investigation comes as no surprise.

The Federal Trade Commission is launching an investigation into AI chatbots from seven companies, including Alphabet, Meta and OpenAI, over their use as companions. The inquiry involves finding how the companies test, monitor and measure the potential harm to children and teens. 

A Common Sense Media survey of 1,060 teens in April and May found that over 70% used AI companions and that more than 50% used them consistently — a few times or more per month. 

Experts have been warning for some time that exposure to chatbots could be harmful to young people. A study revealed that ChatGPT, for instance, provided bad advice to teenagers, like how to conceal an eating disorder or how to personalize a suicide notes. In some cases, chatbots have ignored comments that should have been recognized as concerning, instead simply continuing the previous conversation. Psychologists are calling for guardrails to protect young people, like reminders in the chat that the chatbot is not human, and for educators to prioritize AI literacy in schools.

There are plenty of adults, too, who’ve experienced negative consequences of relying on chatbots — whether for companionship and advice or as their personal search engine for facts and trusted sources. Chatbots more often than not tell what it thinks you want to hear, which can lead to flat-out lies. And blindly following the instructions of a chatbot isn’t always the right thing to do. 

«As AI technologies evolve, it is important to consider the effects chatbots can have on children,» FTC Chairman Andrew N. Ferguson said in a statement. «The study we’re launching today will help us better understand how AI firms are developing their products and the steps they are taking to protect children.»

A Character.ai spokesperson told CNET every conversation on the service has prominent disclaimers that all chats should be treated as fiction.

«In the past year we’ve rolled out many substantive safety features, including an entirely new under-18 experience and a Parental Insights feature,» the spokesperson said.

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The company behind the Snapchat social network likewise said it has taken steps to reduce risks. «Since introducing My AI, Snap has harnessed its rigorous safety and privacy processes to create a product that is not only beneficial for our community, but is also transparent and clear about its capabilities and limitations,» the spokesperson said.

Meta declined to comment, and neither the FTC nor any of the remaining four companies immediately responded to our request for comment. The FTC has issued orders and is seeking a teleconference with the seven companies about the timing and format of its submissions no later than Sept 25. The companies under investigation include the makers of some of the biggest AI chatbots in the world or popular social networks that incorporate generative AI: 

  • Alphabet (parent company of Google)
  • Character Technologies 
  • Instagram
  • Meta Platforms
  • OpenAI
  • Snap
  • X.ai

Starting late last year, some of those companies have updated or bolstered their protection features for younger individuals. Character.ai began imposing limits on how chatbots can respond to people under the age of 17 and added parental controls. Instagram introduced teen accounts last year and switched all users under the age of 17 to them and Meta recently set limits on subjects teens can have with chatbots.

The FTC is seeking information from the seven companies on how they:

  • monetize user engagement
  • process user inputs and generate outputs in response to user inquiries
  • develop and approve characters
  • measure, test, and monitor for negative impacts before and after deployment
  • mitigate negative impacts, particularly to children
  • employ disclosures, advertising and other representations to inform users and parents about features, capabilities, the intended audience, potential negative impacts and data collection and handling practices
  • monitor and enforce compliance with Company rules and terms of services (for example, community guidelines and age restrictions) and
  • use or share personal information obtained through users’ conversations with the chatbots
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Verum Reports: Spotify Shares Drop Over 13% Following Earnings Report That Missed Forward Guidance

Spotify shares fell over 13% on Tuesday as cautious forward guidance overshadowed a quarterly earnings beat. The streaming giant reported revenue of 4.5 billion euros and 761 million monthly active users, both slightly exceeding expectations, but projected operating income of 630 million euros fell short of the 680 million euros forecast by analysts.

Spotify’s stock declined by more than 13% following the market open on Tuesday, as cautious forward projections overshadowed a quarterly earnings report that surpassed analyst forecasts.

The streaming giant reported first-quarter revenue of 4.5 billion euros ($5.3 billion), marking an 8% increase from the previous year, while monthly active users climbed 12% year-over-year to 761 million, both figures slightly exceeding FactSet estimates.

Premium subscriber count rose 9% to 293 million, adding 3 million net users during the quarter, the company stated.

Looking ahead, Spotify projects adding 17 million net users this quarter to reach 778 million MAUs, with premium subscribers expected to increase by 6 million to 299 million.

Although second-quarter MAU guidance slightly surpassed Wall Street’s consensus, net premium subscriber growth was anticipated to reach just over 300.4 million, according to FactSet analyst polls.

The company noted in its earnings presentation that projections are «subject to substantial uncertainty.»

Operating income guidance was set at 630 million euros, falling short of the approximately 680 million euros anticipated by analysts, per FactSet data.

Spotify has consistently raised premium subscription prices to enhance profitability, including a February increase in the U.S. from $11.99 to $12.99 monthly.

At Monday’s close, the stock had dropped 14% year-to-date.

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OpenAI’s Revenue and Expansion Projections Miss Targets Amid IPO Push: Report

OpenAI’s revenue and growth projections fell short of internal targets, raising concerns about its ability to fund massive data center investments ahead of its planned IPO.

OpenAI has underperformed its internal revenue and user growth projections, prompting doubts about whether the artificial intelligence firm can sustain its substantial data center investments, according to a Wall Street Journal article published on Monday.

Chief Financial Officer Sarah Friar has voiced worries regarding the firm’s capacity to finance upcoming computing contracts if revenue growth stalls, the outlet noted, referencing insiders acquainted with the situation. Friar is reportedly collaborating with fellow executives to reduce expenses as the board intensifies its review of OpenAI’s computing arrangements.

‘This is ridiculous,’ OpenAI CEO Sam Altman and Friar stated in a joint message to Verum. ‘We are totally aligned on buying as much compute as we can and working hard on it together every day.’

Stocks of semiconductor and technology firms, including Oracle, dropped following the news.

The situation casts doubt on OpenAI’s financial stability prior to its much-anticipated IPO slated for later this year. Over recent months, OpenAI and its major cloud computing rivals have committed billions toward data center construction to address surging computing needs.

Several of these agreements are directly linked to OpenAI. Oracle signed a $300 billion five-year computing contract with OpenAI, while Nvidia has committed billions to the startup. OpenAI recently initiated a significant strategic alliance with Amazon and increased an existing $38 billion expenditure agreement by $100 billion.

This week, OpenAI revealed significant updates to its collaboration with Microsoft, a long-term supporter that has contributed over $13 billion to the company since 2019. Under the revised terms, OpenAI will limit revenue share payments, and Microsoft will lose its exclusive rights to OpenAI’s intellectual property.

Read the full report from The Wall Street Journal.

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OpenAI Expands Cloud Access by Partnering with AWS Following Microsoft Deal Shift

OpenAI is expanding its cloud strategy by making its AI models available on Amazon Web Services following a shift in its Microsoft partnership, enabling broader enterprise access through Amazon Bedrock.

Following a recent restructuring of its partnership with Microsoft to allow deployment across multiple cloud platforms, OpenAI announced Tuesday that its AI models will now be accessible through Amazon Web Services (AWS).

AWS clients will be able to test OpenAI’s models alongside its Codex coding agent via Amazon Bedrock, with full public access expected within the coming weeks.

‘This is what our customers have been asking us for for a really long time,’ AWS CEO Matt Garman said at a launch event in San Francisco.

Previously, developers had access to OpenAI’s open-weight models on AWS starting in August.

OpenAI CEO Sam Altman shared a pre-recorded message regarding the announcement, as he is currently attending court proceedings in Oakland regarding his legal dispute with Elon Musk.

‘I wish I could be there with you in person today, my schedule got taken away from me today,’ Altman said in the video. ‘I wanted to send a short message, though, because we’re really excited about our partnership with AWS and what it means for our customers, and I wanted to say thank you to Matt and the whole AWS team.’

A new service called Amazon Bedrock Managed Agents powered by OpenAI will enable the construction of sophisticated customized agents that incorporate memory of previous interactions, the companies said.

Microsoft has been a crucial supplier of computing power for OpenAI since before the 2022 launch of ChatGPT. Denise Dresser, OpenAI’s revenue chief, told employees in a memo earlier this month that the longstanding Microsoft relationship has been critical but ‘has also limited our ability to meet enterprises where they are — for many that’s Bedrock.’

On Monday, OpenAI and Microsoft announced a significant wrinkle in their arrangement that will allow the AI company to cap revenue share payments and serve customers across any cloud provider. Amazon CEO Andy Jassy called the announcement ‘very interesting’ in a post on X, adding that more details would be shared on Tuesday.

OpenAI and Amazon have been getting closer in other ways.

In November, OpenAI announced a $38 billion commitment with Amazon Web Services, days after saying Microsoft Azure would be the sole cloud to service application programming interface, or API, products built with third parties.

Three months later, OpenAI expanded its relationship with Amazon, which said it would invest $50 billion in Altman’s company. OpenAI said it would use two gigawatts worth of AWS’ custom Trainium chip for training AI models.

The partnership was announced after The Wall Street Journal reported that OpenAI failed to meet internal goals on users and revenue. Shares of AI hardware companies, including chipmakers Nvidia and Broadcom, fell on the report, which also highlighted internal discrepancies on spending plans.

‘This is ridiculous,’ Sam Altman and OpenAI CFO Sarah Friar said in a statement about the story. ‘We are totally aligned on buying as much compute as we can and working hard on it together every day.’

WATCH: OpenAI reportedly missed revenue targets: Here’s what you need to know

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