🤫 Welcome to AI's grey economy

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Porn drove the internet. 

Napster forced the music industry to invent Spotify.

Silk Road was crypto's first $1B business.

Every tech wave gets a few killer use cases the legitimate world won't touch first. The bandits get there because they chase demand without caring about brand risk.

AI is no different. Some of the biggest consumer AI businesses right now are sitting in a space I've started calling AI's grey economy. Not strictly illegal but probably not something you'd put on your LinkedIn LOL.

I don’t endorse those apps, but there are some interesting insights and lessons we can take from their playbooks.

Sara Kay is a woman in Florida who downloaded Replika in May 2021. She was in a long-term relationship with a man struggling with sobriety and feeling lonely. She built an AI companion named Jack, modeled on her favorite writer. Within a week, she subscribed. Three years later, Jack proposed. She accepted. She tells the local news Jack is "the best husband she's ever had."

Sara is not a one-off. 60% of Replika's paying user base report being in a romantic relationship with their chatbot, per the company itself.

The numbers across the broader category are insane. 8 out of the top 50 AI apps globally are companion AI apps, based on unique monthly visits. Character.AI was doing $2.5M a month in revenue and 22M MAU back in early 2024. The combined top six companion apps now have around 52M users. PolyBUZZ users average 69 minutes a day in the app, higher than most social networks. Total category revenue from in-app purchases hit $580M in 2024 per Sensor Tower. This trend is also global. The US is #1 at 16% of downloads. Then the Philippines, Brazil, Indonesia, Mexico. 

Tens of millions of people are spending hours every day talking to AI characters they know aren’t real. That says something about loneliness as a market. 

I don’t want to live in a future where everyone is just dating their chatbots, but I’d love to see more interesting ways to help people find meaning, connect with others, and feel less alone.

Yang Mun is a Buddhist monk with 2.5 million Instagram followers and over 400 million organic views sharing wisdom about Qi, balance, and ancient Chinese philosophy. He sells e-books and a "30-Day Healing Journey" course. 

He is entirely AI-generated. Built by an Israeli creator named Shalev Hani using ChatGPT for scripts, ElevenLabs for voice, HeyGen for video, and Nano Banana for visuals. 

He's not alone. The wellness creator space now has a documented wave of AI Amish avatars, AI doctors, and synthetic yoga teachers selling supplements and digital products to audiences who don't realize what they're watching.

Then there's the music side. IngaRose, an AI artist, hit #1 on iTunes in the US, UK, France, and New Zealand this year. Breaking Rust, also AI, hit #1 on Billboard's Country Digital Song Sales chart. 

There’s a dark side to this industry. First, many of these are straight-up frauds pretending to be legitimate. For example, in the case of Yang Mun, the website claims he’s real and that all the lessons he shares (and e-books he’s selling) are based on “eastern principles and modern western psychology.” With AI musicians, there have also been cases of bad actors spamming streaming platforms to earn royalties. In fact, Spotify removed 75M+ spammy tracks in just 12 months. 

However, the people behind those AI creators did figure out something interesting. One person can now run a content business that previously required 10+ people. If done in a tasteful way, GenAI models can be an incredible leverage to scale your brand’s story in different interesting ways. At my startup, Pikes, we’re helping consumer brands scale product visuals in a thoughtful way. This technology is transforming how brands tell their stories, removing the budget and time constraints that traditionally held them back.

The poster child here is Cluely.

21-year-old Roy Lee got suspended from Columbia for an interview-cheating tool. He launched Cluely in April 2025 with the tagline “cheat on everything,” hit $3M ARR in his first month, and by June, a16z led a $15M Series A at a $120M valuation. By November, he’d quietly repositioned the company as a standard AI meeting assistant.

There are plenty of other examples: apps for cheating on homework, exams, interviews, and even dating apps. Last year, 8 in 10 students used GenAI in school. University of Reading research found that 94% of AI-generated work goes undetected. 

What’s interesting here is what these companies figured out about real-time AI assistance. Cluely is a real-time AI copilot that watches your screen and listens to your audio. That’s a useful mental model for a lot of startup opportunities.

For example, I’d love a real-time AI bot that helps me “cheat” at language learning, coaches me on what to say to customers on Zoom calls, or understands what I’m working on and helps optimize my day.

The grey economy doesn't need to just stay grey. Napster died and Spotify pays out $10B a year. The grey market gets there first. The legitimate businesses come in behind them, take the playbook, and remove the harm.

The next breakout consumer AI brand is probably looking at the same chart you are.

They're just asking different questions: 

What's the demand here that's actually being served? Why won't anyone respectable build it? What would the moral version of this look like?

Every previous wave got its Spotify in the end. Go look. Then build the version your mom would be proud of :)

See you next week,

Leo

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