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Avatars have been around for much of video game history, but for most of that history, players would never mistake those characters for the people they impersonate. Inworld AI aims to change that by adding AI to virtual characters to make them smarter than ever.
And Inworld AI has demonstrated its technology in a artificially intelligent Santa Claus to show what it can do. This holiday season, kids around the world can have conversations with virtual Santas as part of a newly launched Inworld Character Arcade, which also features Elon Musk and Sigmund Freud.
Inworld uses advanced AI to build generative characters whose personalities, thoughts, memories and behaviors are designed to mimic the deeply social nature of human interaction. This part of the tech industry has exploded this year with generative AI art projects that can yield painted portraits of people or chat programs like ChatGPT.

“I’m dead focused on how we build this into a new form of expression, a new way of creating, with these characters,” Kylan Gibbs, chief product officer and co-founder of Inworld AI, said in an interview with GamesBeat. “How do we create a completely new medium for interaction? That’s what I’m excited about.”
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Gibbs started working on machine learning while at Bain & Co. He worked at DeepMind, which worked on conversational AI using generative models and natural language processing. He started machine learning while working at Bain & Co.
“I’m generally passionate about how this new technology can enable creative use cases,” Gibbs said in an interview with GamesBeat. “We create products that not only increase people’s creativity in terms of new inspiration and encourage that, but also address how we reduce the latency between imagination and reality.”
San Francisco-based Inworld AI came out of stealth in August after raising $50 million in funding from a number of investors, including Intel Capital and Bikraft Ventures. Since that time, the company has started releasing AI characters like Santa Claus. Inworld AI went through an accelerator program with Disney and has started offering grants to game developers who use AI to create game characters.
Virtual Santa
Santa can be powered to learn about the likes, dislikes, habits and Christmas wishes of everyone who uses it, making it ideal for parents to share with kids. Inworld’s Santa can be easily customized to learn more about your children’s favorite books, movies and games, ensuring they get a completely personalized experience. Kids can talk to St. Nick from the comfort and safety of their home and ask a variety of questions in real time, at no cost and with no time limit.
This virtual Santa is one of many Inworld AI is creating to populate the metaverse of the future. The avatars can be the world’s number one expert on a sports team or know the entire history or knowledge of your world by heart. They can be funny, endearing, brilliant, kind, evil or utterly ridiculous. With Inworld, metaverse developers can create and add villains, heroes, historical figures, or just normal, everyday people to their world.
Chatting with an AI character who listens to your problems, laughs at your jokes or answers your pressing questions replicates the social nature many players find attractive on successful metaverse platforms, Gibbs said.
Gibbs believes intelligent AI characters can be even more fun. Adding them to your metaverse platform puts your users in the middle of an interactive digital world with every character you can imagine. Or so they can imagine – it’s easy to give a game’s users the option to create or customize their own AI characters to be their sidekicks, best friends, nemeses, or just their fellow users.
Inworld characters also integrate easily into all metaverse technologies and can power any avatar you choose to build for them. They are avatar agnostic and have integration with Unity and Unreal Engine, as well as a Node.js SDK.
In the grant program, Inworld AI will award up to $1 million in grants to innovators experimenting with new technology and creating new experiences with AI characters. The judges have Snow Crash author Neal Stephenson, Oculus co-founder Nate Mitchell, former Lucasfilm film producer Kiri Hart and Inworld AI creative director John Gaeta on board to review the applications.
The new program will award grants to innovators who want to broaden their creative palette with AI, lead the way in immersive entertainment and introduce new shops, characters and experiences
to live.
Inworld AI wants more advanced characters to be able to have open-ended unwritten conversations. And it wants those characters to experience emotions, respond to triggers, remember shared knowledge or brand knowledge, and pursue their own goals. Some of this sounds like it’s more in the future than it is today, but generative AI technologies have been going really strong this year.
“With these characters, you’re now changing the way games and experiences work, where you’re actually putting in something that allows you to adapt to the player or to the world,” Gibbs said.
The company envisions open worlds populated by generative NPCs, RPG simulations, or experiences that encourage emergent gameplay; characters from movies, books, music or TV translated into interactive entertainment experiences, trailers or promotions; brand activations or e-commerce experiences with digital ambassadors and sales agents; and educational and business training and simulations led by digital facilitators and educators.
“We are excited to see Inworld characters unlocking new experiences across gaming, entertainment and
the company,” said Gibbs. “The creative possibilities of generative AI are endless, so we welcome applications that push the boundaries of storytelling and interactive entertainment. For us, the more innovative and experimental, the better.”
Accelerating Inworld AI

At Disney, the company went through the accelerator and created a dubbed project Star Wars droid maker in collaboration with ILMxLab, part of the Lucasfilm family.
“One of the biggest things we’ve taken out is that people are very focused on creating this hyper-intelligent AI,” Gibbs said. “But what people ultimately want is these hyper-involved and entertaining characters. When you watch a great Pixar movie, it’s about how they tell a story. That has been super useful for us.”
Now the company wants to pass on its lessons to those applying for grants.
The grants are intended to jump-start the ecosystem so that creators can use more AI characters with real ability to adapt to a situation to make things more interesting for players. The developers can use these AI characters instead of stupid non-player characters (NPCs) so that they are more attractive. You can populate entire worlds with these characters.
“There we see some people using it and looking at how to populate these virtual worlds,” Gibbs said.
On the other hand, some users want to work with the AI and write a prequel to a book and tell the whole story through a character interaction. And in games, Gibbs hopes AI can deliver emergent results, with the unscripted conversations leading to much different gameplay than expected.
“The characters can also help provide a backstory. So you could stop and talk to a character in The Lord of the Rings or Game of Thrones or Elden Ring-like game, where you’re actually digging into the lore of the world with that character. And so that both help you develop a relationship with character, but also kind of deepen your relationship with the world,” Gibbs said. “It can give people a push into the story.”
The AI moment

As for the popularity of generative AI in 2022, Gibb said it reminded him of data science when he first moved into that area of computer science around 2014. Data science was the big term.
“I remember finding myself in this career and it absolutely exploded,” he said. “This whole generative AI domain is about to change the way things work.”
He added: “Before, machine learning was something unsupervised where you gave it examples and it learned those patterns. But now the models actually internalize these patterns. And so as a person you only have to give less and less input to get what you want out of it. And the magic of that is opening it up so that you no longer have to be a machine learning practitioner to use AI.”
As for whether AI can wipe out some creative jobs, Gibbs believes it will improve creator jobs. He looks at ophthalmologists, who use AI machines to come up with prescriptions for patients. Those doctors are now more productive and can provide wisdom and services on top of those automated prescriptions.
“Generative AI is in a very interesting early stage where people are just discovering what it’s useful for,” he said. “I think in the next few years, just the ability to create content, both the visual parts of it and the interactive parts of it, will rapidly change. We are now seeing an uncomfortable phase of it.”
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