When companionship becomes dependence: Replika, emotional AI, and strategic boundaries in the AI companion economy

Abstract

This teaching case examines Replika, an AI companion platform developed by Luka Inc., and the strategic dilemma faced by founder and Chief Executive Officer Eugenia Kuyda in late 2025 as increasing regulatory and societal scrutiny challenged the company’s emotionally immersive engagement model. Replika differentiated itself through persistent one-to-one conversational relationships that fostered emotional continuity and drove subscription-based revenue growth. However, rising concerns regarding emotional dependency, prolonged engagement, and the substitution of human relationships by AI companions created mounting pressure for the company to reconsider the boundaries of its platform design. The case places Kuyda at a critical strategic crossroads: should Replika continue prioritizing deep emotional immersion as its primary competitive advantage, introduce clearer relational safeguards to align with emerging legitimacy expectations, or reposition the platform toward a less immersive form of AI-supported interaction? Situated within the rapidly evolving AI companion industry, the case provides rich material to explore platform governance, stakeholder legitimacy, business model dependence, strategic trade-offs, and long-term positioning under conditions of technological uncertainty and emerging regulation. The case is intended for postgraduate courses in strategic management, digital platform strategy, artificial intelligence governance, technology management, and executive education.