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TikTok Ad Case Study: How Chai AI Chat App Reduced CPI by 21% and Boosted Retention

Product used

User Acquisition, Ad Creatives

Publisher

Chai Research Corp

Category

AI Chat Bot

Chai is a leading social AI chat platform where users engage with AI characters featuring unique personalities. From supportive life advisors to entertaining companions, the app offers premium AI conversations through its subscription model. Chai stands out in the growing AI chat app market through its diverse character interactions and engaging user experience.

The Challenge

About Chai

Chai is a mobile app that enables users to chat with AI-driven characters, each having a unique “personality” and conversation style — from a friendly “Pirate of Tales” to a cheerful advisor who gives life tips. The core target audience is 18–34, keen on fun or inspiring virtual dialogs.

Market Context & Pain Points

  • Explosive Advertising Costs
    According to Singular’s Q1 2025 report, global ad spend in 2024 surpassed $1 trillion for the first time. Retail giants and top global brands increased their budgets, driving up CPMs and CPIs across mobile channels.
  • Overcrowded AI Apps Segment
    With the recent AI boom, dozens of chatbot products launched each month. Chai needed to stand out in this competitive landscape and ensure that new users actually stuck around.
  • Client’s Goalssome text
    1. Increase installs (User Acquisition) while controlling CPI
    2. Improve retention (especially Day 7)
    3. Boost in-app monetization (premium subscriptions or add-ons)

Why TikTok Ads?

Chai tested multiple platforms but decided to focus on TikTok Ads for three main reasons:

  1. Ideal Demographic Fit
    TikTok’s biggest user base is 18–34-year-olds, perfectly aligning with Chai’s target market.
  2. High Organic Potential
    Engaging short-form videos can “go viral,” generating organic installs in addition to paid clicks.
  3. Rapid Optimization
    TikTok Ads offers advanced targeting and real-time controls, letting Chai swiftly reallocate budgets to top-performing creatives.

Our Approach: Four Distinct Video Creatives

We produced four short videos (15–30 seconds) to tap into different motivations. Each ad needed to hook viewers within the first 3–5 seconds for maximum impact.

Creative #1: “My Best AI Discovery”

  • Concept: A young man explains how he tried multiple AI apps (Character AI, Polly AI) but ultimately prefers Chai. He highlights the app’s “Pirate of Tales” and how realistic the conversations feel.
  • Why It Worked: Feels like a genuine recommendation, sharply contrasting with “generic” competitors.
  • Results:some text
    • CTR: +28% vs. previous ads
    • CPI: Dropped to $1.20 (US/Canada), down from $1.40 baseline
    • Retention D7: +3 percentage points among men 18–34

Creative #2: “You’re Never Alone”

  • Concept: Showcases Chai as a supportive friend when you’re down or simply need to chat. Emphasis on thousands of unique characters ready to listen.
  • Why It Worked: Taps into empathy, creating an emotional hook.
  • Results:some text
    • CTR: +32% in Europe & LATAM; Spain and Brazil reacted especially well
    • CPI: As low as $1.10 in certain markets
    • Retention D7: +4 p.p. among women 25–34 (appreciating the comforting vibe)

Creative #3: “Playful Flirt Chat”

  • Concept: A lighthearted, semi-romantic chat scenario with hints of a “special evening.”
  • Why It Worked: Appeals to younger audiences (18–24) intrigued by fun, flirt-oriented interactions with AI.
  • Results:some text
    • CTR: +25% vs. non-flirt ads in the US/Canada
    • Retention D7: +5 p.p. among 18–24-year-olds, who stayed to explore more
    • Premium Conversion: +6–8% from this segment

Creative #4: “Freedom to Be Yourself”

  • Concept: Inspiring visuals of nature, travel, friends having fun, and a cozy moment at home — culminating in “Unleash your freedom with Chai.”
  • Why It Worked: Exudes positivity, travel vibes, and self-expression.
  • Results:some text
    • CTR: Up to 4.5% in certain TikTok placements
    • CPI: Around $1.15 in the US, roughly 15% below previous “lifestyle” ads
    • Retention D7: +3 p.p. among a lifestyle/travel-oriented audience (25–34)

Phased Rollout: Layering Creatives for Optimal Results

We introduced each creative over a six-week campaign, allowing us to collect data and optimize step by step.

Phase Newly Introduced Creative(s) Key Metric Changes
Weeks 1–2 #1 "Discovery"
#2 "Never Alone"
- CPI: $1.45 → $1.40
- CTR: 2.6% → 2.8%
- Retention D7: 17% → 18%
Weeks 3–4 #3 "Playful Flirt Chat" - CPI: $1.40 → $1.25
- CTR: ~3.3%
- Retention D7: ~20%
Weeks 5–6 #4 "Freedom to Be Yourself" - CPI: as low as $1.10
- CTR: 3.8% (peaks 4.5%)
- Retention D7: 22%

How the Phased Approach Helped

  • Steady Improvements
    Each new ad targeted different emotional triggers or user segments, steadily decreasing CPI and raising CTR/Retention.
  • Flexible Budget Allocation
    Instead of discarding earlier creatives, we compared performance to see which combo worked best. Strong ads got more budget; weaker ones were tweaked or paused.
  • Real-Time Insights
    Rolling out new concepts every two weeks showed us exactly which themes resonated most (discovery, empathy, flirting, freedom).

Comparative Data

Here’s a before-and-after snapshot, contrasting early efforts (Weeks 1–2) with optimized outcomes (Weeks 5–6):

Metric Baseline (Weeks 1–2) After Optimization (Weeks 5–6)
CPI (US avg.) $1.40 $1.10–$1.15
CTR ~2.8% ~3.8% (peaks at 4.5%)
Retention D7 ~18% ~22–23%
Premium Conversion Rate baseline +6–8% improvement

Why This Matters: The Value to Chai

Even in a hyper-competitive market—where global ad spend surpassed $1 trillion—Chai achieved:

  1. Breakthrough Visibility
    By leveraging multiple creative angles on TikTok (personal discovery, emotional support, playful flirt, and freedom), they attracted diverse segments while keeping CPI in check.
  2. Stronger Retention & Monetization
    High CTR creatives translated into better Retention D7, and flirty/emotional hooks led to 6–8% lifts in premium subscriptions.
  3. Agile Optimization
    Phased rollouts and real-time budget reallocation allowed Chai to sustain momentum over six weeks, ending up with a suite of proven ads that outperformed initial benchmarks.

Ready to Achieve Similar Results?

Our agency specializes in crafting data-driven campaigns with compelling creative that resonates with your target audience. Contact us to discover how you can tap into TikTok’s full potential—no matter how high the CPMs climb. We’ll help your app stand out, improve retention, and drive sustainable growth in today’s crowded mobile marketplace.

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