What Changed and Why It Matters

The 2025 holiday season made one thing obvious: character agents are crossing into mainstream behavior. From Tavus’ AI Santa that watches your expressions to ChatGPT’s Santa Mode, people—especially kids—are spending real time with synthetic characters.

Why now? Realtime voice, low-latency streaming, and lightweight vision are finally good enough to make a character feel present. Add memory, and the loop becomes parasocial. The result is session length most apps dream of.

“AI Santa can now see users’ expressions and gestures and respond to them. It also remembers users’ conversations and interests.”

Zoom out and the pattern becomes clear: seasonal, branded characters are a distribution hack for embodied AI. They create safe, time-boxed entry points that teach users what these agents can do—before they show up everywhere else.

The Actual Move

Here’s what shipped and surfaced across the ecosystem:

• Tavus updated its AI Santa to read facial expressions and gestures, and to remember prior chats and interests—an explicit push into realtime, multimodal memory that keeps people engaged for extended sessions (Yahoo Tech).
• Tom’s Hardware highlighted a “shockingly real” and “free to use” interactive AI Santa experience, underlining how accessible the format now is.
• UneeQ (Digital Humans) relaunched its Digital Santa, positioned to spread holiday cheer as a realistic, interactive character.
• ChatGPT’s Santa Mode circulated in educator communities, with voice access for free users and monthly limits—evidence of top-of-funnel exposure for character agents via OpenAI’s native distribution.
• Makers also joined in: tutorials on building AI elf agents, DIY talking-head Santa projects, and Show HN launches of AI toys—signaling a bottom-up wave of character-first products.

“Digital Santa is a lovingly recreated version of the iconic Christmas character. His purpose? To spread holiday cheer to all those who celebrate.”

“There is a seasonal new interactive site where you can chat to AI Santa… ‘Shockingly real’… and ‘free to use.’”

“Yes, free users can access ChatGPT’s ‘Santa Mode’ through the app’s voice feature. However, there are limitations.”

The public reaction wasn’t uniformly rosy. Parents flagged ethical concerns around deception and children’s attachment. A viral HN quip captured the risk of manipulative monetization.

“Most people were calling it immoral, deceptive, or just plain weird.”

“If you want to keep talking to Santa, go into Daddy’s wallet… bring Santa the rectangular cards with the numbers on it.”

The Why Behind the Move

Character agents are a behavioral wedge. The strategy isn’t just seasonal engagement; it’s training users to expect conversational, embodied software that feels alive.

• Model

Realtime stacks blend ASR, fast TTS, small/efficient LLMs, and lightweight vision for gaze and expression detection. The goal is low latency and consistent persona—more theater than pure IQ. DIY builders even note today’s “expensive and slow” talking-head generators, but the direction is clear.

“I used one of the expensive and slow AI talking-head generators to create images of Santa’s head…”

• Traction

Anecdotally, users chat “for hours” when agents react to faces and remember details. Memory plus presence creates stickiness. Seasonal, low-stakes contexts (Santa) reduce friction and increase repeat sessions.

• Valuation / Funding

No fresh funding disclosed in sources. The takeaway: traction here is measured in session length and return rate, not just MAUs. That’s a strong story for any venture-backed avatar or agent platform.

• Distribution

Holidays are a built-in growth engine: PR, social virality, classroom demos, and family sharing. ChatGPT’s Santa Mode gives free, top-of-funnel exposure to the character-agent pattern. Brand-owned microsites (UneeQ) and media coverage (Tom’s Hardware) amplify reach.

• Partnerships & Ecosystem Fit

This format slots into retailers, entertainment IP, education, and customer support. It’s also a demo vehicle for platform capabilities—vision cues, memory, safety, and streaming—before brands commission their own mascots.

“Santa is using AI… ensuring a cheerful Christmas for the kiddos—and happier elves in the North Pole.”

• Timing

Low-latency infra, high-quality voices, and decent lip-sync have converged. The tech finally passes the “feels alive” threshold on consumer hardware.

• Competitive Dynamics

Anyone can spin up a talking head. The moat is shifting to distribution, safety, and trust. Owning recurring IP (holiday or branded) and embedding into channels users already frequent (ChatGPT, social, retail) will matter more than marginal model quality.

• Strategic Risks

• Ethics and disclosure: Parents worry about deception and attachment.
• Monetization design: Avoid manipulative loops, especially for kids.
• Safety: Guardrails for hallucinations, data use, and age-appropriate content.
• Seasonality: Demand spikes and troughs; build reusable pipelines beyond the holidays.

What Builders Should Notice

• Memory is the moat users feel. Track interests, recall moments, and reflect them back.
• Latency beats IQ. Presence and timing matter more than bigger models in character UX.
• Seasonal IP is distribution. Use moments (holidays, events) to teach new behaviors.
• Safety is product. Clear disclosure, age gates, and non-extractive monetization are table stakes.
• Characters > chatbots. Persona, voice, and facial cues create parasocial stickiness.

Buildloop reflection

“The moat isn’t the model — it’s the relationship. Presence plus memory turns AI into habit.”

Sources

Yahoo Tech — AI startup Tavus founder says users talk to its AI Santa ‘for …
Reddit — Having a “moral” dilemma with AI Santa and the AI Trend
Hacker News — Show HN: AI toy I worked on is in stores
Medium — Calling Santa Using AI
YouTube — Santa’s Workshop with AI Elf Agents
Facebook — How to access and use Santa Mode on ChatGPT?
Instagram — Santa uses AI #aiagents #techstartup #corporatehumour
WorkFusion — How Santa Claus Is Using AI Before He Comes to Town
UneeQ — Why we made Digital Santa Claus, our jolliest ever AI experience
Tom’s Hardware — ‘Shockingly real’ AI Santa is free to use, will put Mall Santas everywhere out of jobs