Were there competitors that did the same thing? AltaVista? Yahoo? Did they undercut on cost? Google was free, I guess. But Google won because it maintained its quality, kept its interface clean and simple, and kept all the eyeballs as a result. Now Google is essentially the entry point to the internet, baked into every major browser except Edge.
Could ChatGPT become the “go-to” first stop on the internet? I think there’s a fair chance. The revenue will find its way to the eyeballs from there.
I already use ChatGPT as my first go-to stop for certain search queries.
I wouldn’t be surprised if OpenAI were still losing money even with the same CPM that Google search has.
Normal people would need to start using a Chat GPT owned interface for search to make an ad based business viable surely? And there's no real sign of that even beginning to happen.
I encourage you to visit https://chatgpt.com in incognito mode.
There are several ways to monetize a product (they already make some use of it).
Are they? I would guess that the cost per query for Google, even back then was insignificant compared to how must OpenAI is spending on GPU compute for every prompt. Are they even breaking even on the $20 subscriptions?
During their growth phase Google could make nothing from most of their users and still have very high gross margins.
OpenAI not only has to attract enough new users but to also ensure that they are bringing more revenue than they cost. Which isn’t really a problem Google or FB ever faced.
Of course presumably more optimized models and faster hardware might solve that longterm. However consumers expectations will likely keep increasing as well and OpenAI has a bunch of competitors willing to undercut them (e.g. they have to keep continuously spending enough money to stay ahead of “open/free” models and then there is Google who would probably prefer to cannibalize their search business themselves than let someone else do it).
> in fact as bezos demonstrated with Amazon for many years, profit is an indication you’ve run out of uses for capital to grow.
Was Amazon primarily funding that growth using their own revenue or cash from external investors? Because that makes a massive difference which makes both cases hardly comparable (Uber might be a better example).
Dissenters should consider that their might be short plays, that if what they think is true they could make some money.
So it’s a long term bet but the idea that Google would lose to an LLM isn’t far fetched to me.
It’s not even clear if OpenAI is breaking even with the $20 subscription just on GPU/compute costs alone (the newer models seem to be a lot faster so maybe they are). So incrementally growing their revenue might be very painful if they keep making the UX worse with extra ads while still simultaneously losing money on every user.
Presumably the idea is that costs will go down as HW became faster and models themselves more optimized/efficient. But LLMs themselves already seem to almost be a commodity so it might become tricky for OpenAI to compete with a bunch of random services using open models that are offering the same thing (while spending a fraction on R&D)
for this, in addition to "google" part, they also need to build "ads" part for monetization, which is also not trivial task.
Facebooks IPO financials were among the best financials at IPO ever
OpenAI has negative 130% adjusted operating margins.
Revenue - 3,711 - 88% YoY growth.
Net Income - 1,000
Cash - 3,908
Tell me how those are bad?
And much as AI hype irritates me, the idea that the most popular LLM platform becomes a ubiquitous consumer technology heavily monetised by context-sensitive ads or a B2B service integrated into everything doesn't seem nearly as fanciful as some of the other "next Googles". At the very least they seem to have enough demand for their API and SaaS services to be able stop losing money as soon as VCs stop queuing up to give them more.
It reminds me of the old joke:
Heard about the guy who fell off a skyscraper? On his way down past each floor, he kept saying to reassure himself: So far so good... so far so good... so far so good.
only display ads business, which is a fraction of total ads revenue
Google's generative ai models probably are used more in a day than the rest combined. Google is a highly profitable business that still has never not grown YoY in its nearly 3 decade history.
In you mind you might think Google is going down, but in reality they have only been going up for nearly 3 decades now.
I personally always use ChatGPT over Google.
Love the use of the personal anecdote to refute my point BTW.
The models will have diminishing returns and other players seem better suited to providing value added features.
https://finance.yahoo.com/news/uae-backs-sam-altman-idea-095...
>The models will have diminishing returns
Wasn't that the going thinking before ChatGPT? And before AlexNet. Of course, we'll again be having some diminishing returns until the next leap.
They are spending a lot on shovels but it’s not clear that there is that much “stuff” (consumer demand) to be shoveled.
VC money can only take you so far, you still need to have an actual way of making money.
LLMs might effectively replace Google but they are already a commodity. It’s really not clear what moat OpenAI can build when there are already a bunch of proprietary/open models that are more or less on the same level.
That basically means that they can’t charge much above datacenter cost + small premium longterm and won’t be able achieve margins that are high enough to justify current valuation.
Only moat OAI has right now is advanced audio mode / real-time audio API, plus arguably o1 and the new eval tools shown the other day as those are essentially vertical integrations.
And maybe, like you said, first-mover advantage. But is not that clear, as even Anthropic got ahead in the race for a while with Claude 3.5 Sonnet.
2 trillion. Approximately 13x OpenAI's current valuation. Google nets almost 100 billion a year. OpenAI grosses 4 billion a year.
Wild numbers.
If we throw out some conservative numbers, and assume costs will rise super modestly, you have to believe OpenAI's earning will grow 50-100x for the investment to make sense. They'd have to maintain their current growth rate for 5+ years, but I wouldn't be surprised if their revenue growth is already slowing
I was prototyping some ideas with ChatGPT that I wanted to integrate into a MVP. It basically involved converting a users query into a well categorized JSON object for processing downstream. I took the same prompt verbatim and used it with an Amazon Bedrock hosted Anthropic model.
It worked just as well. I’m sure there will be plenty of “good enough” models that are just as good as Open AI’s models.
nothing
not really; ChatGPT may have the brand name but there are other offerings that are just as good and which can be incorporated into existing apps that have a captive userbase (Apple, Google, Meta). Why should I switch to another app when I can do genAI within the apps that I'm already using.