And it's up to a $1bn+ monthly revenue run rate, with no ads turned on. It's the first major consumer tech brand to launch since Facebook. It's an incredible business.

> first major consumer tech brand to launch since Facebook

from my recollection, post-FB $75B+ market cap consumer tech companies (excluding financial ones like Robinhood and Coinbase) include:

Uber, Airbnb, Doordash, Spotify (all also have ~$1bn+ monthly revenue run rate)

Fair comment, I will not fight you on it.

I propose oAI is the first one likely to enter the ranks of Apple, Google, Facebook, though. But it's just a proposal. FWIW they are already 3x Uber's MAU.

They aren’t making money so they haven’t entered any rank. They have users and revenue but cannot last at current setup. Ticking time bomb

Uber became profitable only very recently: https://www.theverge.com/2024/2/8/24065999/uber-earnings-pro...

Yes and look at how much their service has degraded to get there.

Spotify goes back and forth from barely profitable to losing money every quarter. They have to give 70% of their revenue to the record labels and that doesn’t count operating expenses.

As Jobs said about Dropbox, music streaming is a feature not a product

I listed multiple candidates so disputing one wouldn't dispute my main point ;)

Hyperbole to say no major consumer tech brands have launched for decades

> back and forth from barely profitable to losing money every quarter

I would be shocked if OpenAI was not in a similar (or worse) position.

I would be shocked if OpenAI was profitable in any quarter...

So so so happy about the "no ads" part and do really hope there is a paid option to keep no ads forever. And hopefully the paid subscriptions keep the ads off the free plans for this who aren't as privileged to pay for it.

My hot take is that it will probably follow the Netflix model of pricing once the VC money wants to turn on the profit switch.

Originally Netflix was a single tier at $9.99 with no ads. As ZIRP ended and investors told Netflix its VC-like honeymoon period was over - ads were introduced at $6.99 and the basic no ad tier went to $15.99 and the Premium went to 19.99.

Currently Netflix ad supported is $7.99, add free is $17.99 and Premium is $24.99.

Mapping that on to OpenAI pricing - ChatGPT will be ~$17.99 for ad supported, ~$49.99 for ad free and ~$599 for Pro.

Netflix has lots of submarine (product placement) ads that you get even on ad-free plans. I expect OpenAI to follow that model too, except it'll be much worse.

Likely ChatGPT's answers will be slightly modified to mention (in the right context) references to their advertisers. It will be subtle, non-obvious.

Zero moat.

Huge brand moat. Consumers around the world equate AI with ChatGPT. That kind of recognition is an extremely difficult thing to pull off, and also hard to unseat as long as they play their cards right.

"Brand moat" is not an actual economic concept. Moats indicate how easy/hard it is to switch to a competitor. If OpenAI does something user-adversarial, it takes two seconds to switch to Anthropic/Gemini (the exception being Enterprise contracts/lock-in, which is exactly why AI companies prioritize that). The entire reason that there are race-to-the-bottom price wars among LLM companies is that it's trivial for most people to switch to whatever's cheapest.

Brand loyalty and users not having sufficient incentive by default to switch to a competitor is something else. OpenAI has lost a lot of money to ensure no such incentive forms.

McDonald’s has brand moat. So does Coca-Cola. And many more products. The switching cost is null, but the brand does it all.

Again, that's brand loyalty, not a brand moat.

Moats, as noted in Google's "We Have no Moat, and Neither Does OpenAI" memo that made the discussion of moats relevant in AI circles, has a specific economic definition.

The Seven Powers is considered an authoritarian source on business moats.

https://www.goodreads.com/book/show/32816087-7-powers

It has branding as one of the seven and uses coca cola as an example.

Switching costs only make sense to talk about for fully online businesses. The "switching cost" for McDonalds depends heavily on whether there's a Burger King nearby. If there isn't then your "switching cost" might now be a 30 minute drive, which is very much a moat.

That's not entirely true. They have a 'infinite' product moat - no one can reproduce a big mac. Essentially every AI model is now 'the same' (queue debate on this). The only way they can build a moat is by adding features beyond the model that lock people in.

The concept of ‘moat’ comes out of marketing - it was a concept in marketing for decades before Warren Buffett coined the term economic moat. Brand moat had been part of marketing for years and is a fully recognized and researched concept. It’s even been researched with fMRIs.

You may not see it, but OpenAI’s brand has value. To a large portion of the less technical world, ChatGPT is AI.

Still not a moat tho

A moat can be being the largest in a field, often the case with Buffett investments eg. Coca cola, Apple, Geico.

Nokia's global market share was ~50% in smartphones back in 2007. Remember that?

Comparing "brand moat" in real-world restaurant vs online services where there's no actual barrier to changing service is silly. Doubly silly when they're free users, so they're not customers. (And then there are also end-users when OpenAI is bundled or embedded, e.g. dating/chatbot services).

McDonald's has lock-in and inertia through its franchisees occupying key real-estate locations, media and film tie-ins, promotions etc. Those are physical moats, way beyond a conceptual "brand moat" (without being able to see how Hamilton Wright Helmer's book characterizes those).

I don't completely agree. Brand value is huge. Product culture matters.

But say you're correct, and follow the reasoning from there: posit "All frontier model companies are in a red queen's race."

If it's a true red queen's race, then some firms (those with the worst capital structure / costs) will drop out. The remaining firms will trend toward 10%-ish net income - just over cost of capital, basically.

Do you think inference demand and spend will stay stable, or grow? Raw profits could increase from here: if inference demand 8x, then oAI, as margins go down from 80% to 10%, would keep making $10bn or so a year in FCF at current spend; they'd decide if they wanted that to go into R&D or just enjoy it, or acquire smaller competitors.

Things you'd have to believe for it to be a true red queen's race:

* There is no liftoff - AGI and ASI will not happen; instead we'll just incrementally get logarithmically better.

* There is no efficiency edge possible for R&D teams to create/discover that would make for a training / inference breakaway in terms of economics

* All product delivery will become truly commoditized, and customers will not care what brand AI they are delivered

* The world's inference demand will not be a case of Jevon's paradox as competition and innovation drives inference costs down, and therefore we are close to peak inference demand.

Anyway, based on my answers to the above questions, oAI seems like a nice bet, and I'd make it if I could. The most "inference doomerish" scenario: capital markets dry up, inference demand stabilizes, R&D progress stops still leaves oAI in a very, very good position in the US, in my opinion.

The moat, imo, is mostly the tooling on top of the model. ChatGPT's thinking and deep research modes are still superior to the competition. But as the models themselves get more and more efficient to run, you won't necessarily need to rent them or rent a data center to run them. Alibaba's Qwen mixture of experts models are living proof that you can have GPT levels of raw inference on a gaming computer right now. How are these AI firms going to adapt once someone is able to run about 90% of raw OpenAI capability on a quad core laptop at 250-300 watts max power consumption?

I think one answer is that they'll have moved farther up the chain; agent training is this year, agent-managing-agents training is next year. The bottom of the chain inference could be Qwen or whatever for certain tasks, but you're going to have a hard and delayed time getting the open models to manage this stuff.

Futures like that are why Anthropic and oAI put out stats like how long the agents can code unattended. The dream is "infinite time".

Having sticky 800M WAU is a moat.

I wouldn’t necessarily say so. I guess that’s what they are trying to « pulse » people and « learn » from you instead of just providing decent unbiased answers.

In Europe, most companies and Gov are pushing for either mistral or os models.

Most dev, which, if I understand it correctly, are pretty much the only customers willing to pay +100$ a month, will change in a matter of minutes if a better model kicks in.

And they loose money on pretty much all usage.

To me a company like Antropics which mostly focus on a target audience + does research on bias, equity and such (very leading research but still) has a much better moat.

Please stop giving them ideas.

That's a very different definition of boring than I'd use. Something can be both popular and boring.

I also wouldn't say "democratized", more like popularized or made accessible. Though I'm more nitpicking here.

I am with you, and they still have so many dials to tweak. Ads is one of the big dials.

Training costs can be brought down. New algorithm can still be invented. So many headrooms.

And this is not just for OpenAI. I think Anthropic and Gemini also have similar room to grow.

productized != democratized

Using inventions from other people or those who have now left the company.

They have no moat, their competitors are building equivalent or better products.

The point of the article is that they are a bad business because it doesn't pan out long term if they follow the same path.

its going to be one of the most consequential companies in human history

Yeah bc of the global warming trend it started and it’s epic collapse

I fully agree. People are going to be pointing to OpenAI as a warning of the dangers of the tech hype cycle for decades after its collapse.

You mean it's thanks to the incredible invention known as the Internet that they were able to "democratize cutting-edge AI to an amazing number of people"

OpenAI didn't build the delivery system they built a chat app.

AOL had a chat app too. There's something special about OpenAI's chat app though. I can't quite put my finger on it though.

They moved the industry, that's for sure.

But at this point - there's nothing really THAT special about them compared to their competition.

They changed the video game dota2 permanently. Their bots could not control a shared unit (courier) among themselves so bot matches against their AI had special rules like everyone having their own. Not long after the game was changed forever.

As a player for over 20 years this will be a core memory of OpenAI. Along with not living up to the name.

You can say the same thing about any number of hugely popular and profitable companies in the world.

You could say the same about Apple, word for word.

Apple has physical stores that will provide you timely top notch customer service. While not perfect, their mobile App Store is the best available in terms of curation and quality. Their hardware is not so diverse so is stable for long term use. And they have the mindshare in way that is hard to move off of.

Let’s say Google or Anthropic release a new model that is significantly cheaper and/or smarter that an OpenAI one, nobody would stick to OpenAI. There is nearly zero cost to switching and it is a commodity product.

Let's say Google release a new phone that is significantly cheaper and/or smarter than an Apple one. nobody would stick to apple. There is nearly zero cost to switching and it is a commodity product.

The AI market, much like the phone market, is not a winner take all. There's plenty of room for multiple $100B/$T companies to "win" together.

> Let's say Google release a new phone that is significantly cheaper and/or smarter than an Apple one. nobody would stick to apple.

This is not at all how the consumer phone market works. Price and “smarts” are not only factor that goes into phone decisions. There are ecosystem factors & messaging networks that add significant friction to switching. The deeper you are into one system the harder it is to switch.

e.g. I am on iPhone and the rest of my family is on Android. The group chat experience is significantly degraded, my videos look like 2003 flip phone videos. Versus my iPhone using friends everything is high resolution.

Cool now apply that same logic to AI

> Let's say Google release a new phone that is significantly cheaper and/or smarter than an Apple one. nobody would stick to apple.

I don't think this is true over the short to mid term. Apple is a status symbol to the point that Android users are bullied over it in schools and dating apps. It would take years ti reverse the perception.

There's a huge "cost" in switching when you are tied to one ecosystem (iOS vs. Android). How will you transfer all your data?

You’re aware that LLMs all have persistent memory now and personalize themselves to you over time right? You can’t transfer that from OAI to Anthropic.

Pixel phones exist (and have for some time!) yet people still buy iPhones

There is only a zero cost to switching if a company is so perfectly run that everyone involved comes to the same conclusion at the same time, there are no meetings and no egos.

The human side is impossible to cost ahead of time because it’s unpredictable and when it goes bad, it goes very bad. It’s kind of like pork - you’ll likely be okay but if you’re not, you’re going to have a shitty time.

Their API product is easy to swith away from but their consumer product (which is by far the biggest part of their revenue) has much better market share and brand recognition than others. I've never heard anyone outside of tech use Gemini or Copilot or X AI outside of work while they all know ChatGPT.

Anecdata but even in work environments I hear mostly complaints about having to use Copilot due to policy and preferring ChatGPT. Which still means Copilot is in a better place than Gemini, because as far as I can tell absolutely nobody even talks about that or uses it.

OpenAI does not have 800m users.

It has 20m paid users and ~ 780m free users. The free users are not at all sticky and can and will bounce to a competitor. (What % of free users converted to paid in 2025? vs bounced?) That is not a moat. The 20m paid users in 2025 is up from 15.5m in 2024.

Forget about the free tier users, they'll disappear. All this jousting about numbers on the free tier sounds reminiscent of Sun Microsystems chirpily quoting "millions and billions of installed base" back in the Java wars, and even including embedded 8-bit controllers.

For people saying OpenAI could get to $100bn revenue, that would need 20m paid users x $5000/yr (~ the current Pro $200/mth tier), but it looks they must be discounting it currently. And that was before Anthropic undercut them on price. Or other competitors.

Free users are users. Google search is free, though ad monetized. But there's nothing stopping, and in fact they plan to monetize free users with ads.

>The free users are not at all sticky and can and will bounce to a competitor.

If you really believe this, that just shows how poor your understanding of the consumer LLM space is.

As it is, ChatGPT (the app) spends most of its compute on Non work messages (approx 1.9B per day vs 716 for Work)[0]. First, from ongoing conversations that users would return to, to the pushing of specific and past chat memories, these conversations have become increasingly personalized. Suddenly, there is a lot of personal data that you rely on it having, that make the product better. You cannot just plop over to Gemini and replicate this.

[0] https://www.nber.org/system/files/working_papers/w34255/w342...

- for code-generation, OpenAI was overtaken by Anthropic

- your comment about lock-in for existing users only applies historically to existing users.

- Sora 2 is a major pivot that signals what segment OpenAI is/isn't targeting next: Scott Galloway was saying today it's not intended to be used by 99% of casual users; they're content consumers, only for content creators and studios.

- for code-generation, OpenAI was overtaken by Anthropic

And that's nice for them.

- your comment about lock-in for existing users only applies historically to existing users.

ChatGPT is the brand name for consumer LLM apps. They are getting the majority of new subscribers as well. Their competitors - Claude, Gemini are nowhere near. chatgpt.com is the 5th most visited site on the planet.

Perhaps for as long as the base tier remains free, ad-free, and burn $8+billion/year, and for as long as they can continue funding that with circular trades with public stocks such as this week's nVidia and AMD deals.

You're aware they already announced they'll add ads in 2026.

And the circular trades are already rattling public markets.

How do they monetize users on the base tier, to any extent? By adding e-commerce? And once they add ads how do they avoid that compromising the integrity of the product?

>How do they monetize users on the base tier, to any extent? By adding e-commerce? And once they add ads how do they avoid that compromising the integrity of the product?

Netflix introduced ads and it quickly became their most popular tier. The vast majority of people don't care about ads unless it's really obnoxious.