> OpenAI reportedly made a loss of $5B in 2024. They also reportedly have 500M MAUs. To reach break-even, they'd just need to monetize those free users for an average of $10/year, or $1/month. A $1 ARPU for a service like this would be pitifully low.
This is a tangent to the rest of the article, but this "just" is doing more heavy lifting than Atlas holding up the skies. Taking a user from $0 to $1 is immeasurably harder than taking a user from $1 to $2, and the vast majority of those active users would drop as soon as you put a real price tag on it, no matter the actual number.
Ok, I clearly should have made the wording more explict since this is the second comment I got in the same vein. I'm not saying you'd convert users to $1/month subscriptions. That would indeed be an absurd idea.
I'm saying that good-enough LLMs are so cheap that they could easily be monetized with ads, and it's not even close. If you look at other companies with similar sized consumer-facing services monetized with ads, their ARPU is far higher than $1.
A lot of people have this mental model of LLMs being so expensive that they can’t possibly be ad-supported, leaving subscriptions as the only consumer option. That might have been true two years ago, but I don't think it's true now.
There are some big problems with this, mostly that openAI doesn't want to break even or be profitable, their entire setup is based on being wildly so. Building a Google sized business on ads is incredibly difficult. They need to be so much better than the competition that we have no choice but to use them, and that's not the case any more. More minor but still a major issue is the underlying IP rights. As users mature they will increasingly look for citations from LLMs, and if open AI is monetizing in this vein everyone is going to come for a piece.
To make a billion dollars, I would simply sell a Coke to everyone in China. I have been giving away Coke in China and it is very popular, so I am sure this will work.
It’s successful for some, but not for everyone. People play roulette all the time but that doesn’t mean everyone other than the house is making a profit. (BTW supermarkets charge for promotional space.)
The word "just" is a huge red flag for me. Any time I hear somebody say "just", it makes me extra skeptical that the speaker understands the full breadth of the problem space.
It's easy. All OpenAI has to do to break even is checks notes replicate Google's multi-trillion dollar advertising engine and network that has been in operation for 2+ decades.
>This is a tangent to the rest of the article, but this "just" is doing more heavy lifting than Atlas holding up the skies. Taking a user from $0 to $1 is immeasurably harder than taking a user from $1 to $2, and the vast majority of those active users would drop as soon as you put a real price tag on it, no matter the actual number.
Hard indeed but they don't need everyone to pay only enough people to effectively subsidise the free users
Last time personal computing took up an entire building, we weren’t anywhere near as close to the physical limits of semiconductors as today, though. We’ll have to see how much optimization headroom there is on the model side.
“Last time” we weren’t up against physical limitations for solid state electronics like the size of an atom, wavelength of light, quantum effects, thermal management, etc.
There are more monetization ways than just a hard paying user. You can ask Google or Facebook. I dont think its super hard to get chatgpt to a. Profitable business. Its probably the most used service currently out there. And its use and effectiveness is immense.
It’s basically the same story as this article: people incorrectly believe they use a huge amount of energy (and water), but it’s actually pretty reasonable and not out of line with anything else we do.
Of there 500M users a very small number are already paying, so it's not zero-to-one for all of them, but monetize more and take $10 a month to $100. It's unclear if this is easier or harder than what you presented, but both are hard.
500M MAU also implies that some are already paying. They need to extract 1$ more on average, not just get all of them to pay 1$ per month. This, I imagine is harder than assuming there are 500m users that pay nothing today.
It's doing some heavy lifting but not that much. Saas subscriptions are not the be-all and end-all of software monetization. He's saying they need to get $1 more on average, not convert all users to $1 subscribers. Doable.
People pay for the perceived value. If apple started by giving away iPhones they would balk at paying that much for them too. It's also very well know that free to anything is much harder than increasing the price
It's not only that they're stupid, it's the fact that maybe they don't really need it.
Do they really need an iPhone? in a sense, yes, since the alternative still means spending a good amount of money and in no way they can do without a phone.
This is a tangent to the rest of the article, but this "just" is doing more heavy lifting than Atlas holding up the skies. Taking a user from $0 to $1 is immeasurably harder than taking a user from $1 to $2, and the vast majority of those active users would drop as soon as you put a real price tag on it, no matter the actual number.