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We'd need to know acquisition costs and lifetime value (difficult to project with such a new product and with Google and Facebook coming up with potential compe
by viscanti 3y ago
We'd need to know acquisition costs and lifetime value (difficult to project with such a new product and with Google and Facebook coming up with potential competitors that might cause users to churn). The idea of looking at quarterly P&L and determining if a business is legit or not doesn't really make sense. Are they profitably buying growth (if acquisition costs are lower than LTV, you're buying future profits that don't show up on that quarterly statement) or just burning money? We'd also want to understand if there's any value to subsidizing things. Perhaps they're able to fine tune and improve based on what users are doing and that's helping them build a moat - or maybe there's no value there.
- svnt 3y agoBased on what we’ve seen acquisition costs are likely extremely low. This is an “if you build it they will come” situation and they built it. Lifetime value they don’t even know at this point — the best we could hope for is an early (and probably still seasonal) assessment of churn.
- viscanti 3y agoWell part of acquisition costs are giving out 3.5 for free hoping to convert people to paid ChatGPT. It's possible they're even subsidizing the paid ChatGPT for additional data (they believe it helps them improve their product and build a moat) and to convert people to Enterprise. For all we know, all their current revenue is considered acquisition costs for Enterprise use, where they might think the real money and profits are. I understand they probably don't have any solid idea on LTV yet. The point is that looking at quarterly numbers doesn't tell us if any VC backed company is lighting cash on fire or making smart investments.
- svnt 3y agoFair points.