3 ms·

If they are making billions from subscriptions, why on earth would they want to switch to an ads business?

• RodgerTheGreat 2y ago
  Might have something to do with the fact that they're also still losing billions operating their services at a loss!
  • nomel 2y ago
    Seems like the sane thing to do with would be put ads on those using the service for free.
    • RodgerTheGreat 2y ago
      but the capitalist thing to do would be to put ads on both the paid and free versions of the service and infuriate all your customers to add penny shavings to your short-term bottom line!
      • leosanchez 2y ago
        First ads on free version then "limited ads" on paid version while creating another tier for paid users for more money
      • nomel 2y ago
        No, the capitalist thing to do would be to optimize profit. Optimizing profit isn't some trivial thing, when there's competition (as there is now). It's literally optimizing the desire and will for people to pull money out of their wallet and give it to you. It's a chaotic system with many attractors. If adding ads causes a reduction in profit, from people moving to add free LLM (there are many), then it would be capitalist, in the interest of profit, to not have ads. And, let's say there's a scenario where all the companies have ads, the capitalist thing to do might be to remove ads, to capture all the users that don't want them. Sure, once competition is gone, capitalism stops working, but we're not even close when it comes to AI.
• SethMLarson 2y ago
  Making billions but spending trillions for no moat (GPUs and models aren't moats) means that the only moat they have are users. Users aren't paying enough to offset costs, the only way to get value from non-subscription users for their scale is through ads.
• soheil 2y ago
  Slightly more accurate: they're raising billions making pennies.
• short_sells_poo 2y ago
  Because it is never enough. We see this time and time again. Once they are making billions, the people in charge will demand that they start making dozens of billions, and then hundreds. The growth must never cease, because the moment you stop growing, you can't sell the dream that supports ridiculous PE ratios anymore. Google was a very profitable business 10 years ago and the search was still decent. In the last decade they absolutely butchered their core product (and the internet along with it) in an effort to squeeze more ad dollars out, because it's not the level of profitability that they need to maintain, but the growth of that profitability. Microsoft was a ridiculously profitable company, but that is not enough, they must show growth. So they add increasingly user hostile features to their core product because the current crop of management needs to see geometric growth during their 5 year tenure. And then in 5 years, the next crop of goobers will need to show geometric growth as well to justify their bonuses. Think about this for a moment: the entire ecosystem is built on the (entirely preposterous) premise that there must be constant geometric growth. Nobody needs to make a decision or even accept that this is long term sustainable, every participant just wants the system to keep doing this during their particular 5-10 year tenure. It's an interesting showcase of essentially an evolutionary algorithm/swarm optimizer falling into a local optimum while a much better global optimum is out of reach because the real world is something like a Rastrigin function with copious amounts of noise with an unknowable but fat tailed distribution. <rant/> by a hedge fund professional.
  • breck 2y ago
    This is such a good rant, and I think you should develop it into an essay and I think there is an important catchy natural equation to mine here.
    • short_sells_poo 2y ago
      Ha, thank you for the kind words. I've been thinking of doing something long form, I'm just unsure if there's enough of an audience in this age of catchy tweets and tiktok videos. Full disclosure, I had no formal education in writing... I suppose all credit goes to the actual great writers I take inspiration from.
  • 2y ago
• croes 2y ago
  To make more billions
  • nomel 2y ago
    * to lose lose less billions [1]. [1] https://www.thestack.technology/microsoft-earnings-openai/ https://www.thestack.technology/microsoft-earnings-openai/
• jajko 2y ago
  You can ask the same for ie Apple where you pay a proper premium for products, yet their ad business keeps growing slowly into respectable proportions, and not by accident.
• insane_dreamer 2y ago
  they're not making billions from subscriptions
  • GaggiX 2y ago
    They do.
• layer8 2y ago
  They get inspired by streaming services doing the same.
• stocknoob 2y ago
  Switch? Por que no los dos?