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> there's a limit on how much you can charge people for subscription fees. I think soon people expect this service to be provided for free and ads would become
by netcan 1y ago
> there's a limit on how much you can charge people for subscription fees. I think soon people expect this service to be provided for free and ads would become the main option to make money out of chatbots.
So... I don't think this is certain. A surprising number of people pay for the ChatGPT app and/or competitors. It's be a >$10bn business already. Could maybe be a >$100bn business long term.
Meanwhile... making money from online ads isn't trivial. When the advertising model works well (eg search/adwords), it is a money faucet. But... it can be very hard to get that money faucet going. No guarantees that Google discover a meaningful business model here... and the innovators' dilema is strong.
Also, Google don't have a great history of getting new businesses up and running regardless of tech chops and timing. Google were pioneers to cloud computing... but amazon and MSFT built better businesses.
At this point, everyone is assuming AI will resolve to a "winner-take-most" game that is all about network effect, scale, barriers to entry and such. Maybe it isn't. Or... maybe LLMs themselves are commodities like ISPs.
The actual business models, at this point, aren't even known.
- tonyedgecombe 1y ago>It's be a >$10bn business already. But not profitable yet.
- miohtama 1y agoFor comparison, Uber is still not profitable after 15 years or so. Give it some time.
- Tepix 1y agoTime for them to finally disappear
- jefftk 1y agoUber had their first profitable year in 2023, and their profit margin was 22% in 2024. https://finance.yahoo.com/news/uber-technologies-full-2024-earnings-132735851.html https://finance.yahoo.com/news/uber-technologies-full-2024-e...
- datavirtue 1y agoThey are still FAR in the red. Technically have never turned a profit. Among other famous companies.
- jefftk 1y agoI'm not a finance person, but how is net income of $9.9B for FY 2024 not profit?
- ecedeno 1y agoI assume they mean the profits in the past couple years are dwarfed by the losses that came before. Looking at the company's entire history, instead of a single FY.
- jefftk 1y agoMaybe? But that's not what anyone means when they describe a company as profitable or not. I was guessing they meant something like the net profit only came from a weird tax thing or something.
- UncleEntity 1y agoSeems like the difference between a profitable investment and a profitable company. They invested tens of billions of dollars in destroying the competition to be able to recently gain a return on that investment. One could either write off that previous spending or calculate it into the totality of "Uber". I don't know how Silicon Valley economics works but, presumably, a lot of that previous spending is now in the form of debt which must be serviced out of the current profits. Not that I'm stating that taking on debt is wrong or anything.
- jefftk 1y agoTo the extent that their past spending was debt, interest on that debt that should already be accounted for in calculating their net income. But the way it usually works for Silicon Valley companies and other startups is that instead of taking on debt they raise money through selling equity. This is money that doesn't have to be paid back, but it means investors own a large portion of this now-profitable company.
- wkat4242 1y agoI'm surprised. They pay the drivers a pittance. My ex drove Uber for a while and it wasn't really worth it. Also, for the customers it's usually more expensive and slower than a normal taxi at least here in Spain. The original idea of ride-sharing made sense but just like airbnb it became an industry and got enshittified.
- ghaff 1y agoMy sense in London is that they’re pretty comparable. I’ll use whichever is more convenient.
- wkat4242 1y agoThey're usually a bit more expensive here than a taxi. It can be beneficial because sometimes they have deals, and I sometimes take one when I have to book it in advance or when I'm afraid there will be delays with a corrsponding high cost. Though Uber tend to hit me with congestion charges then too. At least with a taxi I can ask them to take a different route. The problem with the uber drivers is that they don't know any of the street names here, they just follow the app's navigation. Whereas taxi drivers tend to be much more aware and know the streets and often come up with suggestions. This also means that they sometimes fleece tourists but when they figure you know the city well they don't dare :) Often if they take one wrong turn I make a scene about frowning and looking out of the window and then they quickly get back on track. Of course that's another usecase where uber would be better, if you don't know the city you're in.
- fragmede 1y ago> they sometimes fleece tourists yeah thanks no, I'm paying for an Uber. For all the complaints over Ubers business practices, it's hard not to forget how bad taxis were. Regulatory capture is a clear failure mode of capitalism and the free market and that is no more shown than by the taxis cab industry.
- wkat4242 1y ago
- fpoling 1y agoOpera browser was not profitable for like 15 years and still became rather profitable eventually to make an attractive target to purchase by external investors. And even if not bough it would still made nice profit eventually for the original investors.
- darkwater 1y agoOpera is a shady advertisers cesspool since it was purchased.
- behnamoh 1y agoYou can't burn money in AI for 15 years on the off chance that it’ll pay off.
- kcatskcolbdi 1y agoIt seems like most people are on the road to doing exactly this.
- bigyabai 1y agoI dunno, Nvidia worked on machine learning for 11+ years and it worked out great for them: https://research.nvidia.com/research-area/machine-learning-artificial-intelligence https://research.nvidia.com/research-area/machine-learning-a...
- tsimionescu 1y agoSure, but they were making tons of money elsewhere. OpenAI has no source of revenue anywhere big enough to cover its expenses, it's just burning investor cash at the moment.
- tom_m 1y agoNo, but you can let others burn money for 15 years and then come in and profit off their work while they go under.
- snackernews 1y ago
- amelius 1y agoThe demand is there. People are already becoming addicted to this stuff.
- ghaff 1y agoI think the HN crowd widely overestimates how many people are even passingly familiar with the LLM landscape much less use any of the tools regularly.
- amelius 1y agoWell, they said it is a $10B industry. Not sure how they measure it, but it counts for something, I suppose.
- kcatskcolbdi 1y agoI think you may be underestimating it. At this point in college, LLMs are everywhere. It's completely dominating history/english/mass comm fields with respect to writing papers. Anecdotally all of my working non-tech friends use chatgpt daily.
- ghaff 1y agoIt does anecdotally seem to be very common in education which presumably will carry over to professional workplaces over time. I see it a lot less in non-tech and even tech/adjacent adults today.
- datavirtue 1y agoMy wife, the farthest you can get from the HN crowd, literally goes to tears when faced with Excel or producing a Word doc and she is a regular user of copilot and absolutely raves about it. Very unusual for her to take up new tech like this and put it to use but she uses it for everything now. Horse is out of the barn.
- UncleEntity 1y ago> My wife, the farthest you can get from the HN crowd... She is literally married into the HN crowd. I think the real AI breakthrough is how to monetize the high usage users.
- rrr_oh_man 1y ago> a >$10bn business 'Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit."' ¹ Until something makes a profit it's a charity or predatory monopoly-in-waiting.² ¹ https://en.wikipedia.org/wiki/Business https://en.wikipedia.org/wiki/Business ² https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
- rusk 1y ago> Until something makes a profit The chip makers are making a bundle
- starspangled 1y agoSelling shovels in a gold rush.
- rusk 1y agoSelling stakes
- naijaboiler 1y agoOr a hobby
- crazygringo 1y agoWhat are you talking about? No, it's not a charity or a monopoly-in-waiting. 99.9% of the time, it's an investment hoping to make a profit in the future. And we still call those businesses, even if they're losing money like most businesses do at first.
- reaperducer 1y agoUntil something makes a profit it's a charity or predatory monopoly-in-waiting. This is incorrect. There are millions of companies in the world that exist to accomplish things other than making a profit, and are also not charities.
- coldtea 1y ago>Meanwhile... making money from online ads isn't trivial. Especially when post-tarrifs consumption is going to take a huge nosedive
- ximeng 1y agoGoogle aren’t interested in <1bn USD businesses, so it’s hard for them to build anything new as it’s pretty guaranteed to be smaller than that at first. The business equivalent of the danger of a comfortable salaried job.
- fernandopj 1y agoGoogle is very good at recognizing existential threats. iOS were that to them and they built Android, including hardware, a novelty for them, even faster than mobile incumbents at the time. They're more than willing to expand their moat around AI even if that means multiple unprofitable business for years.
- discordance 1y ago* acquired Android
- addicted 1y agoThey acquired the Android company years before the iPhone existed. It was supposed to be a BlackBerry/Blackjack killer at the time. And then the iPhone was revealed and Google immediately changed Android’s direction to become a touch OS.
- b112 1y agoIn tech, Android's acquisition by Google is ancient history. It has zero relevance to today's Google. When was it, 2006? Almost 20 years ago, back when the company was young.
- runjake 1y agoMobile is still nearly everything. Google continues to develop and improve Android in substantial ways. Android is also counted on by numerous third-party OEMs. This doesn’t strike me as zero relevance.
- 1y ago
- commandersaki 1y agoGoogle were pioneers to cloud computing How so? Amazon were the first with S3 and EC2 including API driven control.
- foobarian 1y agoMaybe for public services, but Google did the "cattle not pets" thing with custom Frankensteined beige boxes starting really early on
- commandersaki 1y agoModern cloud computing is more than just having a scalable infrastructure of servers, it was a paradigm shift to having elastic demand, utility style pricing, being completely API driven, etc. Amazon were not only the first to market but pioneers in this space. Nothing came close at that time.
- phreeza 1y agoAWS was the first to sell it, but Google had something that could be called cloud computing (Borg) before that.
- nostrebored 1y agoWhat do you think AWS decided to sell? Both companies had a significant interest in making infrastructure easy to create and scale.
- pclmulqdq 1y agoAWS had a cleaner host-guest abstraction (the VM) that makes it easier to reason about security, and likely had a much bigger gap between their own usage peaks and troughs.
- mianos 1y agoYep. Google offered app engine which was good for fairly stateless simple apps in an old limited version of python, like a photo gallery or email client. For anything else is waa dismal. Amazon offered VMs. Useful stuff for a lot more platforms.
- Mistletoe 1y agoKeep in mind you are talking to someone that worked at OpenAI and surely knows more of how the sausage is made and how the books look than you do?
- dcow 1y agoI don’t think “AI” as a market is “winner-takes-anything”. Seriously. AI is not a product, it’s a tool for building other products. The winners will be other businesses that use AI tooling to make better products. Does OpenAI really make sense as a chatbot company?
- baby_souffle 1y ago> Does OpenAI really make sense as a chatbot company? If the chat bot remains useful and can execute on instructions, yes. If we see a plateau in integrations or abilities, it’ll stagnate.
- deleted 1y ago[deleted]
- tom_m 1y agoVery few are successful in this position. Zapier comes to mind, but it seems like a tiring business model to me.
- mistrial9 1y agothe subscription is a product
- nothercastle 1y agoI agree the market for 10% better AI isn’t that great but the cost to get there is. An 80% as good model at 10% or even 5% the cost will win every time in the current environment. Most businesses don’t even have a clear use case for AI they just use it because the competition is and there is a FOMO effect
- coredog64 1y ago> Most businesses don’t even have a clear use case for AI they just use it because the competition is and there is a FOMO effect I consult in this space and 80-90% of what I see is chat bots and RAG.
- istjohn 1y ago> No guarantees that Google discover a meaningful business model here... I don't understand this sentiment at all. The business model writes itself (so to speak). This is the company that perfected the art of serving up micro-targeted ads to people at the moment they are seeking a solution to a problem. Just swap the search box for a chat bot. For a while they'll keep the ads off to the side, but over time the ads will become harder and harder to distinguish from the chat bot content. One day, they'll dissapear altogether and companies will pay to subtly bias the AI towards their products and services. It will be subtle--undetectable by end users--but easily quantified and monetized by Google. Companies will also pay to integrate their products and services into Google's agents. When you ask Gemini for a ride, does Uber or Lyft send a car? (Trick question. Waymo does, of course.) When you ask for a pasta bowl, does Grubhub or Doordash fill the order? When Gemini writes a boutique CRM for your vegan catering service, what service does it use for seamless biometric authentication, for payment processing, for SMS and email marketing? What payroll service does it suggest could be added on in a couple seconds of auto-generated code? AI allows Google to continue it's existing business model while opening up new, lucrative opportunities.
- panarky 1y ago> chatbots ... provided for free ... ads Just because the first LLM product people paid for was a chatbot does not mean that chat will be the dominant commercial use of AI. And if the dominant use is agents that replace knowledge workers, then they'll cost closer to $2000 per month than $20 or free, and an ad-based business model won't work.
- netcan 1y agoTrue. This is my point too. The actual business models and revenue sources are still unknown. Consumer subscriptions happens to be the first major model. Ads still aren't. Many other models could dwarf either of these. It's very early to call the final score.
- anon84873628 1y agoI still think it's pretty clear. Google doesn't have to get a new business off the ground, just keep improving the integration into Workspace, Gmail, Cloud, Android etc. I don't see users paying for ChatGPT and then copy/pasting into those other places even if the model is slightly better. Google will just slowly roll out premium plans that include access to AI features. And as far as selling pickaxes go, GCP is in a far better position to serve the top of market than OpenAI. Some companies will wire together multiple point solutions but large enterprises will want a consolidated complete stack. GCP already offers you compute clusters and BigQuery and all the rest.
- selfhoster 1y ago"A surprising number of people pay for the ChatGPT app and/or competitors." I doubt the depiction implied by "surprising number". Marketing types and CEO's who would love 100% profit and only paying the electricity bill for an all AI workforce would believe that. Most people, especially most technical people would not believe that there is a "surprising number" of saps paying for so-called AI.
- tom_m 1y agoAbsolutely agree Microsoft is better there - maybe that's why Google hired someone from Microsoft for their AI stuff. A few people I think. I also agree the business models aren't known. That's part of any hype cycle. I think those in the best position here are those with an existing product(s) and user base to capitalize on the auto complete on crack kinda feature. It will become so cheap to operate and so ubiquitous in the near future that it absolutely will be seen as a table stakes feature. Yes, commodities.
- 1vuio0pswjnm7 1y ago"The actual business models, at this point, aren't even known." "AI" sounds like a great investment. Why waste time investing in businesses when one can invest in something that might become a business. CEOs and employees can accumulate personal weath without any need for the company to be become profitable and succeed.
- staticautomatic 1y agoContextual advertising is a known ad business model that commands higher rates and is an ideal fit for LLMs. Plus ChatGPT has a lot of volume. If there’s anyone who should be worried about pulling that off it’s Perplexity and every other small to mid-sized player.
- ForHackernews 1y ago> At this point, everyone is assuming AI will resolve to a "winner-take-most" game that is all about network effect, scale, barriers to entry and such I don't understand why people believe this: by settling on "unstructured chat" as the API, it means the switching costs are essentially zero. The models may give different results, but as far a plugging a different one in to your app, it's frictionless. I can switch everything to DeepSeek this afternoon.
- kibibu 1y agoWhat happens when OpenAI introduces sponsored answers?
- Eridrus 1y agoThe business model question applies to all of these companies, not just Google. A lack of workable business model is probably good for Google (bad for the rest of the world) since it means AI has not done anything economically useful and Google's Search product remains a huge cash cow.
- ksec 1y ago>Meanwhile... making money from online ads isn't trivial. When the advertising model works well (eg search/adwords), it is a money faucet. But... it can be very hard to get that money faucet going. No guarantees that Google discover a meaningful business model here... and the innovators' dilema is strong. It's funny how the vibe of HN along with real world 's political spectrum have shifted together. We can now discuss Ads on HN while still being number 1 and number 2 post. Extremism still exists, but it is retreating.