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Here's some quick math, which I wish the article had made more prominent: If there are 500 million active users and OpenAI is burning $40 billion per year, the

Here's some quick math, which I wish the article had made more prominent: If there are 500 million active users and OpenAI is burning $40 billion per year, then at most, each user costs $80 per year or $6.67 per month. That's the upper limit because there are development costs, so the actual operating cost per user is probably half that (maybe $3 per month). Thus even assuming they don't come up with new revenue models, the $20 per month Plus plan is profitable. Moreover, since there are 20 million Plus subscribers, each subscriber is currently subsidizing 24 other users. If they can get the ratio down to 1:6 (each Plus subscriber subsidizing 6 free users), the math would work out and OpenAI would be profitable (at least operationally). And that's assuming that they don't unlock the huge enterprise business models that, IMO, are going to be the real drivers of revenue. The whole article is predicated on OpenAI being unable to find profit, but with the article's own number, it doesn't seem hard to convince investors that profit will be there. [The usual caveats apply: I'm just a random idiot and not a financial analyst. Also, I'm bad at mathing, so please correct me if I'm wrong.]

lolinder 2y ago
Clearly it isn't hard to convince investors that profit will be there, they've passed that (pretty low) bar with flying colors so far. The question on everyone's minds is if investors are nuts (which they frequently are). By your numbers, the math they have to make work requires converting to Plus at 4x the rate that they currently do. A 4x increase in conversation rate isn't an optimization, it requires a complete overhaul of their business plan, and we've yet to see any evidence of them having a plan for such an overhaul.
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mppm 2y ago
The article specifically mentions that OpenAI is losing money on all plans, including Plus and Pro. The 500 million number is strongly inflated by those who only use the service on and off.
FrojoS 2y ago
Interesting analysis but not sure it‘s correct. The subscribers are likely consuming much more resources than the free users. A 20$/m user might consume much more than that in compute, thus creating a loss.
tim333 2y ago
It does seem to me that if for example OpenAI suddenly could raise no more money they could drop the free tier and raise the paid price and make a profit, if with far fewer users. The Zitron article seems to assume they are forced to provide free service to millions but it seems to me it's a choice to grab market share that they could step back from.

lolinder 2y ago

Clearly it isn't hard to convince investors that profit will be there, they've passed that (pretty low) bar with flying colors so far. The question on everyone's minds is if investors are nuts (which they frequently are). By your numbers, the math they have to make work requires converting to Plus at 4x the rate that they currently do. A 4x increase in conversation rate isn't an optimization, it requires a complete overhaul of their business plan, and we've yet to see any evidence of them having a plan for such an overhaul.

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mppm 2y ago

The article specifically mentions that OpenAI is losing money on all plans, including Plus and Pro. The 500 million number is strongly inflated by those who only use the service on and off.

FrojoS 2y ago

Interesting analysis but not sure it‘s correct. The subscribers are likely consuming much more resources than the free users. A 20$/m user might consume much more than that in compute, thus creating a loss.

tim333 2y ago

It does seem to me that if for example OpenAI suddenly could raise no more money they could drop the free tier and raise the paid price and make a profit, if with far fewer users. The Zitron article seems to assume they are forced to provide free service to millions but it seems to me it's a choice to grab market share that they could step back from.