10 ms·

To be fair, I would get a ton of value out of someone selling dollars for 20 cents apiece. But ya, OAI is clearly making a ton of revenue. That doesn't mean it

by bloppe 11mo ago

To be fair, I would get a ton of value out of someone selling dollars for 20 cents apiece. But ya, OAI is clearly making a ton of revenue. That doesn't mean it's a good business, though. Giving them a 20 year horizon, shareholders will be very upset unless the firm can deliver about a trillion in profit, not revenue, to justify the 100B (so far) in investment, and that would barely beat the long term s&p 500 average return. But Altman himself has said he'll need much more investment in the coming years. And even if OAI became profitable by jacking up prices and flooding gpt with ads, the underlying technology is so commodified, they'd never be able to achieve a high margin, assuming they can turn a profit at all.

littlestymaar 11mo ago
I'd be a little bit more nuanced: I think there's something off with their plans right now: it's pretty clear at this point that they can't own the technological frontier, Google is just too close already and from a purely technological PoV they are much better suited to have the best tech in the medium term. (There's no moat and Google has way more data and compute available, and also tons of cash to burn without depending on external funding). But ChatGPT is an insane brand and for most (free) customers I don't think model capabilities (aka “intelligence”) are that important. So if they stopped training frontier models right now and focus on driving their costs low by optimizing their inference compute budget while serving ads, they can make a lot of money from their user base. But that would probably mean losing most of its paying customers over the long run (companies won't be buying mediocre token at a premium for long) and more importantly it would require abandoning the AGI bullshit narrative, which I'm not sure Altman is willing to do. (And even if he was, how to do that without collapsing from lack of liquidity due to investors feeling betrayed is an open question).
- riffraff 11mo ago
  > But ChatGPT is an insane brand I mean, so was netscape.
  - littlestymaar 11mo ago
    Maybe, I was too young to remember that.
    - littlestymaar 11mo ago
      What's up with the flock of downvotes? I'd never got a comment with so many as this one… Is being younger than 45 not allowed in here?
  - cmiles8 11mo ago
    This. Netscape was THE browser in the early phases of the Internet. Then Microsoft just packaged IE into Windows and it was game over. The brand means nothing long term. If Google broadly incorporates Gemini into all the Google-owned things everyone already has then it’s game over for OpenAI. The mass commoditization of the tech is rapidly driving AI to be a feature, not a product. And Google is very strongly positioned to take advantage of that. Microsoft too, and of course they have a relationship with OpenAI but that’s fraying.
    - cruffle_duffle 11mo ago
      To be completely fair the later versions of Netscape were increasingly giant bloated piles of crap while IE slowly caught up and surpassed in terms of speed and features. The first versions IE were only good for downloading Netscape. Netscape, to a large degree, killed itself. Not to say IE turned into anything good though. But it did have its hayday.
- bloppe 11mo ago
  The best way to drive inference cost down right now is to use TPUs. Either that or invest tons of additional money and manpower into silicon design like Google did, but they already have a 10 year lead there.
  - littlestymaar 11mo ago
    > The best way to drive inference cost down right now is to use TPUs TPUs are cool, but the best leverage remains to reduce your (active) parameters count.
- TheOtherHobbes 11mo ago
  Altman's main interest is Altman. ChatGPT will be acquihired, most people will be let go, the brand will become a shadow of its former self, and Altman will emerge with a major payday and no obvious dent in his self-made reputation as a leading AGIthinkfluenceretc. I don't think ads are that easy, because the hard part of ads isn't taking money and serving up ad slop, it's providing convincing tracking and analytics. As soon as ad slop appears a lot of customers will run - not all, but enough to make monetisation problematic.
  - a_victorp 11mo ago
    This! Most people that don't work on adtech have no idea how hard it is to: 1. Build a platform that offers new advertising inventory that advertisers can buy 2. Convince advertisers to advertise on your platform 3. Show advertisers that their advertising campaigns in your platform are more successful than in the several other places they can advertise
  - AbstractH24 11mo ago
    And Blockbuster will acquire Netflix
- array_key_first 11mo ago
  Being an insane brand means literally nothing if people can trivially switch to competitors, which they can. There isn't even a tenth of enough money if you group together all of advertising. Like, the entire industry. Ads is a bad, bad plan that wont work. Advertising is also extremely overvalued. And even at it's overvalued price tag, it's nowhere near enough.
  - pjaoko 11mo ago
    > Being an insane brand means literally nothing if people can trivially switch to competitors, which they can. Logically speaking, yes it is easy to switch between OAI and Gemini, or Coke and Pepsi. But brand loyalty is more about emotions (comfort, familiarity,..) rather logical reasoning.
  - whalee 11mo ago
    People could trivially switch their search engine to Bing or Yahoo, but they don't. If ads are so overpriced, how big is your short position on google? Also ads are extremely inefficient in terms of conversion. Ads rendered by an intelligent, personalized system will be OOM more efficient, negating most of the "overvalue". I'm not saying they should serve ads. It's a terrible strategy for other reasons.
    - I-M-S 11mo ago
      Funny that you mention Yahoo, as in my mind they're the perfect example of what the poster above you noted: people quickly switched to Google once a better alternative to Yahoo appeared.
    - timr 11mo ago
      You know that Google literally spends billions to ensure that people don’t switch, right? That’s possible because they’re immensely profitable.
      - bitpush 11mo ago
        Isn't the billions just setting the default? The ability to switch is the same as far as I understand it.
- po 11mo ago
  as long as the business model is: - users want the best/smartest LLM - the best performance for inference is found by spending more and more tokens (deep thinking) - pricing is based on cost per token Then the inference providers/hyperscalers will take all of the margin available to app makers (and then give it to Nvidia apparently). It is a bad business to be in, and not viable for OpenAI at their valuation.
  - littlestymaar 11mo ago
    What I'm saying ils that I'm not sure the first point is true. I think they all have become sufficiently good for most people to stick to what they are used to (especially in terms of tone/“personality” + the memory shared between conversations).
usef- 11mo ago
People did say the same thing about Youtube, which was unprofitable and extremely expensive to run in the early years. I remember thinking everyone would leave once ads were added. At youtube's ad income rate (~$13/year), the current (but growing) ~800 million chatgpt users would add ~$10 billion. At facebook's rate (~$40-50/year) $32-40 billion. Potentially, an assistant would be more integrated into your life than either of those two. The "audience retention" is the key question, not the profitability if they maintain their current audience. I've been surprised how many non-technical people I know don't want to try other models. "ChatGPT knows me".
- adgjlsfhk1 11mo ago
  the problem with the YouTube analogy is that media platforms have significant network affects that NN providers don't. OpenAI can't command a premium because every year that goes by the cost to train an equivalent model to theirs decreases.
  - usef- 11mo ago
    Youtube didn't either at the time. The front page was widely seen as garbage, and everyone I knew watched videos because they were embedded or linked from external sites. "If they introduced ads, people will just switch to other video hosts, wont they?". Many of the cooler creators used Vimeo. It was the good recommendation algorithm that came later, that I think allowed an actual network effect, and I don't remember people predicting that. The field is too young to know what will keep users, but there are definitely things that plausibly could create a lock-in effect. I mentioned one ("ChatGPT knows me") which could grow over time as people have shared more of themselves with ChatGPT. There's also pilots of multi-person chats, and the social elements in Sora. Some people already feel compelled to stick to the "person" they're comfortable talking to. The chance of OpenAI finding something isn't zero.
    - polishTar 11mo ago
      That's a bit revisionist. Network effects were obvious when Google acquired Youtube. Google Video had the edge technically, but it didn't matter because Youtube had the users/content and Google saw that very clearly in their user growth before they made their offer.
safety1st 11mo ago
The whole US economy is so deep into La-La Land at this point that they don't really need to be a good business. There are already murmurings that they may pull off a trillion dollar IPO, I don't see why they wouldn't, Amazon was making it cool to lose money hand over fist during your IPO as far back as 1997. They have the President willing to pump up their joint ventures with executive orders, we may just see tech become more like the financial industry, where a handful of companies are dubbed "too big to fail" based on political connections, and get bailed out at the taxpayer's expense when things get too rough. None of these guys function according to the real rules of the economy or even the legal system at this point, they just make stuff up as they go along and if they're big enough or know someone big enough they often get away with it.

by bloppe 11mo ago

littlestymaar 11mo ago

I'd be a little bit more nuanced: I think there's something off with their plans right now: it's pretty clear at this point that they can't own the technological frontier, Google is just too close already and from a purely technological PoV they are much better suited to have the best tech in the medium term. (There's no moat and Google has way more data and compute available, and also tons of cash to burn without depending on external funding). But ChatGPT is an insane brand and for most (free) customers I don't think model capabilities (aka “intelligence”) are that important. So if they stopped training frontier models right now and focus on driving their costs low by optimizing their inference compute budget while serving ads, they can make a lot of money from their user base. But that would probably mean losing most of its paying customers over the long run (companies won't be buying mediocre token at a premium for long) and more importantly it would require abandoning the AGI bullshit narrative, which I'm not sure Altman is willing to do. (And even if he was, how to do that without collapsing from lack of liquidity due to investors feeling betrayed is an open question).

riffraff 11mo ago
> But ChatGPT is an insane brand I mean, so was netscape.
- littlestymaar 11mo ago
  Maybe, I was too young to remember that.
  - littlestymaar 11mo ago
    What's up with the flock of downvotes? I'd never got a comment with so many as this one… Is being younger than 45 not allowed in here?
- cmiles8 11mo ago
  This. Netscape was THE browser in the early phases of the Internet. Then Microsoft just packaged IE into Windows and it was game over. The brand means nothing long term. If Google broadly incorporates Gemini into all the Google-owned things everyone already has then it’s game over for OpenAI. The mass commoditization of the tech is rapidly driving AI to be a feature, not a product. And Google is very strongly positioned to take advantage of that. Microsoft too, and of course they have a relationship with OpenAI but that’s fraying.
  - cruffle_duffle 11mo ago
    To be completely fair the later versions of Netscape were increasingly giant bloated piles of crap while IE slowly caught up and surpassed in terms of speed and features. The first versions IE were only good for downloading Netscape. Netscape, to a large degree, killed itself. Not to say IE turned into anything good though. But it did have its hayday.
bloppe 11mo ago
The best way to drive inference cost down right now is to use TPUs. Either that or invest tons of additional money and manpower into silicon design like Google did, but they already have a 10 year lead there.
- littlestymaar 11mo ago
  > The best way to drive inference cost down right now is to use TPUs TPUs are cool, but the best leverage remains to reduce your (active) parameters count.
TheOtherHobbes 11mo ago
Altman's main interest is Altman. ChatGPT will be acquihired, most people will be let go, the brand will become a shadow of its former self, and Altman will emerge with a major payday and no obvious dent in his self-made reputation as a leading AGIthinkfluenceretc. I don't think ads are that easy, because the hard part of ads isn't taking money and serving up ad slop, it's providing convincing tracking and analytics. As soon as ad slop appears a lot of customers will run - not all, but enough to make monetisation problematic.
- a_victorp 11mo ago
  This! Most people that don't work on adtech have no idea how hard it is to: 1. Build a platform that offers new advertising inventory that advertisers can buy 2. Convince advertisers to advertise on your platform 3. Show advertisers that their advertising campaigns in your platform are more successful than in the several other places they can advertise
- AbstractH24 11mo ago
  And Blockbuster will acquire Netflix
array_key_first 11mo ago
Being an insane brand means literally nothing if people can trivially switch to competitors, which they can. There isn't even a tenth of enough money if you group together all of advertising. Like, the entire industry. Ads is a bad, bad plan that wont work. Advertising is also extremely overvalued. And even at it's overvalued price tag, it's nowhere near enough.
- pjaoko 11mo ago
  > Being an insane brand means literally nothing if people can trivially switch to competitors, which they can. Logically speaking, yes it is easy to switch between OAI and Gemini, or Coke and Pepsi. But brand loyalty is more about emotions (comfort, familiarity,..) rather logical reasoning.
- whalee 11mo ago
  People could trivially switch their search engine to Bing or Yahoo, but they don't. If ads are so overpriced, how big is your short position on google? Also ads are extremely inefficient in terms of conversion. Ads rendered by an intelligent, personalized system will be OOM more efficient, negating most of the "overvalue". I'm not saying they should serve ads. It's a terrible strategy for other reasons.
  - I-M-S 11mo ago
    Funny that you mention Yahoo, as in my mind they're the perfect example of what the poster above you noted: people quickly switched to Google once a better alternative to Yahoo appeared.
  - timr 11mo ago
    You know that Google literally spends billions to ensure that people don’t switch, right? That’s possible because they’re immensely profitable.
    - bitpush 11mo ago
      Isn't the billions just setting the default? The ability to switch is the same as far as I understand it.
po 11mo ago
as long as the business model is: - users want the best/smartest LLM - the best performance for inference is found by spending more and more tokens (deep thinking) - pricing is based on cost per token Then the inference providers/hyperscalers will take all of the margin available to app makers (and then give it to Nvidia apparently). It is a bad business to be in, and not viable for OpenAI at their valuation.
- littlestymaar 11mo ago
  What I'm saying ils that I'm not sure the first point is true. I think they all have become sufficiently good for most people to stick to what they are used to (especially in terms of tone/“personality” + the memory shared between conversations).

usef- 11mo ago

People did say the same thing about Youtube, which was unprofitable and extremely expensive to run in the early years. I remember thinking everyone would leave once ads were added. At youtube's ad income rate (~$13/year), the current (but growing) ~800 million chatgpt users would add ~$10 billion. At facebook's rate (~$40-50/year) $32-40 billion. Potentially, an assistant would be more integrated into your life than either of those two. The "audience retention" is the key question, not the profitability if they maintain their current audience. I've been surprised how many non-technical people I know don't want to try other models. "ChatGPT knows me".

adgjlsfhk1 11mo ago
the problem with the YouTube analogy is that media platforms have significant network affects that NN providers don't. OpenAI can't command a premium because every year that goes by the cost to train an equivalent model to theirs decreases.
- usef- 11mo ago
  Youtube didn't either at the time. The front page was widely seen as garbage, and everyone I knew watched videos because they were embedded or linked from external sites. "If they introduced ads, people will just switch to other video hosts, wont they?". Many of the cooler creators used Vimeo. It was the good recommendation algorithm that came later, that I think allowed an actual network effect, and I don't remember people predicting that. The field is too young to know what will keep users, but there are definitely things that plausibly could create a lock-in effect. I mentioned one ("ChatGPT knows me") which could grow over time as people have shared more of themselves with ChatGPT. There's also pilots of multi-person chats, and the social elements in Sora. Some people already feel compelled to stick to the "person" they're comfortable talking to. The chance of OpenAI finding something isn't zero.
  - polishTar 11mo ago
    That's a bit revisionist. Network effects were obvious when Google acquired Youtube. Google Video had the edge technically, but it didn't matter because Youtube had the users/content and Google saw that very clearly in their user growth before they made their offer.

safety1st 11mo ago

The whole US economy is so deep into La-La Land at this point that they don't really need to be a good business. There are already murmurings that they may pull off a trillion dollar IPO, I don't see why they wouldn't, Amazon was making it cool to lose money hand over fist during your IPO as far back as 1997. They have the President willing to pump up their joint ventures with executive orders, we may just see tech become more like the financial industry, where a handful of companies are dubbed "too big to fail" based on political connections, and get bailed out at the taxpayer's expense when things get too rough. None of these guys function according to the real rules of the economy or even the legal system at this point, they just make stuff up as they go along and if they're big enough or know someone big enough they often get away with it.