5 ms·

Ads.

stymaar 2mo ago
Ads work when you can server $.01 worth of ads to a user for $.0001 of server cost. I fail to see how you can make it work when doing LLM inference which is significantly costlier than web search.
- tokioyoyo 2mo ago
  In about 4 months, OpenAI’s fundraiser decks will leak, which will include their current ad revenue.
  - livinglist 2mo ago
    Is this a promise or speculation?
    - mlvljr 2mo ago
      [dead]
- kristofferR 2mo ago
  90+% of queries are probably so common/evergreen that, if a cheaper model made all the different language varients and ways of asking the question into one query, they could be cached quite effectively.
  - aleph_minus_one 2mo ago
    > 90+% of queries are probably so common/evergreen that, if a cheaper model made all the different language vari[a]nts and ways of asking the question into one query, they could be cached quite effectively. As I wrote in some parallel post: "When I look at my history with AI chatbots, 90 % of the conversations revolve around research-level problems in math and computer science. :-D" For quite a few of them, creating a decent answer involved quite a bit of thinking by the AI, so I assume they are not the easiest queries to answer, and the queries are too obscure to cache.
    - kristofferR 2mo ago
      Sure, but you don't represent the average ChatGPT free user in that case probably. I regularly do super complicated queries that Pro spends ages replying to, but yesterday I also asked if chilis are toxic, or just unpleasant, for dogs, and if other species other than flamingos get colored by the food they eat.
- virgildotcodes 2mo ago
  I recently saw some discussion about the CPC for personal injury lawyers being ~$200 on Google ads. Seems insane to me, but I’m totally disconnected from the advertising world. That said, depending on the conversion rates between chats and clicks, the math could be favorable for OAI.
  - mikeshi42 2mo ago
    High CACs are supported by high LTVs, that is about the right ballpark for things like lawyers or even plumbers.
- famouswaffles 2mo ago
  > I fail to see how you can make it work when doing LLM inference which is significantly costlier than web search. The median LLM query isn't significantly costlier than web search.
  - stymaar 2mo ago
    I don't know where you get that from, but it's pretty easy to prove it wrong: with their daily active users count, OpenAI and Anthropic would have been profitable for years if that was true. Instead they are bleeding cash like no others and are still trying to secure another round of funding 4 years after becoming among the most heavily used apps in existence. Whatever you think about Altman and Amodei, they aren't clueless idiots and if ads was all they needed they would have done that from the beginning.
    - famouswaffles 2mo ago
      >with their daily active users count, OpenAI and Anthropic would have been profitable for years if that was true. No they wouldn't have. Low cost isn't no cost, R$D is expensive and there are a class of tokenmaxxing users well outside the median (e.g Agentic Coding). > I don't know where you get that from https://cloud.google.com/blog/products/infrastructure/measuring-the-environmental-impact-of-ai-inference https://cloud.google.com/blog/products/infrastructure/measur... https://epoch.ai/gradient-updates/how-much-energy-does-chatgpt-use https://epoch.ai/gradient-updates/how-much-energy-does-chatg...
      - stymaar 2mo ago
        > No they wouldn't have. Low cost isn't no cost, R$D is expensive I'm not talking about R&D. > there are a class of tokenmaxxing users well outside the median (e.g Agentic Coding). It wasn't a thing before last year and OpenAI wasn't making profit before that either. > https://cloud.google.com/blog/products/infrastructure/measur https://cloud.google.com/blog/products/infrastructure/measur... > https://epoch.ai/gradient-updates/how-much-energy-does-chatg https://epoch.ai/gradient-updates/how-much-energy-does-chatg... None of these support your claim. Again, when you're here saying that the CEOs of the two biggest AI companies are basically idiots, nobody will take you seriously.
- fragmede 2mo ago
  Except that Google is giving AI answers for ~every search now, so they're paying that cost for every search now as well.
  - theptip 2mo ago
    I bet they cache a lot more than OpenAI can though.
- keeda 2mo ago
  That's a problem Google has to solve too ;-) To expand: it seems inevitable that Google's SERP format will be replaced with a conversational / chatbot / agentic interface, which equalizes the playing field for all chatbot providers. This is because you can stuff in much fewer ads into a chat interface compared to SERPs. (They could try stuffing more ads but that would likely just push users more to the competition who have a much lower baseline on which to show growth.) As such, Google would be forced to progressively nullify its own invincible firehose of ad revenue as they deprecate SERPs in favor of AI overviews.
  - red_green_yell 2mo ago
    Google has multiple massive cost advantages over OAI: TPUs, free access to massively valuable data (search index, gmail, maps reviews/PO/ navigation, youtube, android etc.), lower talent costs, lower training costs, lower distribution costs (they can shove AI down our throats in so many different places), lower ad infrastructure costs (it will be a lot of work for OAI to recreate adwords), lower ad sales costs (OAI deploying an ad sales team will be a massive investment). There's no way OAI has a long term advantage over google in replacing the search engine experience. Google's one major weakness is it will face the innovator's dilemma as their core search revenue gets cannibalized. But they seem to have been able to get their entire org to recognize that AI is an existential threat so at least that's a good sign.
    - eru 2mo ago
      I'm not sure Google has lower talent costs. What makes you think so?
      - red_green_yell 2mo ago
        You are right to question that. I am basing that statement off of the many famous engineers that have recently left and were very highly paid. My guess is Google is ceding the frontier and the high salaries that go with it and letting Anthropic/OpenAI fight over the high priced talent that exit. The remaining non-famous engineers will not be able to command celebrity salaries. But this is just speculation and I don't have great evidence that the celebrity salaries are enough to meaningfully reduce overall talent costs. A counter point would be OAI and Anthropic can pay with more equity that they can promise will go to the moon. But all the equity base compensation eventually dilutes earnings per share so it's not free once you go public and people start caring about that.
- theptip 2mo ago
  OpenAI can very plausibly target ads far better than Google can. Email is a good window but lots of people talk in more depth with a chat bot. Search is a good “purchase intent moment” but people are telling a chat bot exactly what they care about in a purchase, rather than making indirect search terms and reading review sites.
  - aleph_minus_one 2mo ago
    > Email is a good window but lots of people talk in more depth with a chat bot. > Search is a good “purchase intent moment” but people are telling a chat bot exactly what they care about in a purchase, rather than making indirect search terms and reading review sites. When I look at my history with AI chatbots, 90 % of the conversations revolve around research-level problems in math and computer science. :-D
    - theptip 2mo ago
      Yeah I can easily imagine the “AI for work” version never being ad supported and gradually capturing more of the value created. Thats a very different usage pattern. But 90% (99%?) of user sessions don’t require a huge amount of reasoning tokens or output; keep in mind LLMs are replacing search for single-turn answers.
johnsmith1840 2mo ago
More like LLMs are near commodity at the common tier the ones who wins are those who can inference the cheapest and google is easily thr best positioned to do that with many years of custom chip model optimization. Google is going to be able to push cost down further and for longer than anyone else. They also rightfully believe this is a company ending gamble if they fail they could be a second tier player for decades. So better inference margins, far better operation experience serving cheap AI at massive scale, a massive warchest, and the fear of complete company irrelevence. That's going to be one hell of a company to beat for free tier LLMs. Also chatgpt is impressive but it's notthing like google search quite yet. On top of that AI labs must use google's product for their AI. They also own more data by an exponential margin. Anything but dominance of free AI on google's side would mean they are just so incompetent they deserve to fail.

Ads.

Ads work when you can server $.01 worth of ads to a user for $.0001 of server cost. I fail to see how you can make it work when doing LLM inference which is significantly costlier than web search.

tokioyoyo 2mo ago
In about 4 months, OpenAI’s fundraiser decks will leak, which will include their current ad revenue.
- livinglist 2mo ago
  Is this a promise or speculation?
  - mlvljr 2mo ago
    [dead]
kristofferR 2mo ago
90+% of queries are probably so common/evergreen that, if a cheaper model made all the different language varients and ways of asking the question into one query, they could be cached quite effectively.
- aleph_minus_one 2mo ago
  > 90+% of queries are probably so common/evergreen that, if a cheaper model made all the different language vari[a]nts and ways of asking the question into one query, they could be cached quite effectively. As I wrote in some parallel post: "When I look at my history with AI chatbots, 90 % of the conversations revolve around research-level problems in math and computer science. :-D" For quite a few of them, creating a decent answer involved quite a bit of thinking by the AI, so I assume they are not the easiest queries to answer, and the queries are too obscure to cache.
  - kristofferR 2mo ago
    Sure, but you don't represent the average ChatGPT free user in that case probably. I regularly do super complicated queries that Pro spends ages replying to, but yesterday I also asked if chilis are toxic, or just unpleasant, for dogs, and if other species other than flamingos get colored by the food they eat.
virgildotcodes 2mo ago
I recently saw some discussion about the CPC for personal injury lawyers being ~$200 on Google ads. Seems insane to me, but I’m totally disconnected from the advertising world. That said, depending on the conversion rates between chats and clicks, the math could be favorable for OAI.
- mikeshi42 2mo ago
  High CACs are supported by high LTVs, that is about the right ballpark for things like lawyers or even plumbers.
famouswaffles 2mo ago
> I fail to see how you can make it work when doing LLM inference which is significantly costlier than web search. The median LLM query isn't significantly costlier than web search.
- stymaar 2mo ago
  I don't know where you get that from, but it's pretty easy to prove it wrong: with their daily active users count, OpenAI and Anthropic would have been profitable for years if that was true. Instead they are bleeding cash like no others and are still trying to secure another round of funding 4 years after becoming among the most heavily used apps in existence. Whatever you think about Altman and Amodei, they aren't clueless idiots and if ads was all they needed they would have done that from the beginning.
  - famouswaffles 2mo ago
    >with their daily active users count, OpenAI and Anthropic would have been profitable for years if that was true. No they wouldn't have. Low cost isn't no cost, R$D is expensive and there are a class of tokenmaxxing users well outside the median (e.g Agentic Coding). > I don't know where you get that from https://cloud.google.com/blog/products/infrastructure/measuring-the-environmental-impact-of-ai-inference https://cloud.google.com/blog/products/infrastructure/measur... https://epoch.ai/gradient-updates/how-much-energy-does-chatgpt-use https://epoch.ai/gradient-updates/how-much-energy-does-chatg...
    - stymaar 2mo ago
      > No they wouldn't have. Low cost isn't no cost, R$D is expensive I'm not talking about R&D. > there are a class of tokenmaxxing users well outside the median (e.g Agentic Coding). It wasn't a thing before last year and OpenAI wasn't making profit before that either. > https://cloud.google.com/blog/products/infrastructure/measur https://cloud.google.com/blog/products/infrastructure/measur... > https://epoch.ai/gradient-updates/how-much-energy-does-chatg https://epoch.ai/gradient-updates/how-much-energy-does-chatg... None of these support your claim. Again, when you're here saying that the CEOs of the two biggest AI companies are basically idiots, nobody will take you seriously.
fragmede 2mo ago
Except that Google is giving AI answers for ~every search now, so they're paying that cost for every search now as well.
- theptip 2mo ago
  I bet they cache a lot more than OpenAI can though.
keeda 2mo ago
That's a problem Google has to solve too ;-) To expand: it seems inevitable that Google's SERP format will be replaced with a conversational / chatbot / agentic interface, which equalizes the playing field for all chatbot providers. This is because you can stuff in much fewer ads into a chat interface compared to SERPs. (They could try stuffing more ads but that would likely just push users more to the competition who have a much lower baseline on which to show growth.) As such, Google would be forced to progressively nullify its own invincible firehose of ad revenue as they deprecate SERPs in favor of AI overviews.
- red_green_yell 2mo ago
  Google has multiple massive cost advantages over OAI: TPUs, free access to massively valuable data (search index, gmail, maps reviews/PO/ navigation, youtube, android etc.), lower talent costs, lower training costs, lower distribution costs (they can shove AI down our throats in so many different places), lower ad infrastructure costs (it will be a lot of work for OAI to recreate adwords), lower ad sales costs (OAI deploying an ad sales team will be a massive investment). There's no way OAI has a long term advantage over google in replacing the search engine experience. Google's one major weakness is it will face the innovator's dilemma as their core search revenue gets cannibalized. But they seem to have been able to get their entire org to recognize that AI is an existential threat so at least that's a good sign.
  - eru 2mo ago
    I'm not sure Google has lower talent costs. What makes you think so?
    - red_green_yell 2mo ago
      You are right to question that. I am basing that statement off of the many famous engineers that have recently left and were very highly paid. My guess is Google is ceding the frontier and the high salaries that go with it and letting Anthropic/OpenAI fight over the high priced talent that exit. The remaining non-famous engineers will not be able to command celebrity salaries. But this is just speculation and I don't have great evidence that the celebrity salaries are enough to meaningfully reduce overall talent costs. A counter point would be OAI and Anthropic can pay with more equity that they can promise will go to the moon. But all the equity base compensation eventually dilutes earnings per share so it's not free once you go public and people start caring about that.
theptip 2mo ago
OpenAI can very plausibly target ads far better than Google can. Email is a good window but lots of people talk in more depth with a chat bot. Search is a good “purchase intent moment” but people are telling a chat bot exactly what they care about in a purchase, rather than making indirect search terms and reading review sites.
- aleph_minus_one 2mo ago
  > Email is a good window but lots of people talk in more depth with a chat bot. > Search is a good “purchase intent moment” but people are telling a chat bot exactly what they care about in a purchase, rather than making indirect search terms and reading review sites. When I look at my history with AI chatbots, 90 % of the conversations revolve around research-level problems in math and computer science. :-D
  - theptip 2mo ago
    Yeah I can easily imagine the “AI for work” version never being ad supported and gradually capturing more of the value created. Thats a very different usage pattern. But 90% (99%?) of user sessions don’t require a huge amount of reasoning tokens or output; keep in mind LLMs are replacing search for single-turn answers.

johnsmith1840 2mo ago

More like LLMs are near commodity at the common tier the ones who wins are those who can inference the cheapest and google is easily thr best positioned to do that with many years of custom chip model optimization. Google is going to be able to push cost down further and for longer than anyone else. They also rightfully believe this is a company ending gamble if they fail they could be a second tier player for decades. So better inference margins, far better operation experience serving cheap AI at massive scale, a massive warchest, and the fear of complete company irrelevence. That's going to be one hell of a company to beat for free tier LLMs. Also chatgpt is impressive but it's notthing like google search quite yet. On top of that AI labs must use google's product for their AI. They also own more data by an exponential margin. Anything but dominance of free AI on google's side would mean they are just so incompetent they deserve to fail.