How will OpenAI compete?

> But is "only" 5% of users paying of a 8-900M user base really so inconsequential? What percentage of Meta's users are paying? Google's? I would be curious to see the author dig deeper here, because I am skeptical that this is really as bad as the author suggests.

The difference is in the unit economics. OpenAI has to spend massively per free user it serves. The others you mentioned have SaaS economics where the marginal cost of onboarding and serving each non-paying user is essentially zero while also gaining money from these free users via advertising. Hence, the free users are actually a net positive rather than an endless money sink.

Keep also in mind that AI has always been, and will always be, a commodity. The moment you start forcing people to convert into paying customers is the moment they jump ship at scale.

Just something to keep in mind.

People underestimate the lead OAI has with their post-5.2 models. The author does not strike me as someone who closely follows the progress frontier labs make in US and around the world.

> What percentage of Meta's users are paying? Google's?

The advertiser based business model for those companies makes your question/thought process here problematic for me. Historically speaking Google and "Meta" (Facebook) were primarily advertising provider companies. They provided billboards (space and time on the web page in front of an end-user) to people who were willing to buy tht space and time on the billboard. The "free access" end-users would always end up seeing said billboards, which is how they ended up "paying" for the service.

So most of Meta/Google end-users were "paying" users. They were being subsidised by the advertising customers paying for the end-users (who were forced to view adverts). The end-users paid with interruption to the service by an advert. [0]

In that context it feels a little like you're comparing apples to dave's left foot, as OpenAI hasn't had that with advertising ............ historically [1].

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[0]: yes ad-blockers, yes more diverse revenue income streams over the years like with phones, yes this is simplified yadayada

[1]: excluding government etc. ~bailouts~ investments as not the same as advertising subsidies, but you could argue it's doing the same thing

Sometimes I like to imagine what this would be like if the technology had appeared 25 years ago.

First off, nonetheless open publishing stuff. Everything would have been trade secrets.

Next off no interoperable json apis instead binary APIs that are hard to integrate with and therefore sticky. Once you spent 3 or 4 months getting your MCP server setup, no way would you ever try to change to a different vendor!

The number of investors was much smaller so odds are you wouldn't have seen these crazy high salaries and you wouldn't have people running off to different companies left and right. (I know, .com boom, but the .com boom never saw 500k cash salaries...)

Imagine if Google hadn't published any papers about transformers or the attention paper had been an internal memo or heck just word2vec was only an internal library.

It has all been a net good for technological progress but not that good for the companies involved.

It seems like it’s really only China that’s pursuing the route of doing more with smaller/cheaper models, too, which also has a lot of potential to give the whole bubble a good shake.

To me it seems like the most obvious thing to do. More efficient models both make up for whatever you lost by using cheaper hardware and let you do more with the hardware you have than the competition can. By comparison the ever-growing-model strategy is a dead end.