The article mostly focuses on ChatGPT uses, but hard to say if ChatGPT is going to be the main revenue driver. It could be! Also unclear if the underlying report is underconsidering the other products.
It also estimates that LLM companies will capture 2% of the digital advertising market, which seems kind of low to me. There will be challenges in capturing it and challenges with user trust, but it seems super promising because it will likely be harder to block and has a lot of intent context that should make it like search advertising++. And for context, search advertising is 40% of digital ad revenue.
Seems like the error bars have to be pretty big on these estimates.
Meanwhile, Google would be perfectly fine. They can just integrate whatever improvements the actually existing AI models offer into their other products.
If this is what users actually want.
If you think of openAI like a new google, as in a new category-defining primary channel for consumers to search and discover products. Well, 2% does seem pretty low.
Yeah, I don't like that estimate. It's either way too low, or much too high. Like, I've seen no sign of OpenAI building an ads team or product, which they'd need to do soon if it's going to contribute meaningful revenue by 2030.
Is that role not exactly what you mention?
There are a bunch of people from FB at OpenAI, so they could staff an adtech team internally I think, but I also think they might not be looking at ads yet, with having "higher" ambitions (at least not the typical ads machine ala FB/Google). Also if they really needed to monetize, I bet they could wire up Meta ads platform to buy on ChatGPT, saving themselves a decade of building a solid buying platform for marketers.
Well they have Fidji, so she could definitely recruit enough people to make it work.
> with having "higher" ambitions (at least not the typical ads machine ala FB/Google)
Everyone has higher ambitions till the bills come due. Instagram was once going to only have thoughtfully artisan brand content and now it's just DR (like every other place on the Internet).
> At least the description is not at all about building an adtech platform inside OpenAI, it's about optimizing their marketing spend (which being a big brand, makes sense).
The job description has both, suggesting that they're hedging their bets. They want someone to build attribution systems which is both wildly, wildly ambitious and not necessary unless they want to sell ads.
> I bet they could wire up Meta ads platform to buy on ChatGPT, saving themselves a decade of building a solid buying platform for marketers.
Wouldn't work. The Meta ads system is so tuned for feed based ranking that I suspect they wouldn't gain much from this approach.
I do think that this seems odd, looks like they're hiring an IC to build some of this stuff, which seems odd as I would have expected them to be hiring multiple teams.
That being said, the earliest they could start making decent money from this is 2028, and if we don't see them hire a real sales team by next March then it's more likely to be 2030 or so.
Response: Book a car at <totally not an ad> and it will be waiting for you at arrival terminal, drive to Napoli and stay at <totally not an ad> with an amazing view. There's an amazing <totally not an ad> place that serves grandma's favorite carbonara! Do you want me to make the bookings with a totally not fake 20% discount?
I guess we'll just put that in the "Cost of Goods Sold" bucket.
At least with an ad it's obvious a separate company is involved. If you do all the payment through OpenAI it seems to leave them open to liability.
Travel sites, VPNs and insurance all pay quite handsomely (compared to say amazon links on cooking sites)
Maybe they're thinking they can build a universal store with search over every store? Like a "Google Shopping" type experience?
2% is optimistic in my opinion.
But all the search companies have their own AI so how would OAI make money in this sector?
1. Paid ads - ChatGPT could offer paid listings at the top of its answers, just like Google does when it provides a results page. Not all people will necessarily leave Google/Gemini for future search queries, but some of the money that used to go to Google/Bing could now go to OpenAI.
2. Behavioral targeting based on past ChatGPT queries. If you have been asking about headache remedies, you might see ads for painkillers - both within ChatGPT and as display ads across the web.
3. Affiliate / commission revenue - if you've asked for product recommendations, at least some might be affiliate links.
The revenue from the above likely wouldn't cover all costs based on their current expenditure. But it would help a bit - particularly for monetizing free users.
Plus, I'm sure there will be new advertising models that emerge in time. If an advertiser could say "I can offer $30 per new customer" and let AI figure out how to get them and send a bill, that's very different to someone setting up an ad campaign - which involves everything from audience selection and creative, to bid management and conversion rate optimization.
The team also assumes LLM companies will capture 2 per cent of the digital advertising market in revenue, from slightly more than zero currently.
I think people are severely underestimating ChatGPT as a way to make money other than subscriptions. I also think people are underestimating the branding power ChatGPT has already. All my friends have ChatGPT on their phone. None of them except me has Gemini or Claude app.
This doesn't account for OpenAI's other ambitions such as Sora app.
Hey Sam Altman or OpenAI employee, if you are reading this, I think you should buy the North American version of TikTok if the opportunity presents itself. The future of short videos will be heavily AI generated/assisted. Combine Tiktok's audience with your Sora tools and ChatGPT data and you got yourself a true Instagram competitor immediately. If the $14b sales price of US Tiktok is real, that's an absolute bargain in the grand scheme of things.
Meta makes about $200B on ads, Google makes about $235B on ads. Advertising is roughly 1.5% of the total GDP of the US and hasn't changed in 20+ years. So what you have is a big ass pie with a few players fighting for it that barely grows every year.
OpenAI has to somehow:
1. Compete directly with Google Gemini and Meta's Llama for a piece of users pie with a product that has very little differentiator (functionality and technically speaking).
2. Have to prove to advertisers that their single dollar ad purchase on OpenAI is categorically worth more than any other channel.
3. Have enough forward capital to continue purchasing capital-intense hardware purchases.
4. Having enough capital to weather any potential economic headwinds.
I know where my bet is.
Meta has WhatsApp, Instagram, and Facebook to account for that.
OpenAI has ChatGPT (not a social platform).
It seems to me you're comparing apples and oranges here.
OpenAI has ChatGPT (not a social platform).
Anyways, check this out: https://openai.com/index/group-chats-in-chatgpt/
It seems to me you're comparing apples and oranges here.
PS. That's why Meta and Google are all in on AI. OpenAI is an existential threat to both in my humble opinion.
The network effects matter so much more for a social platform than a chat bot. The switching costs for a user are much lower, so users can move to a different one much easier.
How sticky will chat bots prove to be in the long term? Will OpenAI be able to maintain a lead in the space in the long term, the way Google was over Bing? It's possible, but it's also pretty easy to imagine other providers being competitive and a landscape where users move between different LLMs more fluidly
But I think Open AI is not a slam dunk for Ads. Gemini and AI mode will compete for the same budget, and Google's Ad machine is polished.
I think eventually you will buy Ads for Open AI in Google's marketing platforms, just like most people buy bing ads in Google.
I'm telling it nearly everything from my work problems to health problems to love life problems to product research, traveling plans, etc.
It's becoming social as well: https://openai.com/index/group-chats-in-chatgpt/
I will have whatever you're smoking. If a social media platform literally proves the dead internet theory, it's not making any money.
Hideous idea as it is, I fully expect they break even in 2026.
If they can figure out how to get the right kickbacks/referrals without compromising user trust and really nail the search and aggregation of data this could be a real money-maker.
There are adjacancies in white collar work like financial analysis that they will go after. All these will capture high ARPU usage.
Consumer is not their only path to revenue but it is probably the easiest to model. The enterprise play to automate and accelerate some white collar workers is a clear target not reflected here.
For the IPO itself Amazon sold 3 million shares at $18, for a raise of 54m (from the IPO alone they had enough cash to pay off every investor up to that point). In July 2001, in the heart of the dotcom crash, they raised 100m by selling equity to undisclosed investors, and of course they have been using shares as part of their compensation packages for a very long time, but that's about it for Amazon's entire equity.
They did raise 15b in a bond issuance a few weeks ago, their first bonds issued since 2022, with the money going to several things but mostly AI. However, since bond payoffs are very different from selling equity this is a very different play from what OAI is doing. Amazon will never pay more than a fixed amount for that money, capped upside.
The reason this is different is that Amazon has largely run either a small profit or a small loss, quarter after quarter, because they take their profits and put it into building datacenters and warehouses and software and the like. But because of that cash generation they have only rarely tapped outside investors, either in bonds or equity markets. OAI is not generating near enough cash to fund their operations, so they have been selling equity in absolutely enormous quantities- they have already raised more cash pre-IPO than any company in history and outside estimates like this one from HSBC call for them to blow past the amount they've already raised. This is fundamentally very very different.
Had a look and:
>In total, OpenAI aims to invest approximately $1.4 trillion in computing infrastructure – encompassing Google Cloud, Nvidia chips, and data center expansions.
Huh yeah fair. That's more than the yearly defense budget. Absurd. Though I'm sure it's not _yearly_
- [1] https://en.wikipedia.org/wiki/Military_budget_of_the_United_...
OpenAI is still losing money much faster than it can make it and is planning to accelerate those losses indefinitely.
I think the most likely outcome is that it turns into something like Uber, where they continue to lose money waiting for a major technological leap (truly unassisted and reliable AI in this case, fully self-driving cars in the case of Uber) and then pivot a bit to a largely unnecessary and poorly executed business model that people reluctantly use for the most part (with some eager advocates) but makes some money.
I think beyond the number of crazy assumptions (no Google taking market share in the consumer market?? only 2% of digital advertising expected to be captured by OpenAI?) it is hard to nail down which levers could move which might make this funding hole disappear.
If their business isn't sustainable they should go bankrupt, and close shop.
The CEOs making big calls across the economy have already negotiated golden parachutes in the event of their failure.
The financiers and lawyers getting a chunk of each bond deal they close have every incentive to raise more than what's actually needed. Investment funds flush with ZIRP dollars have every incentive to plow it back into investments to show that "the money is at work".
In terms of business, it is not sustainable:
https://www.youtube.com/watch?v=t-8TDOFqkQA
The hype-cycle is nothing new =3
"Memoirs of extraordinary popular delusions and the madness of crowds" (Charles Mackay, 1852)
What is this saying? Is this sarcastic?
I don't know anybody with a Microsoft 365 subscription.
I suppose the cloud storage is nice, but you can do much better; Google gives you double that for the same price ($99/yr).
We're barely scratching the surface of the utility of LLMs with today's models. They aren't more pervasive because of their costs today, but what happens if they drop another order of magnitude with the current capabilities?
What does that even mean?
If OpenAI crashes, for example funding stops, they go broke, fall behind, nobody buys anything, then all the money they invested for data centers or demand they created for NVIDIA chips and compute collapses. That creates surplus of hardware, causes lots of construction/buildout / stockup orders to get cancelled, and the whole thing ripples as suppliers and construction and data center providers etc etc suddenly lose a ton of anticipated profits.
Share prices drop as people dump to protect their portfolios, anticipating dips in the prices because share prices will drop as people dump to protect their portfolios (I'm not kidding).
Given that the big 7 AI companies are basically _all_ of the market growth lately, it doesn't even take a serious panic / paranoia episode to see the market itself stagnate or significantly regress, as people pull from anything AI related, and then pull from the market itself anticipating the market will fall.
It's a fairly standard playbook at this point.
They are spending more money than they are bringing in. This means they are losing money.
Compared with .com bubble. most .com dies, and the one who survived are GOOGLE, AMAZON, Tencent etc.
I have been talking to AI a lot about what portfolios will survive that crash. :)
Right now I use a Chinese vibe code plan, really good value.
Everything’s for sale, and they will amplify whatever == revenue.
Living in AImaginationland must be nice. C’mon kids, let’s all sing the AImagination song: AImagination, AImagination, AIiiimagination, …
> People crying about the revenue gap constantly forget that OpenAI still hasn't turned on the ads, porn, and gambling
But quite the opposite, HSBC assumed that they will have a virtual global monopoly on AI, and even under those projections they will still need to take on hundreds of billions of debt. I'm sure if they get there getting access to that debt will be easier than I'm assuming currently.
I hope the porn and gambling aren't turned on, but they will be. Probably under spin off companies to shield the brand, but using the tech.
two out of three of those require me to want to do them for them to affect my life.
it's pretty sobering to think that the so-called harbingers of SkyNet AGI have to fall back to mafia-era revenue streams like vice to convince shareholders that their money wasn't wasted.
This is truly the most stupid timeline.
We already have those at home without OpenAI.
Also, the competition would be ruthless.
Ads & referrals are already in the works, and people are generally tolerant of those. But, as with any company, appearances matter. ChatGPT will definitely lose users at the slightest possibility of having non-sanitized content served to more morally sensible groups.
Sure OpenAI may well be bleeding money into the 2030s, or may even go bust completely depending on how pessimistic you are, but the analysis completely skips:
- They are building their own data centers, and will be less reliant on renting compute from Microsoft and Amazon over time.
- Once the AI bubble has subsided costs for GPU purchases and rentals will decrease significantly. Plus there will be more advancements and competition in the space (e.g. Google TPUs) and Nvidia will no longer be able to name their own price.
- We will write more efficient software for training and inference.
- Once user growth is tapped out OpenAI will no longer need to have the overly generous free tier that they do today. And if they decide to turn up the advertising faucet these users could bring in a ton more revenue than in the projection. Thinking that every AI company combined will capture only 2% of the total digital advertising market is ridiculous. AI apps are already challenging social media for scrolling time.
Basically, the entire space is evolving so rapidly that it's pointless to make a projection with the assumption that the landscape isn't going to change from here on.
If OpenAI goes bankrupt, what happens? People won’t be able to write their precious slop oh no and serious professionals will just switch to any other LLM provider
In unconstrained capitalism, a small group of powerful individuals use corporate control of government for their personal benefit.
Clearly, these outcomes are completely different.
Their stock prices might go down but they're not going down.