[paxys]

Google is a digital advertising company. OpenAI hasn't even entered the ads business. In the absolute best case they can take over a large chunk of Google's search market share, sure, but that still doesn't make it anything similar to Google in terms of finances. How do they start making the queries profitable? What do they do when their competitors (Claude, Gemini, Llama, Mistral, Grok and several others) undercut them on price?

[plaidfuji]

Google didn’t start as an ads company. It started as a blank text box that gave you a bunch of good answers from the internet in a list of links.

Were there competitors that did the same thing? AltaVista? Yahoo? Did they undercut on cost? Google was free, I guess. But Google won because it maintained its quality, kept its interface clean and simple, and kept all the eyeballs as a result. Now Google is essentially the entry point to the internet, baked into every major browser except Edge.

Could ChatGPT become the “go-to” first stop on the internet? I think there’s a fair chance. The revenue will find its way to the eyeballs from there.

[Shakahs]

Well when you describe it that way, OpenAI also started as a blank text box that gave you a bunch of good answers, and they've already expanded with other services.

I already use ChatGPT as my first go-to stop for certain search queries.

[ywvcbk]

I guess the difference (at least at comparable development stages) is that a single user query cost almost nothing for Google compared to how much money running ChatGPT costs.

I wouldn’t be surprised if OpenAI were still losing money even with the same CPM that Google search has.

[tgma]

I am not bearish on OpenAI, but the analogy is flawed in that Google probably raised, I don't know, less than 50 million, before it was actually profitable.

[NomDePlum]

It quickly moved into ads though. Incorporated late 1998 and started selling ads in 2000.

Normal people would need to start using a Chat GPT owned interface for search to make an ad based business viable surely? And there's no real sign of that even beginning to happen.

[tptacek]

This subthread is full of people explaining why they don't believe OpenAI could successfully match Google's financial performance. Sure. I'm not investing either. My point isn't that they're going to be successful, it's that there are plausible stories for their success that don't involve science fiction.

[jt2190]

People don’t seem to understand that investment portfolios are personal, that just because an investment doesn’t make sense for their portfolio doesn’t mean that it doesn’t make sense for anyone’s. Allocating a tiny fraction of a portfolio to high risk/high reward investments is a sound practice. When those portfolios are, say, large pension funds, the total sum to invest can be hundreds of millions.

Dissenters should consider that their might be short plays, that if what they think is true they could make some money.

[fnordpiglet]

Google also offered a free product. OpenAI isn’t offering a free product but a subscription product plus metered API product amongst other. Their economics are structurally better than googles assuming they can keep growing their captured market share. Their outrageous costs are also opportunities to optimize costs, including massive amounts of R&D, etc. They don’t need to be profitable now - in fact as bezos demonstrated with Amazon for many years, profit is an indication you’ve run out of uses for capital to grow.

[airstrike]

> OpenAI isn’t offering a free product

I encourage you to visit https://chatgpt.com in incognito mode.

[fnordpiglet]

That’s demoware.

[vitorgrs]

That's like saying Youtube isn't free because there's a subscription...

[fnordpiglet]

It’s like saying just because there’s a free offering the product isn’t free. Anyone who has ever built a shareware or demoware product understand the free offering is a funnel to the paid offering and doesn’t exist as an independent part but as an advertisement for the paid product.

[vitorgrs]

Yes, but still a free product. Unless you say that in the future the product won't have a free offering anymore, it's a free product.

[buzzerbetrayed]

No it isn’t. Free tier of YouTube make money from ads. Free tier of ChatGPT is just a funnel for the paid tier. It’s a marketing cost.

[vitorgrs]

Don't you think they will put ads on ChatGPT?

There are several ways to monetize a product (they already make some use of it).

[ywvcbk]

> Their economics are structurally better than googles assuming

Are they? I would guess that the cost per query for Google, even back then was insignificant compared to how must OpenAI is spending on GPU compute for every prompt. Are they even breaking even on the $20 subscriptions?

During their growth phase Google could make nothing from most of their users and still have very high gross margins.

OpenAI not only has to attract enough new users but to also ensure that they are bringing more revenue than they cost. Which isn’t really a problem Google or FB ever faced.

Of course presumably more optimized models and faster hardware might solve that longterm. However consumers expectations will likely keep increasing as well and OpenAI has a bunch of competitors willing to undercut them (e.g. they have to keep continuously spending enough money to stay ahead of “open/free” models and then there is Google who would probably prefer to cannibalize their search business themselves than let someone else do it).

> in fact as bezos demonstrated with Amazon for many years, profit is an indication you’ve run out of uses for capital to grow.

Was Amazon primarily funding that growth using their own revenue or cash from external investors? Because that makes a massive difference which makes both cases hardly comparable (Uber might be a better example).

[iepathos]

Ads are the most likely monetization path for openai. They want to capture as many users right now and can pull the trigger on ads whenever they want to start juicing users further. As long as the funding flows they can delay the ads. Google and Facebook were ad free initially for years only switching to it for monetization after building up critical user mass.

[ywvcbk]

To cost per user for Google and FB was/is almost insignificant(relative to LLMs). So all the ad revenue was almost free cash.

It’s not even clear if OpenAI is breaking even with the $20 subscription just on GPU/compute costs alone (the newer models seem to be a lot faster so maybe they are). So incrementally growing their revenue might be very painful if they keep making the UX worse with extra ads while still simultaneously losing money on every user.

Presumably the idea is that costs will go down as HW became faster and models themselves more optimized/efficient. But LLMs themselves already seem to almost be a commodity so it might become tricky for OpenAI to compete with a bunch of random services using open models that are offering the same thing (while spending a fraction on R&D)

[fooster]

They’re already monetized in lots of ways. I doubt ads make much sense or are necessary.

[fumar]

I would say they are likely already working through a potential ads experience

[kibibu]

With slipping consumer standards around separating ads from real content, OpenAI are in a position to much more insidiously advertise than Google.

[mulmen]

Google started as a useful search service then corrupted itself with ads. This is the same thing that Facebook and Reddit did. It’s not hard to imagine an LLM that provides “sponsored” responses.

So it’s a long term bet but the idea that Google would lose to an LLM isn’t far fetched to me.

[gammarator]

The unit economics appear to be substantially different.

[Ekaros]

Also Google's adds are not just in their products. They are absolutely everywhere step down from other big players. And I don't think OpenAI can beat that moat. It is entirely different game, and very hard to enter or someone else would have done it.