[_jab]

This agreement feels so friendly towards OpenAI that it's not obvious to me why Microsoft accepted this. I guess Microsoft just realized that the previous agreement was kneecapping OpenAI so much that the investment was at risk, especially with serious competition now coming from Anthropic?

[DanielHB]

Microsoft is a major shareholder of OpenAI, they don't want their investment to go to 0. You don't just take a loss on a multiple-digit billion investment.

[snowwrestler]

I think you’re right about this deal. But it’s kind of funny to think back and realize that Microsoft actually has just written off multi-billion-dollar deals, several times in fact.

[nacozarina]

One (1) year after M$ bought Nokia they wrote it off for $7.6 Billion.

There’s no upper limit to their financial stupidity.

[snek_case]

The metaverse is another example if anyone doubts the bounds of corporate stupidity.

[lesuorac]

Why?

FaceBook largely requires an Apple iPhone, Apple computer, "Microsoft" computer, "Google" phone, or a "Google" computer to use it. At any point one of those companies could cut FaceBook off (ex. [1]).

The Metaverse was a long term goal to get people onto a device (Occulus) that Meta controlled. While I think an AR device is much more useful than VR; I'm not convinced that it's a mistake for Meta to peruse not being beholden to other platforms.

[1]: https://arstechnica.com/gadgets/2019/01/facebook-and-google-...

[everforward]

I think this is sane washing their idea in the modern context of it having failed. I think at the time, they thought VR would be the next big thing and wanted to become the dominant player via first mover advantage.

The headsets don’t really make sense to me in the way you’re describing. Phones are omnipresent because it’s a thing you always just have on you. Headsets are large enough that it’s a conscious choice to bring it; they’re closer to a laptop than a phone.

Also, the web interface is like right there staring at them. Any device with a browser can access Facebook like that. Google/Apple/Microsoft can’t mess with that much without causing a huge scene and probably massive antitrust backlash.

[etempleton]

Naming your company off a product that doesn't really exist yet and then ultimately fails is a pretty crazy and stupid thing to do. A bit cart before horse.

[latexr]

> I'm not convinced that it's a mistake for Meta to peruse not being beholden to other platforms.

Devoid of other context, it’s hard to disagree. But your parent comment only asserted that the metaverse specifically as proposed by Facebook was an obviously stupid idea.

[adrr]

For the money spent(over $80b), they could have launched a phone or a car. Now their pivot is to smart glasses which require a phone so once again they are beholden to phone manufacturers.

[IshKebab]

Because it's been very clear for a long time that the vast majority of people do not want to play VR Second Life.

[JKCalhoun]

"I'm not convinced that it's a mistake for Meta to peruse not being beholden to other platforms."

But thinking AR/VR was the way to go is a failure to read the room. If anything the up and coming generations seem to be recoiling from tech.

Regardless, as Microsoft found, it's too late for a 3rd platform and it seems somehow that there's only room in the world for two.

(Meta would have done better to start up a line of caffeinated sugar drinks.)

[Dylan16807]

> At any point one of those companies could cut FaceBook off (ex. [1]).

Some of those companies can cut off invasive apps.

There is no risk of facebook.com getting blocked. And absolutely nobody is going to prefer a headset over a website for doing facebook things.

[turtlesdown11]

so after $80 billion spent, they must have an ecosystem of hundreds of millions of users? Right?

Maybe they should have spent that on the facebookphone

[corford]

>Why?

Patrick Boyle did a nice video a few weeks back: https://www.youtube.com/watch?v=8BaSBjxNg-M

[PKop]

Because it's been a massively expensive failure. They can't just will their own platform into existence just because it would be good to have, consumers have a say and they've rejected it completely.

[aucisson_masque]

Good luck using an Oculus in your car or while waiting the bus.

If it was really their goal, they would have made an Android competitor. Maybe a fork like amazon did and sell phones that supported it.

Zuckerberg had one great idea (and then it wasn't really his idea) at the right time, since then he failed over and over at everything else. 'Internet for all', remember ?

I really wouldn't give them the benefit of the doubt.

[lxxpxlxxxx]

Can anybody cut meta off? I don't think you could mass market a device with no access to FB, IG or WS.

Maybe a niche product could do it, but good luck selling a laptop that won't open FB

[dkrich]

Probably more that they are compute constrained. In his latest post Ben Thompson talks about how Microsoft had to use their own infrastructure and supplant outside users in the process so this is probably to free up compute.

[Rapzid]

I think it's this. They sell a crap ton of b2b inference through Azure and I'm sure this competes with resources needed for training.

[az226]

OpenAI found a way to circumvent the exclusivity. The deal was poorly defined by Microsoft. OpenAI had started selling a service on AWS that had a stateful component to it, not purely an API. Obviously Microsoft didn’t like that and confronted Altman, and this is the settlement of that confrontation, OpenAI doesn’t need to do workarounds, Microsoft won’t sue to enforce exclusivity, and Microsoft doesn’t have to pay dev share to OpenAI. AWS is a much bigger market so OpenAI doesn’t care.

[oh_no]

1- Getting OpenAI's models in Azure with no license fee is pretty nice. 2- Microsoft owns ~15-27% of OpenAI, if the agreement was hurting OpenAI more than it was helping Microsoft, seems reasonable to change the terms.

[guluarte]

I think MS wants OpenAI to fail so it can absorb it

[Oras]

MS put 10B for 50% if I remember correctly. OpenAI is worth many multiples of that.

[marricks]

> OpenAI is worth many multiples of that

valued at --which I'd say is a reasonable distinction to make right about now

[Oras]

Their revenue is 20B, so they still worth multiples of 10B regardless of valuation even if you consider the basic 5x revenue valuation

https://www.reuters.com/business/openai-cfo-says-annualized-...

[Dylan16807]

"The basic 5x revenue valuation" doesn't work for businesses that aren't profitable.

[3eb7988a1663]

It is also unclear to me how much real debt they carry. They have famously been signing many deals: RAM, datacenters, maybe nuclear power plants -I no longer know what is a joke or not. They must be carrying hundreds of billions in paper debt obligations, which is tough to payback at $20B revenue.

[cheema33]

> Their revenue is 20B, so they still worth multiples of 10B regardless of valuation...

I can easily generate double that revenue, by selling $20 bills for $10.

[HWR_14]

When they put 10B in, they got weird tiered revenue shares and other rights. That has been simplified to 27% of OpenAI today. I don't know what that meant their 10B would be worth before dilution in later rounds.

[bmitc]

> OpenAI is worth many multiples of that.

How?

[senordevnyc]

Because they recently issued shares at a price many multiples of that, and people bought them. How else would you define financial worth?

[andriy_koval]

I would use your number adjusted by some demand elasticity curve.

[tanseydavid]

The "back-of-the-napkin" only has enough room to estimate based on recently issued share price. Seems reasonable to me.

[bmitc]

Does speculation equal worth?

[dinosor]

> Microsoft will no longer pay a revenue share to OpenAI.

I feel this looks like a nice thing to have given they remain the primary cloud provider. If Azure improves it's overall quality then I don't see why this ends up as a money printing press as long as OpenAI brings good models?

[JumpCrisscross]

OpenAI was also threatening to accuse "Microsoft of anticompetitive behavior during their partnership," an "effort [which] could involve seeking federal regulatory review of the terms of the contract for potential violations of antitrust law, as well as a public campaign" [1].

[1] https://www.wsj.com/tech/ai/openai-and-microsoft-tensions-ar...

[someguyiguess]

Pot? Meet Kettle.

[aurareturn]

Does this mean Microsoft gets OpenAI's models for "free" without having to pay them a dime until 2032?

And on top of that, OpenAI still has to pay Microsoft a share of their revenue made on AWS/Google/anywhere until 2030?

And Microsoft owns 27% of OpenAI, period?

That's a damn good deal for Microsoft. Likely the investment that will keep Microsoft's stock relevant for years.

[dzonga]

own 27%. but are entitled to OpenAI profits of 49% for eternity (if OpenAI is profitable or government steps in)

[aurareturn]

  own 27%. but are entitled to OpenAI profits of 49% for eternity (if OpenAI is profitable or government steps in)

Where is the 49% coming from? The new deal does not talk about that.

[lokar]

Does anyone expect azure quality to improve? Has it improved at all in the last 3 years? Does leadership at MS think it needs to improve?

I doubt it

[gchamonlive]

No and at this point tying yourself to azure is a strategic passive and anyone making such decisions should be held responsible for any service outage or degradation.

[jiggawatts]

This is certainly... an opinion.

AWS's us-east-1 famously takes down either a bunch of companies with it, or causes global outages on the regular.

AWS has a terrible, terrible user interface partly because it is partitioned by service and region on purpose to decrease the "blast radius" of a failure, which is a design decision made totally pointless by having a bunch of their most critical services in one region, which also happens to be their most flaky.

[gchamonlive]

Nobody is winning any UX prize there. Azure, AWS, GCP... they are all terrible. Back then GCP for instance used to only work reliably on chromo-based browsers. Azure has that horrible overlay UI that abuses extended real estate that just doesn't work.

But azure wins most prizes for being terrible becuase, among other things, https://isolveproblems.substack.com/p/how-microsoft-vaporize.... It's not the worst provider maybe because oracle is somehow still kicking around.

Its just a bad product. Just like windows, OneDrive, teams and basically everything Microsoft has pumped out in the past decade.

Microsoft is in the top 5 most valuable companies in the world. It's got azure that is a huge cloud provider. And yet it was utterly unable to present its answer in the AI race. Not even a bad model with a half baked harness. Nothing. And meanwhile they are trying to port NTFS to low powered FPGAs because insanity. Just let that sink in.

[rawoke083600]

Check out hetzner ui (regardless if you like their services, i know some ppl have opions or experiences lol) BUT, their cloud ux/ui is fantasties for a cloud company!

[lokar]

I don’t see how you could care (a lot) about both the UI and reliability.

[jiggawatts]

One is caused by the other. Amazons engineers decided to split the interface in a “user hostile” manner with the stated purpose of increasing reliability… which didn’t materialise. The clunky UI did.

Or maybe you can provide a better explanation for why users had to “hunt” through hundreds(!) of product-region combinations to find that last lingering service they were getting billed $0.01 a month for?

This just doesn’t happen in GCP or Azure. You get a single pane of glass.

[alternatex]

MS incentivizes feature quantity, and the leadership are employees like any other. Product improvements are not on the table unless the company starts promoting people based on it. Doesn't look this will start happening any time soon.

[jakeydus]

Don’t worry I’m sure there’s a few products without copilot integration still. They’ll get to them before too long.

[HWR_14]

This is probably a delayed outgrowth of the negotiations last year, where Microsoft started trading weird revenue shares and exclusivity for 27% of the company.

[p_stuart82]

$250b committed to azure helps. especially when some of that is your own investment coming back.

[david_shi]

What aspects of the deal do you think kneecapped OpenAI the most?