> there's a limit on how much you can charge people for subscription fees. I think soon people expect this service to be provided for free and ads would become the main option to make money out of chatbots.
So... I don't think this is certain. A surprising number of people pay for the ChatGPT app and/or competitors. It's be a >$10bn business already. Could maybe be a >$100bn business long term.
Meanwhile... making money from online ads isn't trivial. When the advertising model works well (eg search/adwords), it is a money faucet. But... it can be very hard to get that money faucet going. No guarantees that Google discover a meaningful business model here... and the innovators' dilema is strong.
Also, Google don't have a great history of getting new businesses up and running regardless of tech chops and timing. Google were pioneers to cloud computing... but amazon and MSFT built better businesses.
At this point, everyone is assuming AI will resolve to a "winner-take-most" game that is all about network effect, scale, barriers to entry and such. Maybe it isn't. Or... maybe LLMs themselves are commodities like ISPs.
The actual business models, at this point, aren't even known.
> No guarantees that Google discover a meaningful business model here...
I don't understand this sentiment at all. The business model writes itself (so to speak). This is the company that perfected the art of serving up micro-targeted ads to people at the moment they are seeking a solution to a problem. Just swap the search box for a chat bot.
For a while they'll keep the ads off to the side, but over time the ads will become harder and harder to distinguish from the chat bot content. One day, they'll dissapear altogether and companies will pay to subtly bias the AI towards their products and services. It will be subtle--undetectable by end users--but easily quantified and monetized by Google.
Companies will also pay to integrate their products and services into Google's agents. When you ask Gemini for a ride, does Uber or Lyft send a car? (Trick question. Waymo does, of course.) When you ask for a pasta bowl, does Grubhub or Doordash fill the order?
When Gemini writes a boutique CRM for your vegan catering service, what service does it use for seamless biometric authentication, for payment processing, for SMS and email marketing? What payroll service does it suggest could be added on in a couple seconds of auto-generated code?
AI allows Google to continue it's existing business model while opening up new, lucrative opportunities.
I don’t think it works. Search is the perfect place for ads for exactly the reasons you state: people have high intent.
But a majority of chatbot usage is not searching for the solution to a problem. And if he Chatbot is serving the ads when I’m using it for creative writing, reformatting text, having a python function, written, etc, I’m going to be annoyed and switch to a different product.
Search is all about information retrieval. AI is all about task accomplishment. I don’t think ads work well in the latter , perhaps some subset, like the task is really complicated or the AI can tell the user is failing to achieve it. But I don’t think it’s nearly as could have a fit as search.
It doesn't have to be high intent all the time though. Chrome itself is "free" and isn't the actual technical thing serving me ads (the individual websites / ad platforms do that regardless of which browser I'm using), but it keeps me in the Google ecosystem and indirectly supports both data gathering (better ad targeting, profitable) and those actual ad services (sometimes subtly, sometimes in heavy-handed ways like via ad blocker restrictions). Similar arguments to be made with most of the free services like Calendar, Photos, Drive, etc - they drive some subscriptions (just like chatbots), but they're mostly supporting the ads indirectly.
Many of my Google searches aren't high intent, or any purchase intent at all ("how to spell ___" an embarrassing number of times), but it's profitable for Google as a whole to keep those pieces working for me so that the ads do their thing the rest of the time. There's no reason chatbots can't/won't eventually follow similar models. Whether that's enough to be profitable remains to be seen.
> Search is all about information retrieval. AI is all about task accomplishment.
Same outcome, different intermediate steps. I'm usually searching for information so that I can do something, build something, acquire something, achieve something. Sell me a product for the right price that accomplishes my end goal, and I'm a satisfied customer. How many ads for app builders / coding tools have you seen today? :)
I have shifted the majority of my search for products to ChatGPT. In the past my starting point would have been Amazon or Google. It’s just so much easier to describe what I’m looking for and ask for recommendations that fit my parameters. If I could buy directly from the ChatGPT, I probably would. It’s just as much or more high intent as search.
Chatgpt is effectively a functional search engine for a lot of people. Searching for the answer "how do i braid my daughter's hair?", or, "how do i bake a cake for a birthday party?" can be resolved via tradtitional search and finding a video or blog post, or simply read the result from an LLM. LLM has a lot more functionality overall, but ChatGPT and it's competitors are absolutely an existential threat to Google, as (in my opinion) it's a superior service because it just gives you the best answer, rather than feeding you into whatever 10 blog services that utilize google ads the most this month. Right now ChatGPT doesn't even serve up ads, which is great. I'm almost certain they're selling my info though, as specific one-off stuff I ask ChatGPT about, ends up as ads in Meta social medias the next day.
> And if he Chatbot is serving the ads when I’m using it for creative writing, reformatting text, having a python function, written, etc, I’m going to be annoyed and switch to a different product.
You may not even notice it when AI does a product placement when it's done opportunistically in creative writing (see Hollywood). There also are plenty of high-intent assistant-type AI tasks.
Re "going to be annoyed" there is definitely a spectrum starting at benign and culminating to the point of where you switch.
Photopea, for example, seems to be successful and ads displayed on the free tier lets me think that they feel at least these users are willing to see ads while they go about their workflow.
Obviously, an LLM is in a perfect position to decide whether an add can be "injected" into the current conversation. If you're using it for creative writing it will be add free. But chances are you will also use it to solve real world problems where relevant adds can be injected via product or service suggestions.
The intent will be obvious from the prompt and context. The AI will behave differently when called from a Doc about the yearly sales strategy vs consumer search app.
Just because the first LLM product people paid for was a chatbot does not mean that chat will be the dominant commercial use of AI.
And if the dominant use is agents that replace knowledge workers, then they'll cost closer to $2000 per month than $20 or free, and an ad-based business model won't work.
The actual business models and revenue sources are still unknown. Consumer subscriptions happens to be the first major model. Ads still aren't. Many other models could dwarf either of these.
I still think it's pretty clear. Google doesn't have to get a new business off the ground, just keep improving the integration into Workspace, Gmail, Cloud, Android etc. I don't see users paying for ChatGPT and then copy/pasting into those other places even if the model is slightly better. Google will just slowly roll out premium plans that include access to AI features.
And as far as selling pickaxes go, GCP is in a far better position to serve the top of market than OpenAI. Some companies will wire together multiple point solutions but large enterprises will want a consolidated complete stack. GCP already offers you compute clusters and BigQuery and all the rest.
Perhaps... but perhaps not. A chatbot instead of a search box may not be how the future looks. Also... a chatbot prompt may not (probably won't) translate from search query smoothly... in a Way That keep ad markets intact.
That "perfected art" of search advertising is highly optimized. You (probably) loose all of that in transition. Any new advertising products will be intrepid territory.
You could not have predicted in advance that search advertising would dwarf video (yourube) advertising as a segment.
Meanwhile... they need to keep their market share at 90%.
A friend of mine works in advertising/marketing guy at the director level (Career ad guy), for big brands like nationwide cell carriers, big box stores etc, but mostly telcom stuff I think, and he uses it every day; he calls it "my second brain". LLM are great at riffing on ideas and brainstorming sessions.
LLM based advertising has amazing potential when you consider that you can train them to try to persuade people to buy the advertised products and services.
That seems like a recipe for class action false advertising lawsuits. The AI is extremely likely to make materially false claims, and if this text is an advertisement, whoever placed it is legally liable for that.
I don't think we should expect that risk to dissuade these companies. They will plow ahead, fight for years in court, then slightly change the product if forced to ¯\_(ツ)_/¯
>Meanwhile... making money from online ads isn't trivial. When the advertising model works well (eg search/adwords), it is a money faucet. But... it can be very hard to get that money faucet going. No guarantees that Google discover a meaningful business model here... and the innovators' dilema is strong.
It's funny how the vibe of HN along with real world 's political spectrum have shifted together.
We can now discuss Ads on HN while still being number 1 and number 2 post. Extremism still exists, but it is retreating.
I don’t think “AI” as a market is “winner-takes-anything”. Seriously. AI is not a product, it’s a tool for building other products. The winners will be other businesses that use AI tooling to make better products. Does OpenAI really make sense as a chatbot company?
I agree the market for 10% better AI isn’t that great but the cost to get there is. An 80% as good model at 10% or even 5% the cost will win every time in the current environment. Most businesses don’t even have a clear use case for AI they just use it because the competition is and there is a FOMO effect
There are two perspectives on this. What you said is definitely a good one if you're a business planning to add AI to whatever you're selling. But personally, as a user, I want the opposite to happen - I want AI to be the product that takes all the current products and turns them into tools it can use.
I agree, I want a more intelligent voice assistant similar to Siri as a product, and all my apps to be add-ons the voice assistant could integrate with.
According to the linked Wikipedia article, he did not go broke from the gold rush. He went broke because he invested the pickaxe windfall in land, and when his wife divorced him, the judge ruled he had to pay her 50%, but since he was 100% in land he had to sell it. (The article is not clear why he couldn't deed her 50% of it, or only sell 50%. Maybe it happened during a bad market, he had a deadline, etc.)
So maybe if the AI pickaxe sellers get divorced it could lead to poor financial results, but I'm not sure his story is applicable otherwise.
Basically every tech company likes to say they are selling pickaxes, but basically no VC funded company matches that model. To actually come out ahead selling pickaxes you had to pocket a profit on each one you sold.
If you sell your pickaxes at a loss to gain market share, or pour all of your revenue into rapid pickaxe store expansion, you’re going to be just as broke as prospectors when the boom goes bust.
If there were 2 other Amazons all with similar products and the same ease of shipping would you care where you purchased? Amazon is simply the best UX for online ordering. If anything else matched it I’d shop platform agnostic.
Great Wells Fargo has an "agent" ... and every one else is talking about how to make their products available for agent based AI.
People don't want 47 different agents to talk to, then want a single end point, they want a "personal assistant" in digital form, a virtual concierge...
And we can't have this, because the open web has been dead for more than a decade.
The business model question applies to all of these companies, not just Google.
A lack of workable business model is probably good for Google (bad for the rest of the world) since it means AI has not done anything economically useful and Google's Search product remains a huge cash cow.
Opera browser was not profitable for like 15 years and still became rather profitable eventually to make an attractive target to purchase by external investors. And even if not bough it would still made nice profit eventually for the original investors.
Sure, but they were making tons of money elsewhere. OpenAI has no source of revenue anywhere big enough to cover its expenses, it's just burning investor cash at the moment.
Last Month, Google, Youtube, Facebook, Instagram and Twitter (very close to this one, likely passes it this month) were the only sites with more visits than chatgpt. Couple that with the 400M+ weekly active users (according to open ai in February) and i seriously doubt that.
Weekly active users is a pretty strange metric. Essential tools and even social networking apps report DAUs, and they do that because essential things get used daily. How many times did you use Google in the past day? How many times did you visit (insert some social media site you prefer) in the last day? If you’re only using something once per week, it probably isn’t that important to you.
Mostly only social media/messaging sites report daily active users regularly. Everything else usually reports monthly active users at best.
>in the last day? If you’re only using something once per week, it probably isn’t that important to you.
No, something I use on a weekly basis (which is not necessarily just once a week) is pretty important to me and spinning it otherwise is bizarre.
Google is the frontend to the web for the vast majority of internet users so yeah it gets a lot of daily use. Social media sites are social media sites and are in a league of their own. I don't think i need to explain why they would get a disproportionate amount of daily users.
I am entirely confused by this. ChatGPT is absolutely unimportant to me. I don't use it for any serious work, I don't use it for search, I find its output to still be mostly a novelty. Even coding questions I mostly solve using StackExchange searches because I've been burned using it a couple of times in esoteric areas. In the few areas where I actually did want some solid LLM output, I used Claude. If ChatGPT disappeared off the Internet tomorrow, I would suffer not at all.
And yet I probably duck into ChatGPT at least once a month or more (I see a bunch of trivial uses in 2024) mostly as a novelty. Last week I used it a bunch because my wife wanted a logo for a new website. But I could have easily made that logo with another service. ChatGPT serves the same role to me as dozens of other replaceable Internet services that I probably duck into on a weekly basis (e.g., random finance websites, meme generators) but have no essential need for whatsoever. And if I did have an essential need for it, there are at least four well-funded competitors with all the same capabilities, and modestly weaker open weight models.
It is really your view that "any service you use at least once a week must be really important to you?" I bet if you sat down and looked at your web history, you'd find dozens that aren't.
(PS in the course of writing this post I was horrified to find out that I'd started a subscription to the damn thing in 2024 on a different Google account just to fool around with it, and forgot to cancel it, which I just did.)
>I am entirely confused by this. ChatGPT is absolutely unimportant to me. I don't use it for any serious work, I don't use it for search, I find its output to still be mostly a novelty. Even coding questions I mostly solve using StackExchange searches because I've been burned using it a couple of times in esoteric areas. In the few areas where I actually did want some solid LLM output, I used Claude. If ChatGPT disappeared off the Internet tomorrow, I would suffer not at all.
OK? That's fine. I don't think I ever claimed you were a WAU
>And yet I probably duck into ChatGPT at least once a month or more (I see a bunch of trivial uses in 2024) mostly as a novelty.
So you are not a weekly active user then. Maybe not even a monthly active one.
>Last week I used it a bunch because my wife wanted a logo for a new website. But I could have easily made that logo with another service.
Maybe[1], but you didn't. And I doubt your wife needs a new logo every week so again not a weekly active user.
>ChatGPT serves the same role to me as dozens of other replaceable Internet services that I probably duck into on a weekly basis (e.g., random finance websites, meme generators)but have no essential need for whatsoever.
You visit the same exact meme generator or finance site every week? If so, then that site is pretty important to you. If not, then again you're not a weekly active user to it.
If you visit a (but not the same) meme generator every week then clearly creating memes is important to you because I've never visited one in my life.
>And if I did have an essential need for it, there are at least four well-funded competitors with all the same capabilities, and modestly weaker open weight models.
There are well funded alternatives to Google Search too but how many use anything else? Rarely does any valuable niche have no competition.
>It is really your view that "any service you use at least once a week must be really important to you?" I bet if you sat down and looked at your web history, you'd find dozens that aren't.
Yeah it is and so far, you've not actually said anything to indicate the contrary.
[1]ChatGPT had an image generation update recently that made it capable of doing things other services can't. Good chance you could not in fact do what you did (to the same satisfaction) elsewhere. But that's beside my point.
Yes corporate leaders do chase hype and they also believe in magic.
I think companies implement DEI initiatives for different reasons than hype though. Many are now abandoning DEI ostensibly out of fear due to the change in U.S. regime.
Aside from university mentioned by sibling comments, there is major uptake of AI in journalism (summarize long press statements, create first draft of the teaser, or even full articles ...) and many people in my social groups use it regularly for having something explained, finding something ... it's wide spread
It does anecdotally seem to be very common in education which presumably will carry over to professional workplaces over time. I see it a lot less in non-tech and even tech/adjacent adults today.
My wife, the farthest you can get from the HN crowd, literally goes to tears when faced with Excel or producing a Word doc and she is a regular user of copilot and absolutely raves about it. Very unusual for her to take up new tech like this and put it to use but she uses it for everything now. Horse is out of the barn.
For many, this stuff is mostly about copilot being shoved down everyone's throats via ms office obnoxious ads and distractions, and I haven't yet heard of anyone liking it or perceiving it as an improvement. We are now years into this, so my bets are on the thing fading away slowly and becoming a taboo at Microsoft.
Many recent HN articles about how middle managers are already becoming addicted and forcing it on their peons. One was about the game dev industry in particular.
In my work I see semi-technical people (like basic python ability) wiring together some workflows and doing fairly interesting analytical things that do solve real problems. They are things that could have been done with regular code already but weren't worth the engineering investment.
In the "real world" I see people generating crummy movies and textbooks now. There is a certain type of person it definitely appeals to.
Uber is a profitable company both in 2023 and - to the tune of billions of dollars - in 2024. Please read their financials if you doubt this statement.
I assume they mean the profits in the past couple years are dwarfed by the losses that came before. Looking at the company's entire history, instead of a single FY.
Seems like the difference between a profitable investment and a profitable company.
They invested tens of billions of dollars in destroying the competition to be able to recently gain a return on that investment. One could either write off that previous spending or calculate it into the totality of "Uber". I don't know how Silicon Valley economics works but, presumably, a lot of that previous spending is now in the form of debt which must be serviced out of the current profits. Not that I'm stating that taking on debt is wrong or anything.
To the extent that their past spending was debt, interest on that debt that should already be accounted for in calculating their net income.
But the way it usually works for Silicon Valley companies and other startups is that instead of taking on debt they raise money through selling equity. This is money that doesn't have to be paid back, but it means investors own a large portion of this now-profitable company.
I'm surprised. They pay the drivers a pittance. My ex drove Uber for a while and it wasn't really worth it. Also, for the customers it's usually more expensive and slower than a normal taxi at least here in Spain.
The original idea of ride-sharing made sense but just like airbnb it became an industry and got enshittified.
> They pay the drivers a pittance. My ex drove Uber for a while and it wasn't really worth it.
I keep hearing this online, but every time I’ve used an Uber recently it’s driven by someone who says they’ve been doing it for a very long time. Seems clear to me that it is worth it for some, but not worth it if you have other better job options or don’t need the marginal income.
PS: I know that in Romania it's the opposite. Uber is kinda like a luxury taxi there. Normal taxis have standard rates, but these days it's hardly enough to cover rising fuel prices. So cars are ancient and un a bad state of repair, drivers often trick foreigners. A colleague was even robbed by one. Uber is much more expensive but much safer (and still cheap by western standards).
> but not worth it if you have other better job options
Pretty much any service job, really...
When I had occasion to take a ride share in Phoenix I'd interrogate the driver about how much they were getting paid because I drove cabs for years and knew how much I would have gotten paid for the same trip.
Let's just say they were getting paid significantly less than I used to for the same work. If you calculated in the expenses of maintaining a car vs. leasing a cab I expect the difference is even greater.
There were a few times where I had just enough money to take public transportation down to get a cab and then snag a couple cash calls to be able to put gas in the car and eat. Then I could start working on paying off the lease and go home at the end of the day with some cash in my pocket -- there were times (not counting when the Super Bowl was in town) where I made my rent in a single day.
They're usually a bit more expensive here than a taxi. It can be beneficial because sometimes they have deals, and I sometimes take one when I have to book it in advance or when I'm afraid there will be delays with a corrsponding high cost. Though Uber tend to hit me with congestion charges then too. At least with a taxi I can ask them to take a different route. The problem with the uber drivers is that they don't know any of the street names here, they just follow the app's navigation. Whereas taxi drivers tend to be much more aware and know the streets and often come up with suggestions.
This also means that they sometimes fleece tourists but when they figure you know the city well they don't dare :) Often if they take one wrong turn I make a scene about frowning and looking out of the window and then they quickly get back on track. Of course that's another usecase where uber would be better, if you don't know the city you're in.
yeah thanks no, I'm paying for an Uber. For all the complaints over Ubers business practices, it's hard not to forget how bad taxis were. Regulatory capture is a clear failure mode of capitalism and the free market and that is no more shown than by the taxis cab industry.
"A surprising number of people pay for the ChatGPT app and/or competitors."
I doubt the depiction implied by "surprising number". Marketing types and CEO's who would love 100% profit and only paying the electricity bill for an all AI workforce would believe that. Most people, especially most technical people would not believe that there is a "surprising number" of saps paying for so-called AI.
Absolutely agree Microsoft is better there - maybe that's why Google hired someone from Microsoft for their AI stuff. A few people I think.
I also agree the business models aren't known. That's part of any hype cycle. I think those in the best position here are those with an existing product(s) and user base to capitalize on the auto complete on crack kinda feature. It will become so cheap to operate and so ubiquitous in the near future that it absolutely will be seen as a table stakes feature. Yes, commodities.
Google aren’t interested in <1bn USD businesses, so it’s hard for them to build anything new as it’s pretty guaranteed to be smaller than that at first. The business equivalent of the danger of a comfortable salaried job.
Google is very good at recognizing existential threats. iOS were that to them and they built Android, including hardware, a novelty for them, even faster than mobile incumbents at the time.
They're more than willing to expand their moat around AI even if that means multiple unprofitable business for years.
Mobile is still nearly everything. Google continues to develop and improve Android in substantial ways. Android is also counted on by numerous third-party OEMs.
If you are a business customer of Google or pay attention to things like Cloud Next that just happened, it is very clear that Google is building heavily in this area. Your statement has already been disproven.
"The actual business models, at this point, aren't even known."
"AI" sounds like a great investment. Why waste time investing in businesses when one can invest in something that might become a business. CEOs and employees can accumulate personal weath without any need for the company to be become profitable and succeed.
Contextual advertising is a known ad business model that commands higher rates and is an ideal fit for LLMs. Plus ChatGPT has a lot of volume. If there’s anyone who should be worried about pulling that off it’s Perplexity and every other small to mid-sized player.
'Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit."' ¹
Until something makes a profit it's a charity or predatory monopoly-in-waiting.²
Until something makes a profit it's a charity or predatory monopoly-in-waiting.
This is incorrect. There are millions of companies in the world that exist to accomplish things other than making a profit, and are also not charities.
99.9% of the time, it's an investment hoping to make a profit in the future. And we still call those businesses, even if they're losing money like most businesses do at first.
> At this point, everyone is assuming AI will resolve to a "winner-take-most" game that is all about network effect, scale, barriers to entry and such
I don't understand why people believe this: by settling on "unstructured chat" as the API, it means the switching costs are essentially zero. The models may give different results, but as far a plugging a different one in to your app, it's frictionless. I can switch everything to DeepSeek this afternoon.
That's like asking a McDonald's employee if they own Burger King stock and making market assumptions on that. The best people have already left is such a common trope.
Modern cloud computing is more than just having a scalable infrastructure of servers, it was a paradigm shift to having elastic demand, utility style pricing, being completely API driven, etc. Amazon were not only the first to market but pioneers in this space. Nothing came close at that time.
AWS had a cleaner host-guest abstraction (the VM) that makes it easier to reason about security, and likely had a much bigger gap between their own usage peaks and troughs.
Yep. Google offered app engine which was good for fairly stateless simple apps in an old limited version of python, like a photo gallery or email client. For anything else is waa dismal. Amazon offered VMs. Useful stuff for a lot more platforms.
So... I don't think this is certain. A surprising number of people pay for the ChatGPT app and/or competitors. It's be a >$10bn business already. Could maybe be a >$100bn business long term.
Meanwhile... making money from online ads isn't trivial. When the advertising model works well (eg search/adwords), it is a money faucet. But... it can be very hard to get that money faucet going. No guarantees that Google discover a meaningful business model here... and the innovators' dilema is strong.
Also, Google don't have a great history of getting new businesses up and running regardless of tech chops and timing. Google were pioneers to cloud computing... but amazon and MSFT built better businesses.
At this point, everyone is assuming AI will resolve to a "winner-take-most" game that is all about network effect, scale, barriers to entry and such. Maybe it isn't. Or... maybe LLMs themselves are commodities like ISPs.
The actual business models, at this point, aren't even known.