Comment by matthewdgreen
6 months ago
But their research costs are extremely high, and without a network effect that revenue is only safe until a better competitor emerges.
6 months ago
But their research costs are extremely high, and without a network effect that revenue is only safe until a better competitor emerges.
You're moving the goalposts, given the original complaint was not about research costs but about the marginal cost of serving additional users...
I guess you'd be surprised to find out that Meta's R&D costs are an order of magnitude higher than OpenAI's training + research costs? ($45B in 2024, vs. about $5B for OpenAI according to the leaked financials.)
Meta has a massively profitable social media business with an impenetrable network effect, so they're using that to subsidize the research. Whether that's a good decision or not is above my paygrade, but it's sustainable until something changes with the social media market.
I don't know what "moving the goalposts" means. Why were the goalposts there in the first place? The interesting questions here are whether OpenAI can sustain their current cost model long-term, and whether the revenue stream is sustainable without the costs. We'll see, I guess! It's fascinating.
I mean, the GP made a point about "per-user costs" that I believe was false, so that was the specific thing I was commenting on. Steering the discussion to a totally different topic of research costs doesn't help us reach closure on that point. It's basically new objections being thrown at the wall, and none being scraped off.
I think what you're not realizing is that OpenAI already has the kind of consumer-facing business that makes Google and Meta hundreds of billions of revenue a year. They have the product, they have the consumer mindshare and usage. All they are missing is the monetization part. And they're doing that at a vastly lower cost basis than Google or Meta, no matter what class of spending you measure. Their unit costs are lower, their fixed costs are lower, their R&D costs are lower.
They don't need to stop R&D to be profitable. Literally all they'd need to do is minimal ads monetization.
There's all kinds of things you can criticize the AI companies for, but the economics being unsustainable really isn't one of them. OpenAI is running a massive consumer-facing app for incredibly cheap in comparison to its peers running systems of a similar scale. It'd be way more effective to concentrate on the areas where the criticism is either obviously correct, or there's at least more uncertainty.
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