Comment by hobofan
3 months ago
In many ways OpenAI is transitioning towards an end-user facing product business. They have by far the strongest brand among consumers and are positioning themselves to take on Google/Meta in the ad business.
By proxy, having the strongest frontier model becomes less and less necessary for them and instead building a strong product by properly layering medium-strong models in a cost-efficient way is the priority.
I'd argue their brand might be too strong, ChatGPT has already begun to enter the same semantic space as "Velcro". Everyone I know seems to have tried it yet quickly you begin to realize that for most people ChatGPT == LLM, it seems everyone is using "ChatGPT" on completely different platforms.
In the end, regardless of technical understanding, people will always shop around on price if the feature set is similar enough I suppose.
The thing is, laypeople aren't using anything other than Google Search even for LLM answers.
If I want an LLM answer to "is erythritol bad for you", I'm not firing up ChatGPT. I'm just typing it into Google, and the LLM answer it spits out is pretty good.
ChatGPT needs to be significantly more compelling for most people to use it for one-shot LLM answers over Google Search. And the minute Google removes the one-shottedness of its search answers, it's over for ChatGPT.
Imo ChatGPT is just "a feature not a product", in the search engine space, as the adage goes.
I have no idea on the data, but anecdotally I'd dispute this. Regular folks in my life (i.e. non-techies) routinely talk to an LLM and use it to answer questions that 5 years ago they'd have searched for.
The techies are the ones who are steering clear and sticking with search engines in my experience.
It's a Google without ads right now. Worth using until that day comes
ChatGPT though isn’t where the profit id going to come from. Businesses using LLMs are and Amazon (AWS) is not selling access to Bedrock and neither is Google (GCP). Models are becoming a commodity. *Every* implementation I’ve done one of the requirements is to easily be able to switch between multiple models
This argument regarding brand loyalty gets repeated but it’s really weak to me. The immense majority of people don’t tie their identity to the software services they are using. Without network effects or an ecosystem locking customers will switch as soon as there is a less expensive and/or better alternative, as the history of software has shown countless of times.
Keep in mind how severely the quality of Google search results or e.g. any consumer facing piece of Microsoft software (Windows, Office, OneDrive, etc.) have deteriorated to the point it has far transcended the more nerdy corners of the web, yet both continue to retain a strict grip, thanks to buy in/brand strength.
There's no viable alternative for either of those yet. Massive network effects around Microsoft office, and Google's only real competition is the equally-bad Bing.
8 replies →
I have been using DDG for years and even with Google quality having plunged it is neither better nor less expensive (nor the default when non technical users just type in the search bar of their browser). Yahoo has shown that even with immense brand recognition people will still switch if the alternative is really better. And if Google was 2x more expensive than DDG they’d switch too.
Regarding Microsoft it’s not as easy to switch as going on another website, OpenAI doesn’t have that ecosystem lock in.
1 reply →
It's due exclusively to network effects.
People use Google search because they have (or rather, need) a Google account. Also, there are no alternatives really, because search is very difficult.
Microsoft has alternatives, but it doesn't matter, because you're artificially restricted from using them. All your friends (MBAs who cut your check) are using Excel, so why don't you just use Excel too?
no but there’s the network effect that Google has / once had with search that OpenAI has with ChatGPT: user interactions. all that data and classification will help tremendously getting better datasets, which is equally important (or more important) than better algorithms.
And defaults matter - every browser that matters except for Edge defaults to Google as well as every mobile phone outside of China.
Both Google and Apple (ie any searches in Safari make money for Apple based on the Google deal) said there was no slowdown on Google searches and the “AI overview” by Google is “good enough”.
> They have by far the strongest brand
Just like Blackberry, but instead of having to buy an new device to switch to the competition, the customer just needs to click on a different website.
Not a great analogy. Blackberry was never really for mass consumers and was always business-first. They lost to Apple because Apple won the mass market, and the mass market overwhelmed the specific niche business use-case that was BB.
OpenAI is already the consumer-first AI platform. And, in my opinion, in the minds of the average consumer, the biggest one that is "an app" with memory and folders, vs. something like Gemini which is perceived as an extension of Google Search and thus doesn't have the same "knowledge database" UI.
Yeah but consumers don't want to pay for these 7 second memes or "erotica", blackberries had actual value that companies paid for.
> They have by far the strongest brand
They don't really, because of Gemini and Grok.
If it was OpenAI vs Claude then yeah, ChatGPT is known whereas Claude you have to be an enthusiast to know.
But everyone using Google runs into Gemini and everyone using X runs into Grok, and people talk. Now even the laypeople know there is more than one AI, and they're from big brands that they trust. Which means that people will window shop for the AI with the best performance per cost. Bye bye brand power.
Twitter never had a meaningful customer base compared to Meta and it’s been declining since Musk took over.
Does anyone trust Xitter? If so, they shouldn't.
why?
3 replies →
It’s going be pretty hard to dethrone Google when even Apple is going to Google for AI with another huge billion $ contract.
In fairness, that is for their model, not their brand. In this industry, the mind share and buy in OpenAI has is still second to none, even when Gemini 2.5 Pro served the vast majority of users far better than the OpenAI models, the latter MAU trounced all competitors.
We do not know for certain as of yet, but I’d be very surprised if Apple felt the need to loudly communicate to their user base that the upcoming Siri improvements aren’t Apple Intelligence. They won’t lie of course, but Googles brand in the space isn’t nearly as strong with the layperson, whereas they more than happily shouted their use of GPT from the rooftops initially.
This year.
Apple is in the business of contracting out new-hotness until their polish is done.
Then they put their name on the thing, pretend it’s new technology – and depending on the named feature, sometimes it is!
It's hard to see how they become profitable enough to justify current valuations.
The numbers are just mind boggling even in the optimistic scenario.
If they are able to actually successfully pivot into ads as a business model, it's very easy to justify the valuation: Just look at Google/Meta.
I'm personally skeptical that they are able to pull off ads, at least on the short timescale they likely need to. They more or less have to nurture/disrupt a whole SEO industry, and the way big corps allocate advertising budgets are very slow to shift (many are still struggling to find their footing in social media advertising).
> If they are able to actually successfully pivot into ads as a business model, it's very easy to justify the valuation: Just look at Google/Meta.
Ads are not just a switch one can turn on. Firstly, you need to build a decent ad serving/targeting/pacing engine. Secondly (and more importantly) you need to hire a shed ton of sales people (in many, many geos) and then ramp them all up (difficult if you're building the product at the same time).
And then you need to keep at it for 3-5 years minimum before you'll finally get the bigger/more conservative brands/agencies/etc to buy in properly.
At that point, you'll make decent money, after accounting for all of the costs. I'm not sure that you'll make enough money, but it would definitely stanch their bleeding a little.
tl;dr if they haven't already built this ad product, it's unlikely to make a material difference before 2030.
Why should they give a fuck about the SEO industry? You think Google "nurtures" the SEO industry? They're selling ads to businesses and displaying them to consumers. SEO folks are just parasites in the system.
1 reply →
I can see a world where if everything they do pans out, on average 1B "entities" end up paying 20$/mo to openAI, via the myriad of integrations they end up supporting. Where entity can be a user, and one human can have many entities (i.e. a work account where the company pays, a personal account, etc). That'd be a quarter of a T$ revenue / year. Dunno, while the number is so large it's hard to compute, it somewhat seems plausible.
And then they'll ruin it all by injecting adverts to get an extra $20b a year in revenue
Their goal is obviously to take a fraction of the world's economy, proportional to the productivity lift they can attribute to themselves. That's in the trillions.
How does one take a fraction of the world economy?
Microsoft sells services pretty much everywhere on earth and has a near-monopoly on PC OSes, enterprise email, productivity suites plus a giant cloud computing service....and their annual revenue last year was just $245 billion.
OAI can't get anywhere close to that, not least because they have multiple competitors and several large corporations (MSFT, Google, Meta) would rather dogfood their own solutions than use a rival's.