Comment by cmiles8
8 hours ago
AI is turning into the worst possible business setup for AI startups. A commodity that requires huge capital investment and ongoing innovation to stay relevant. There’s no room for someone to run a small but profitable gold mine or couple of oil wells on the side. The only path to survival is investing crazy sums just to stay relevant and keep up. Meanwhile customers have virtually zero brand loyalty so if you slip behind just a bit folks will swap API endpoints and leave you in the dust. It’s a terrible setup business wise.
There’s also no real moat with all the major models converging to be “good enough” for nearly all use cases. Far beyond a typical race to the bottom.
Those like Google with other products will just add AI features and everyone else trying to make AI their product will just get completely crushed financially.
There is clearly a very strong moat. OpenAI is close to 1 billion active users on ChatGPT while Claude barely have any non-business users. Even though Anthropic had better models at different times this year, I never stopped using ChatGPT and paying for Plus.
We just don't know who will win in which area yet. It doesn't mean there is no moat.
I don’t think it’s a question of moat. The usage limits on the chat interface with the more advanced Claud models are brutal. I feel like I can barely start a conversation before I get shutdown. However, I switched over to Gemini almost completely and barely ever checkin with ChatGPT these days.
I did, moved off to Claude in 2024 and many others around me did the same. Do you have data for non-business claim besides anecdotal evidence?
Yes.
Claude has 1% based on this: https://gs.statcounter.com/ai-chatbot-market-share
Consumers overwhelmingly use ChatGPT over Claude. ChatGPT dominance has not wavered.
OpenAI has close to 1 billion users which are mostly free users and will switch provider the moment OpenAI start charging them or adding ads. Which they will, as OpenAI themselves said they are losing money even with 200$ subs. So that amount of users is pretty meaningless.
Google search is free to use too. So is Instagram. Facebook. Whatsapp. All of these have ads.
OpenAI says they're very profitable on inference.
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If you think of it like cloud, where it's a commodity that reaches competitive prices, then you can use it to build products and applications, instead of competing for infrastructure (see also: railroads, optical fiber)
There is tons of money to be made at the application layer, and VCs will start looking at that once the infrastructure layer collapses.
Here's a blog post I wrote about that: https://parsnip.substack.com/p/models-arent-moats
It's a good take. I think both trajectories are occurring simultaneously.
OpenAI challenging Google search is a winner takes all situation, not to mention the vast amounts of user data.
On the other hand, us lesser mortals can leverage AI like a commoditized service to build applications with it.
Not really though. The cloud has some stickiness. It’s pretty hard to move once you’ve settled in. For a lot of AI integrations though it’s just swapping some API endpoints and maybe tweaking the prompting a bit. For probably 95% of AI use cases there almost no barrier to switching.