Comment by shubhamjain

So in summary OpenAI are basing their valuation of 285 billion on the moat of 'users won't be arsed to download a different app'???

Seems optimistic when there is very little intrinsic stickness due to learning the UI or network effects. Perhaps a little bit chat history - but not 285 billions worth.

Also completely ignoring the fact that most devices things will start to come with the same features directly built into the device/app - and the largest market will be as a commodity backend api that the eventually users won't know or care if it's a google or openai model.

As I see it, they need to be doing stuff nobody else can ( in either price or performance ), otherwise it's hard to justify the valuation.

I think you're right about stickyness up to a point.

Cultural defaults seem unchangeable but then suddenly everyone knows, that's everyone knows, that OpenAI is passé.

OpenAI has a real chance to blow their lead, ending up in a hellish no-man's land by trying to please everyone: Not cool enough for normies, not safe enough for business, not radical enough for techies. Pick a lane or perish.

Not owning their own infrastructure, and being propped up by financial / valuation tricks are more red flags.

Being a first mover doesn't guarantee getting to the golden goose, remember MySpace.

> Everyone is actually underestimating stickiness.

I think you're underestimating how fickle consumers are, and how much their choices are based on fashion and emotion. A couple more of these, and OpenAI will find itself relegated to the kids' table with Grok and Perplexity. https://www.technologyreview.com/2025/08/15/1121900/gpt4o-gr...

Is she paying for it? That is the only question that matters in the end.

For myself, I use LLMs daily and I would even say a lot on some days and I _did_ pay the 20€/mo subscription for ChatGPT, but with the latest model I cannot justify that anymore.

4o was amazingly good even if it had some parasocial issues with some people, it actually did what I expect an LLM to do. Now the quality of the 5.whatever has gone drastically down. It no longer searches web for things it doesn't know, but instead guesses.

Even worse is the tone it uses; "Let's look at this calmly" and other repeated sentences are just off putting and make the conversation feel like the LLM thinks I am about to kill myself constantly and that is not what I want from my LLM.

I hear the claim that people already have their conversation on ChatGPT and can't move them. I'm curious, what are these discussions like? I've never continued an old discussion, I just start a new one every time I have a question. If the discussion is long, I often start a new chat to get a blank slate. My experience is that the chat history just causes confusion.

So I'm curious to understand: What are the discussions like that people go back to and would lose if they moved to another platform?

"Near billion users", yet less than 5% pay them a single penny[1]. Like you said, the vast majority of these will never pay anything, but I'd argue the majority will migrate to the "next" free provider as soon as OpenAI starts inserting too many ads into the product.

I watched my partner switch from OAI to DeepSeek during the last outage and she hasn't been back to OAI since. I am skeptical there is any actual stickyness when basically all of the chatbots do the same thing for the casual user.

[1] https://www.theregister.com/2025/10/15/openais_chatgpt_popul...

Anecdata point: I canceled my ChatGPT pro subscription last year over some shitty thing Altman did at OpenAI and easily moved over to Claude. The only thing I took with me was the system prompt or whatever it's called, I couldn't care less about my conversation history. I'm planning to do the same thing with my Claude subscription if Anthropic kowtows to the Pentagon. These services are not sticky at all IMO.

> but people have hundreds and thousands on conversation on these apps that can't be easily moved elsewhere.

Except these aren't conversations in the traditional sense. Yes, there's the history of prompts and responses exchanged. But the threads don't build on each other - there's no cross-conversational memory, such as you'd have in a human relationship. Even within a conversation it's mostly stateless, sending the full context history each time as input.

So there's no real data or network effect moat - the moat is all in model quality (which is an extremely competitive race) and harness quality (same). I just don't think there's any real switching cost here.

> Everyone is actually underestimating stickiness. The near billion users OpenAI has is actually a real moat and might translate into decent chunk of revenue.

I’ve got a small-ish sample of friends who are regular people and use various AI chatbots because mobile phone providers now commonly bundle an AI subscription with their services. People seem to switch between Perplexity, Claude, and ChatGPT without any trouble. It does not look sticky at all to me and the half-a-percent difference in benchmarks we love to obsess about does not translate at all in increased user satisfaction.

I don't think chat history is enough for real stickiness.

But the trillion dollar question is, what is? Now that I think about it, I'd bet heavily on Google. They've got your email, your photos, your location history, yada yada. Once they're able to pull all that into AI and make a reasonably cohesive product out of it, it seems like that's what people would use by default. Plus they've got a browser, search page, and phone OS that all can lead you to their AI.

They could train custom LoRA layers to mimic your tone, encode special tokens that indicate your name and data and various facts about you and your contacts, to make output more accurate, consistent, and personalized. Lots of possibilities for increased stickiness.

Even enterprise-wise, gemini is pretty good at coding and if your company has all its docs on Google docs, that could become a pretty seamless integration. They can even build their agents to prefer GCP, or maybe make that the free tier but have other providers support be more expensive.

At some point, a reasonable business model might be "we replace your engineering team with AI plus a few Google engineers on retainer for when things get wonky," which could scale to pretty large. (Granted this sounds more like a msft power move.)

They already have all the infrastructure, all they need is a reasonable competitor to github. They really screwed up losing out to msft on that one!

It would literally take you 5 mins to set up your wife with a competing client for her needs.

Sure it's 'sticky' at least a little, but it's not a moat. A moat is a show stopper like they own you.

> The near billion users OpenAI has is actually a real moat and might translate into decent chunk of revenue.

People used to suggest this about MySpace.

In theory you can export your data from ChatGPT under Settings > Data Controls. In practice, I tried this recently and the download link was broken. Convenient bug I must say.

Yahoo, altavista, askjeeves, Google

Friendster, MySpace, Facebook

Netscape, ie, chrome

Icq, aim, MSN messenger, a million other chat apps

First mover advantage doesn't last long

Very high chance that the winner in five years is a company that does not yet exist

My wife, for example, uses [Netscape Navigator] on a daily basis, but has found no reason to try anything else. There are no network effects for sure, but people have hundreds and thousands on [bookmarks] on these apps that can't be easily moved elsewhere.

See how stupid it sounds?

ChatGPT has a good name. It's weird and awkward but it still rolls off the tongue. And I am saying that as a non native English speaker because the name has been migrated to other languages with the English pronunciation.

In comparison, Claude's name is very bad, it just doesn't sound right and people might mishear me when I say it. I never say "Claude" when talking to other, especially non-technical people, and instead say "ChatGPT" even though I am using Claude exclusively.

Google has another problem - they advertise their models as separate products. There is Gemini and there is Nano Banana, also Nano Banana Pro. But they are all somehow under the same product which is still called Gemini. I understand the distinction but I am sure many non-technical people find it confusing.

> The near billion users OpenAI has is actually a real moat and might translate into decent chunk of revenue.

> My wife, for example, uses ChatGPT on a daily basis, but has found no reason to try anything else.

Is she paying for it? Because as we have seen repeatedly in the past, paid products whither and die when Microsoft bundles a default replacement.

You need to provide a really good reason why this time its different.

I don’t know how much of an anecdote it is, but all the non-tech people with whom I talk about IA only know chatGPT. Competition is either non existent or the same thing. Among those, no one wants to pay the service, they just stop using it when limits are reached. I can’t say which users can turn the market around but chatGPT is indeed burned in the mind of many and because they don’t care about tech and are not interested in tech they won’t search for any other service it seems. Even after many discussions they don’t remember the names of other IA I told them

> My wife, for example, uses ChatGPT on a daily basis, but has found no reason to try anything else.

Ads might change that. If we know anything, nobody beats Google with ad based monetization. OAI is absolutely correct to be scared.

I commute on the train, I see students studying with it. I go for brunch on the weekend, I see parents consulting it while at the table with their infants. I'm at work, colleagues are using it all day. I leave work and I overhear the random woman smoking in the alleyway talking on her cellphone saying "so I asked chatgpt". It's mind-bogglingly pervasive, the last time something had such a seizmic cultural impact like this was I dunno, Facebook? And secondly, it's all one specific brand. I'm not encountering co-pilot or gemini in the meat-space.

I think that's false. The cost of switching is so low that the best product will win and there's no moat.

I honestly can't see how OpenAI can possibly recoup the hundreds of billions poured into it at this point. I'd say AI assistants are no more sticky than browsers or search engines.

You might be tempted to say that Chrome or Google are sticky. But they're really not. A lot of people aren't old enough to remember the 90s when we had multiple search engines and people did switch. I know this goes against prevailing HN dogma but I'm sorry: Google is simply the best search engine. It doesn't have a magical hold on people. People aren't fooling themselves.

And Chrome? Before smartphones it was simply the better browser. Firefox used to have a much larger market share and Chrome ate their lunch. By being a better browser. Chrome was I think the first browser, or at least the first major browser, to do one process per tab. I still remember Firefox hanging my entire browser when something went wrong. I switched to Chrome in version 2 for that reason.

And now browsers are more sticky because of Chrome on Android and Safari on iOS. Safari really needs to be cross-platform, like seriously so. I know they briefly tried on Windows but they didn't really mean it.

Anyway, back to the point. I believe there's a certain amount of brand inertia but that's it. If Gemini dominates ChatGPT performance and UI/UX, people will switch so fast.

Google, Microsoft and Meta can survive the AI collapse. Apple is irrelevant (at least for now). OpenAI? Doomed IMHO.

> people have hundreds and thousands on conversation on these apps that can't be easily moved elsewhere.

I just asked it to build me a searchable indexed downloaded version of all my conversations. One shot, one html page, everything exported (json files).

I’m sure I could ask Claude to import it. I don’t see the moat.

I think that kind of inertia mostly lasts as long as there is no financial incentive to move. A ChatGPT user who is not paying anything to OpenAI is of little benefit to them, and has little incentive to switch. However if OpenAI start trying to make money off those users by adding advertising, or removing the free tier, then things may change. Google can afford to subsidize chat from their other revenue streams, but OpenAI can't.

Why would you want to move conversations with you? I use multiple different models, I don't care about the history.

My "brain" in terms of projects, is local on my computer. I have a simple set of system rules that I need to copy.

I am not everyone, I understand that. What I try to say: don't overestimate the lock in effect of AI. I doubt there is one.

OpenAI is already building complex user models. And I mean, super detailed user models - where you are from, what you do, what are your most vulnerable weaknesses, what you care about the most and everything else. This is information even the world's largest advertising company would struggle to put together across their fragmented eco-system (Gmail, Search, etc), but OpenAI has all this on a silver platter. And that scares me, because, a lot of people use ChatGPT as a therapist. We know this because of their advertising intent which they've explicitly expressed. Advertising requires good user models to work (so advertisers can efficiently target their audience) and it is the only way to prove ROI to the advertisers. "But, OpenAI said they won't do targeted ads..". Remember, Google said "Don't be evil" once upon a time too..

That's ok, we use ChatGPT only for coding. We should be good, right? Umm, no. They already explicitly expressed the intention to take a percentage of your revenue if you shipped something with ChatGPT, so even the tech guys aren't safe.

"As intelligence moves into scientific research, drug discovery, energy systems, and financial modeling, new economic models will emerge. Licensing, IP-based agreements, and outcome-based pricing will share in the value created. That is how the internet evolved. Intelligence will follow the same path."

"Intelligence will follow the same path."

https://openai.com/index/a-business-that-scales-with-the-val...

So yes, OpenAI has the best chance to win on the consumer side than anyone else. But, that's not necessarily a good thing (and the OpenAI fanboys will hate me for pointing this out).

I think defaultism plays a huge role. If your wife's next smartphone or TV or whatever comes with AI made by a different company, I think she won't really care and use that if it's good.

By the way this is a perfectly rational stance. If the supermarket next to me stopped stocking Coca Cola, I would just by Pepsi.

The moment openai starts charging for their service properly, people will start shopping around.

See power users such as devs with coding assistants that have model selection dropdowns allowing you to switch on a whim. There is zero loyalty or stickiness in the paying user crowd.

Not sure how that works when there are fierce competitions, and openai's product is not substantially better than the rest. There are US competitors, then China.

Take ozempic as an example. The word is already part of the culture, but the company is losing badly to lly. Novo nordisk is projecting revenue DECLINE while eli lilly is still growing massively. I am not even sure people know other glp1 drugs other than ozempic. I don't even remember lilly drugs name.

I think people should not underestimate the market. It's a dynamic game where engineering intuition might not be enough

Google is sticky too, and has a huge moat around that access (android, browsers).

Google hasn't yet pushed hard into dominating the chatGPT use case, but they could EASILY push out chatGPT if they tried. For example, if they instantly turned their search page to the gemini chat, they would instantly have dominated openAI use cases. I'm not saying they would do that, they will probably go for the 'everything app' approach slowly

I think the use cases of chatGPT and google are not differentiated enough to justify 2 winners

Netscape had a 90% market share in 1995. If OpenAI is metaphorically netscape, what prevents its competitors from prying away customers every day? What prevents google/facebook/microsoft from using their position to bundle chat experiences? Especially if the tech is a commodity and OpenAI's models are about as good as everyone elses?

I never considered that. When I change LLM models its usually due to two reasons.

1. the current AI model is producing answers that do not met my needs so I try multiple others at the same time and the one that produces the best answer I stick with until I have this problem again.

2. there is a new model released and advertises a new capability that I want to try out.

I can imagine that for many people the answer that ChatGPT generates is adequate enough that they never need to try another model even if better answers exists from another model. For people with less complex needs this is a very real stickiness. Why make the effort to try something new if the answer is adequate.

In this case, OpenAI would only f*k up if they change the pricing significantly, add intrusive ads or their answers become significantly worse.

> The near billion users OpenAI has

They're losing market share and the growth of active user plateaued. They captured all the normies who learned about llms on TV but these people will never spend a cent as you said.

They're not even on the top 10 most used llms on openrouter anymore: https://openrouter.ai/rankings

At the current pace anthropic will make more money than openai soon: https://epochai.substack.com/p/anthropic-could-surpass-opena...

https://menlovc.com/wp-content/uploads/2025/07/2-llm_api_mar...

> people have hundreds and thousands on conversation on these apps that can't be easily moved elsewhere

Neither can they be easily searched nor organized. And what prolonged AI use teaches you is: don't search for that old chat, just ask anew.

That particular piece of flypaper isn't as sticky as it may seem.

Switching llms is like switching a car. Its a bit annoying in the beginning, it responds slightly different and you need to change you subconscious habits before it feels comfortable. Why everyone always complains about new models. So unless there is a very obvious improvement; most users will prefer to stick to their current llm

I disagree. Are people really that attached to their conversations though?

Anecdotally, the vast majority of my own conversations and coding interactions are transient in nature, to the point where I prefer to use the ‘temporary’ mode in whatever tool I’m using.

For coding, every project needs a plan and readme to get whatever agent back up to speed with what the task is. Anyone with a paid-for GH Copilot license knows that you can just switch between whatever provider at a whim, depending on the needs of your task or financial requirements.

I think people will find it easier to revert back to Siri 2.0 if that ever materialises, in which case the stickiness moat is bridged by a more familiar and widely integrated abstraction layer.

I imagine the stickiest customers would be large enterprises. You aren't going to get the evangelists to stick on a single model provider, so their best bet is probably employees who are going to have their choices dictated to them by whoever purchases the softare. (Especially in large enterprises where using an unapproved AI provider is likely not allowed, or the AI is imposed on the workers.) The question then is, how do you differentiate yourself in enterprise sales? As much as people seem to dislike Copilot, from a business standpoint "buy the extra microsoft thing in our current contract" or "buy the extra google thing in our current contract" could likely be a lot cheaper/less friction.

It's really easy to overcome that -- just sponsor some IndieDevs to flood the internet with scripts and tools to migrate all your conversations from OpenAI. Make it easy for people to switch using a simple process, make sure it's well distributed, and BOOM! Watch their user count drop like a rock. People act like just because a service has a lot of users it can't be destroyed. Anyone who has ever worked at a large web company can tell you otherwise. These things can be destroyed in a just a few days if they are targeted.

They look like fortresses from the outside, but they are all incredibly vulnerable. That's the truth they don't want people to know or realize just how vulnerable they all are.

Do people care about their old LLM sessions?

I might have sessions I revisit over a few weeks, but nothing longer than that. The conversations feel as ephemeral as the code produced. Some tiny fractions of it might persist long term, but most of it is already forgotten and replaced by lunch time.

I disagree. So far I've seen people use "Photoshop" and "Google" as verbs. No one uses "ChatGPT" as a verb. People do use ChatGPT but the brand recognition isn't that strong.

My anecdotes are that Google is winning even on consumer side.

My wife uses Google AI overview - as an extension of search - on a daily basis and then jumps to Gemini

I don't know. I switched to Gemini and haven't missed anything from OpenAI even for a second. I could switch back to OpenAI and not miss anything from Gemini. I don't feel the stickiness AT ALL.

I don't think they have a billion active users who opted-in. Google/Apple/Microsoft are the gatekeepers (for the most part) for retail users and they decide who is on by default. The USG isn't going to step-in and the EU won't step in either.

So I suspect that Google will lean into Gemini, Microsoft will lean into OpenAI, and Apple ... it's a tough question what they do in the longer term.

For business users it's a different story and I see room for Anthropic to shine. And then there are the specialty AI services but those are all different markets from the general purpose AI.

Just as people underestimate bundling and multiple-product companies. As soon as LLM corpos will start increasing prices to actually match expenses and recouping their immense debts customers will very quickly catch up how OAI product is x5 times more expensive than Google's and the only moat is is to open pre-installed Gemini :) .

Competing in freeware products is impossible as soon as monopoly emerges. Competing in paid products is way easier, especially after free money age has ended.

At this moment, I agree. Your average person (which doesn't really exist) has already been exposed and trained on ChatGPT. Arguing moving to another "chat" experience has not gone well, for example Bing, etc. Pretty sure Google had the "box" figured out first and won. I think people overthink how much effort people are willing to put into "change". There is nothing wrong with staying put if it works, after all, there is an unlimited number of other things happening in this world besides AI.

I definitely think they’ve nailed the personality better than others too. Gemini and grok are always paragraphs and paragraphs of text to sift through for something that with openai is usually digested to much less

To the extent that it is a popularity contest, that's one thing.

Of course the first thing people may look at is technologies going head-to-head.

Another big one is user pricing, plus the underlying cost to serve users. Actually minus that cost.

Biggest so far is capital.

Seems to be going that way, a contest of capital could dominate like so many other things regardless of technologies.

There are probably other things that companies may leverage if competition does really ramp up.

It may not have to be a moat to be a defining characteristic that some prefer.

The difficulty is that “winning” in this case is setting up a monopoly or duopoly and slowly increasing prices. It’s not clear if OpenAI can get so far ahead of the competition that it becomes a two or one horse race. Right now Anthropic and Google are at least as good. And the open source models keep them all honest pricing wise.

OpenAI will likely keep their billion users, and likely monetise them fairly effectively with ads. Their revenue will be considerable. It’s less clear that OpenAI will “win” and their competitors won’t.

My nontechnical friends only know about ChatGPT, all other LLMs are a complete and total mystery to them outside of what is built into Google's search engine and Copilot. I imagine they represent the majority of consumers. It'd require significant marketing campaign for most of them to switch or for OpenAI to make a substantial mistake.

I think there are users who view "their AI" as somewhere in the venn-diagram of their relationships.

And it's a spectrum, at one end you got the full-on AI psychosis and at the other "its a machine, I owe it nothing".

Conversational AI is going to be sticky to the extent that you see a switch to a different provider as dropping a relationship.

I don't really see that stickiness to be honest.

Most people I know with android phones, myself included, just use Gemini which is bundled with the OS and has a dedicated button, has excellent data and integration with maps and such.

When it comes to enterprise, non IT companies (banking, insurance, etc) in Europe seem to be defaulting to Google's offerings, Gemini and NotebookLM in particular.

The problem with the stickiness is that they will eventually need to start charging, and that friction point will immediately make them come undone. Let’s says they charge $1.99 a month, and Anthropic then step in with a six month free offer, and suddenly everyone has two apps on their phone they’re comfortable with, and it’s a price war over very lightly differentiated products

Google has bigger network effect. It can stomp OpenAI

The problem is that, at least for now, it is dead easy to switch to something else. No need to convert anything, reconfigure anything, it is not like changing gmail to something else or dropping Word for LibreOffice.

Chat window is a chat window.

I can imagine that sooner or later things like OpenClaw (or its alikes) will become more popular and that could be something that will catch users.

I disagree (imo).

It would take me minutes to copy across a histories of projects and continue relatively unscathed by the experience.

I use chatGPT and currently relatively like it. But there is no moat beyond that.

Not like, for example, whatssap where it's almost impossible to detach from it due to the network ... (I've really tried with about a 10% success rate)

> I think OpenAI has better chance to winning on the consumer side than everyone else.

Which doesn't make money.

> Of course, would that much up against hundreds of billions of dollars in capex remains to be seen.

Most of that is a bet against enterprise adoption. Automation of customer service, sales, marketing, warehouses, medical discoveries, etc...

Isn't half the appeal of AI that they can write a prompt like move all my text history from OpenAI to Claude and then they do it?

But also a billion users is ChatGPT's biggest weakness. So many free users burning compute up. So many incentives to nerf the intelligence to affordable levels. Sounds like a nightmare.

several of my friends named their chatgpt 'Amanda' or 'George' because they talked about real mental issues with it. I don't see them moving to another platform because that's essentially asking them to leave their 'best friend/therapist'.

These articles are largely based on a false equivalence of LLM=moat.

That's not the case. OpenAI is advancing on many fronts; codex, vectorStore, embeddings, response API, containers, batch processing, voice-to-speech, image generation... the list goes on.

by this argument Google will win though. Identical interface with similar quality answers

As a counter anecdote, my wife stopped using it because it is quite terrible when you ask it about current events. She almost exclusively uses the Grok app now because it has the "best" internet search and current events results

Exactly. ChatGPT is ubiquitous for the new generation of AI (LLMs) for everyone outside our of bubble. I've spoken to dozens of friends and non-techncial folks about this topic over the last year and not a single one has ever said they use Gemini, Grok or Claude.

OpenAI has by far the strongest brand and user base. It's not even close.

And, when it comes to the product they've been locked in the last few months it seems. The coding models are no longer behind Anthropic's and their general-use chat offering has always been up there at the top.

>on conversation on these apps that can't be easily moved elsewhere.

they can be super easily moved. just use the existing export feature, all a competitor needs is ability to import conversations.

I think you're overestimating stickiness. People spoke endlessly about stickiness of Google for years and years and it took what 18 months for Google search to become virtually irrelevant after LLMs came along?

They are more easily moved than other data honestly. You can use chat gpt to build your own chatbot and then export all of your data from openai and load it into the new chatbot.

Completely disagree with this take. I was an early free OpenAI user and switched to Gemini once it got good enough and bundled a bunch of services together to make the paid product free. OpenAI will need distribution to maintain any kind of durable market share. They need to become a bundler of other subs, or else they will just be the next Disney+ or Spotify that needs telecoms (Hah!) to push their paid product onto user's phone bills.

> but people have hundreds and thousands on conversation on these apps that can't be easily moved elsewhere.

But why would you want to?

You can just leave them there at slowly start new conversation on another platform.

It's way too easy to export your context for this to be real. I moved away from ChatGPT from Gemini months ago and haven't thought of it. Paid.

Conversations are not really a valuable service for these companies. The token usage is miniscule.

Agentic development and claw style personal assistants are where the dough is at.

At the conversation backlogs worth anything? To me they seem as valuable as Google search history. After maybe 3 days they are worthless.

All of ChatGPT's users could be gone in a month if something better comes along. And plenty of other options are coming along.

  and thousands on conversation on these apps that can't be easily moved elsewhere.

This obstacle looks familiar.

Having a known brand is not a moat mate. Sorry.

myspace used to be a well known brand. I've worked there.

i've been using chat gpt for 'chatting/questions' kind of things + snippets of code

it's plenty good on free tier

as soon as they start adding restrictions / raising prices / etc won't take long to look for alternatives

A good solution for memory would help with stickiness. But it's a hard thing to crack.

We are in the Yahoo, Altavista, Lycos etc. stage. Plenty of room for a Google still.

> Everyone is actually underestimating stickiness. The near billion users OpenAI has is actually a real moat and might translate into decent chunk of revenue.

Maybe you're overestimating their "moat" and stickiness. The dust is still settling on this madness and "OpenAI"[1] creates a lot of noise in the market.

These LLMs are being rapidly commoditized, very soon they will become as "boring" as virtual machines or containers. Altman has the exceptional skill to dupe people into giving their money to him. The "infinite money glitch" that he has been exploiting isn't really infinite.

I just hope there'll be a breakthrough with truly transparent LLMs that will stabilize this madness. As I've griped[2] two years ago, I find OpenAI too scummy, and it is unlikely that they will "win" with their sleazy ways.

[1] Air quotes because of their persistent abuse of the word "open"

[2] https://news.ycombinator.com/item?id=40425735

nah, open ai doesn't have a moat it has a brief window to get a lot cheaper to run or it's going to go pop when someone figure out how to do inference a lot cheaper.

How much is your wife paying for the privilege to use OAI presently?

Does she pay for it. No? Then she’s causing them a loss

This is what Netscape thought too

I really like your analysis and agree up to a point.

The problem with a moat in the consumer space is it depends on brand and marketing. OpenAI came into this world as a tech novelty, then an amazing tech tool, then a household name.

But… can they compete with massive consumer companies like Apple, Google, etc? In the long run?

There’s no technical reason they can’t. The question is whether they have consumer marketing in their blood. The space doesn’t have a lot of network effects, so it’s not like early Facebook where you had to be on it because everyone was.

Not saying they’ll fail, just saying it would be a significant challenge to be a hybrid frontier model / consumer product company.

And?

The tech landscape is littered with companies they had users who couldn’t monetize through ads. Beside the costs of serving request via LLMs is orders of magnitude greater than a search result.

On top of that, OpenAI is a sharecropper on other companies’ server, they depend on another company’s search engine and unlike Google, they are dependent on Nvidia.

Don’t forget that most browsing is done on the web and Google is the default search engine on almost every phone sold outside of China.

That being said: I used MySpace daily too... Until I didn't.

OpenAI got me to cancel my anthropic sub for Codex. Anthropic weekly limits on Pro are atrocious. You listening anthropic?

Microsoft is surviving precisely because of stickiness as you put it. But their users have to use them, and have to pay for it. There are very few people that use openai today that have to pay for it, those forced to use it are typically doing so via free avenues like windows copilot.

OpenAI has the stickiness of MSN news or MS Teams. Your wife uses chatgpt on a daily basis but is she paying for it? If they charge her $0.99/mo will she not look at alternatives? If she gets two or three bad responses from chatgpt in a row, will she not explore alternatives to see if there is something better? Does she not use google? If she does, she is already interacting with gemini everyday via their AI overview.

OpenAI has a first-to-market advantage, not a moat as you think. they can absolutley dominate the market, if they stay on top of their game. Ebay was the main online shopping network, they had that advantage, they were even the ones that made Paypal a thing! But they're relatively little used now, better alternatives crushed them.

Amazon was the first-to-market with cloud services, they didn't get worse in any significant way, but their market share is not as great as it used to be, Azure has gained decent ground on them. 10 years ago the market share break down was 31/7/4, now it is 28/21/14 for AWS/Azure/GCP respectively.

For OpenAI to survive it needs most of the market share, if it gets only a 3rd for example, the AI industry on its own needs to be a $1T+ industry. Over the past 10 years revenue alone (not profit) for AWS has been $620B total and just made $128B in revenue (highest) last year. OpenAI needs to make in profits (not revenue) what AWS made last year in revenue by 2029 just to break even. If it manages to just break even by then, it needs to have more profits than the revenue AWS managed to attain after its entire lifetime until now. It's far easier to switch LLM models than cloud providers too!

Their only remote way of survival, I hate to say it, is by going the way of palantir and doing dirty things for governments and militaries. they need a cash-cow client that can't get anyone else like that. And even then, being US-based, I don't think outside the US any military is insane enough to use OpenAI at all due to geopolitics. Even in sectors like education, Google (via chromebooks) is more likely to form dependence than Microsoft via OpenAI since somehow they're more open to arbitrary apps due to historical anti-trust suits.

I can see a somewhat far-fetched argument being made for their survival, but only on thin-threads and excellent execution. But I can't see how they can actually survive competition. They're using the Azure strategy for market share, they're banking on AI being so ubiquitous that existing vendor-lock-in mindset will serve as a moat. They'll need to be much more profitable than AWS in like 1/5th of the time. Their product is comparable to (and literally is in Azure) one of many cloud service offerings, as oppose to an entire cloud provider, and their costs are huge similar to cloud providers like needing their own data-centers level huge, they need to overcome those costs, and on top of that have $125B> revenue in like 2 years!!

Yup this is just another case of the HN bubble. I polled a bunch of non technical friends recently who I know use AI on a daily basis. Out of 10+ maybe 2 had ever heard of Claude, and no one had any interest in trying it.

ChapGPT has become the AI verb, and in the consumer space it is not getting dethroned.