[liamconnell]

Unfortunately for OpenAI, they are not positioned to capture value from any of the "big margin" use cases that they highlight as key to their future. I think all of these are pretty unrealistic for them:

- Revenue sharing from drug discovery (called out by OpenAI CFO): Why would a pharma company give away the upside to a commoditized intelligence layer? Why would OpenAI have a more compelling story than Google Deep Mind, which has serious accolades in this space?

- Media generation for ads and other content: For ads, OpenAI is facing off against Google, Meta and Amazon, all of which have existing relationships with advertisers. For the foreseeable future, AI content will be a major discount product compared to humans. OpenAI will not get to charge $1M for an ad like a production company does. So the TAM of ad production (~$50B) shrinks below $1B because AI deflates prices so much.

- Other agent use cases: OpenAI doesnt have a surface to build these on. Google has chrome, Microsoft has office, Apple has OS's. The other use cases like coding will be a low-margin competition between model providers until some of them throw in the towel. The players with the best cash position win - and thats not OAI.

I think the place that they could win is retail (also called out by OAI CFO). They made deals with Etsy and other small retailers. I was fixing my guitar the other day and would have instantly bought the tools it had suggested that I would need. The problem is that they have to win against Amazon here, and there is zero chance of a partnership for obvious reasons.

[vb-8448]

At some point, I'd expect the following pattern to emerge:

- random user: hey chatgpt, I need a new mechanical keyboard, buy me one - openai will get money for mechanical keyboard vendors to be on top of gpt's agent list

the ad business will shift from trying to hack google to hack gpt

[liamconnell]

Yes that's what I meant. But Amazon will fight for its life to stop this. So OpenAI will have to go to other retailers, which don't have the same product catalogue size as Amazon. Best case scenario: Target or Walmart. But there is a reason that OpenAI announced deals with Etsy and Shopify rather than those.

And OpenAI doesn't have as much product insight as the retailers so they have to rely on the retailer to choose which is the "best" mechanical keyboard for this person. And at that point, pretty much all of the shopping value is being provided by the retailer rather than ChatGPT, so why would they get much money?

There's a market for this but its not going to be trivial for OpenAI to win it. And it probably wont be a cashflow monster like AdWords or Amazon.

[notatoad]

this was supposed to be the business model for alexa. amazon had all the pieces - they had the product listings, marketplace, ordering infrastructure, the smart speaker in your home always listening to you, and they built exactly that product.

it hasn't exactly taken off, and i don't think OpenAI has addressed any of the problems that prevented amazon's version from being a success. and that was without taking advertiser money to choose which product to sell you, amazon was happy to just make a sale. if the product choices the AI shopping assistant makes are driven by advertiser dollars instead of product quality, i really don't expect consumers to accept it.

[jimkleiber]

It's already shifting. I know someone who used to do SEO and is now marketing how to get in llm results.

[Analemma_]

This was Amazon's huge bet on Alexa: that if you made a frictionless way to buy products by saying "computer, buy me [thing]", then people would use it and then you could sell favored placement on it.

It was a total failure. I know lots of people-- both technical and non-technical-- who have Alexa devices, and not one of them has ever bought anything with it. You can read various comments from Amazon insiders confirming that the rate of buying things with Alexa was close to zero. And why not? It's the shittiest possible way to shop, like buying a lottery ticket except where the RNG is knowingly gamed. This is why Amazon is writing off Alexa entirely.

I've commented to this effect before, but "what if people could shop sight unseen" is a PM fantasy, not a thing anybody actually wants. LLMs might be useful for helping with research and comparison shopping, but the "one-click [or one-prompt] buying" workflow is not gonna happen.

[kristo]

At that point why would I use ChatGPT if it’s just getting paid to show me stuff?

[____tom____]

and then, to make money, they'd have to stop giving the correct answer, just like search engines

[rco8786]

This is it.

Their real moonshot should be search and ads. They're already taking big chunks from Google, they're just not monetizing at all (yet).

I already use chatgpt constantly for product research.

[brazukadev]

That would be the optimal scenario for openai but even this one I'm not really expecting to happen anymore. OpenAI failed.

[javier2]

I am already using claude to help me shopping. It can be so hard to find the actual specifications of a product. Amazon is filled with nonsense information, and its nearly impossible to compare different variants of things like monitors, tvs, cpus and other technical things that clearly are made with certain specifications in mind.

[holden_nelson]

> OpenAI is facing off against Google, Meta and Amazon, all of which have existing relationships with advertisers.

I will point out that these companies have existing relationships with advertisers because they have massive, sticky userbases and advanced targeting tools. The average consumer is absolutely using ChatGPT for personal use, and maybe Copilot at work if applicable. And they're using Google's AI by proxy when they perform searches.

If OpenAI were to roll out advertising tooling, I have no doubt advertisers would flock there to try it out.

Additionally, the other thing I think OpenAI leads in is Product. Google is amazing at creating technologies and awful at creating products. I think OpenAI can be positioned to win based off of that alone.

[autoexec]

> . The average consumer is absolutely using ChatGPT for personal use

In my experience the "average consumer" isn't doing anything with ChatGPT except maybe play with it for a little bit before getting bored. They actively avoid AI when the apps and products they use try to shove it down their throats and they search the internet and ask their tech savvy family members for ways to disable AI in their stuff when they see it nag at them about using it.

Inevitably, AI ends up being used by people in some ways (like the AI reply at the top of every google search) but almost never because the average consumer asked for that or wanted it. It's a toy when they want to use it, and annoying when they don't but are forced to.

[aylmao]

> Additionally, the other thing I think OpenAI leads in is Product. Google is amazing at creating technologies and awful at creating products. I think OpenAI can be positioned to win based off of that alone.

I agree that Google isn't great at creating products anymore, but I'm not sure that OpenAI is. We've seen relatively simple products by them (a chat app, a short-form video app, various web interfaces) but we haven't seen anything as complex as some of Google's bigger products (Gmail, Docs, Maps, etc).

If OpenAI hits jackpot with a "simple" product, it could be easily replicated by a bigger company in the way Meta quickly copied Stories from Snapchat or TikTok to make Reels. It's already happened with Chat; the LLM is hard to compete against but the actual product, a web/app chat interface, was quickly copied by other companies with LLMs.

OpenAI would need to make something very complex and hard to copy to give it a solid head start they could really build a moat around— something like Google Maps, which took Apple years to replicate (and other companies won't even try to) or the iPhone, which was years ahead at launch. I just don't think we've seen OpenAI prove it has the capacity to build a product like that yet.

[chickenegg]

I know plenty of SaaS companies that are paying tens of thousands of dollars every month for LLM optimization & AI visibility. Lots of marketing agencies that have been working hard on delivering paid ads & search engine optimizing are floating in a river of cash now because all these companies are panicking. So, yeah, fully agree that if OpenAI rolls out a halfway decent advertising option, advertisers will throw money at them.

[kristianc]

Which is likely why they won't try. Trying to raise that much money from 20 large individual customers would be suicidal. At the scale they're talking about, you need billions of "customers".

Trying to embed themsleves into every enterprise workflow and taking a cut from it seems much more likely than them trying to invent the next killer app. ChatGPT is just the marketing arm which keeps them front of mind.

[jstummbillig]

> - Revenue sharing from drug discovery (called out by OpenAI CFO): Why would a pharma company give away the upside to a commoditized intelligence layer? Why would OpenAI have a more compelling story than Google Deep Mind, which has serious accolades in this space?

I am not sure I follow. They "give it away", because they have to. They have to pay any of the model companies. What do DeepMind's accolades matter if it's commoditized, as you propose?

AI resources will remain scarce for the foreseeable future: I have to literally wait multiple Minutes to get an answer for semi-hard coding problems. The current demand is the delta between this, and the few milliseconds that it could take if supply was there. I suspect the tension will grow. Why would there not be multiple companies positioned to capture value? Assuming that any of them can turn demand into profit, that seems to be the most likely story right now.

[liamconnell]

The CFO isn't talking about selling tokens to pharma companies. There's no money in that. She proposed revenue sharing. In this scenario, OpenAI's AI service helps discover drug candidates, and shares the IP ownership of the candidate (which is basically a risky bet that it will get through clinical trials and be profitable). Biotech is a complicated market filled with smart people and great negotiators - they dont give away IP ownership without a lot of thought.

If OpenAI wants anything more valuable than selling tokens, they will need to offer something valuable and differentiated. Right now they are not differentiated in the space at all. Look up "OpenAI Biotech" - anything that they've built themselves?

If any company will have a new product that biotech companies will pay top dollar for, its Google. Deepmind has been in biology (proteins) for almost a decade and they it has subsidiaries like Isomorphic Labs that are bringing products to market.

[mattmanser]

His point is AI's already getting commodified. So OpenAI won't get a portion of the profits or revenue sharing, it'll be a simple transaction. They simply pay for compute time.

It's like pretending sulphuric acid manufacturers would get the right to demand a portion of drug company profits.

[jabberwhookie]

Big pharma might choose to pay full cost to get reasonable speed. To get to a partnership that looks a lot like tenant farming you would need a model that is actually 100X better at drug discovery than any other model, Why would that be OpenAI instead of deepmind? Not that either is likely worth much premium.

Generally, I think only penny stock pharma cares at all to deal with IP with any kind of baggage instead of having already forgotten it in the backlog.

[danpalmer]

> Why would a pharma company give away the upside to a commoditized intelligence layer?

Why would a commoditized intelligence company give away the upside to a commoditized silicon company?

It still amazes me that Nvidia is worth so much, they're just one slice of the value chain, from mining, through chip fabrication, through to chip IP, through to technology stack, training, inference, and product integration.

I understand the reasons why, it's mostly lock in with CUDA and isn't really about unique chips, and I think the market sentiment on this is changing, but still it's crazy to me.

[ivan_gammel]

>Other agent use cases: OpenAI doesnt have a surface to build these on. Google has chrome

ChatGPT app is their Chrome. Large consumer base using chat on daily basis can expand to prosumer and to enterprise. They build an emotional connection to their customers that has the vibe of iPhone.

[liamconnell]

Yes but its not relevant to the agent use cases (which are mostly about interacting with external systems). So agents built by Microsoft (Copilot) can natively interact with Office files in Sharepoint, and the Sharepoint product team can build to enable this in special ways. OpenAI has to use the APIs and deal with rate limits, speed issues and other limitations.

[9cb14c1ec0]

> OpenAI doesnt have a surface to build these on

Correct. They certainly could. An OpenAI alternative to g suite and MS Office would be a good start (integrated with the chatgpt mobile and web presence), but would also be a huge engineering effort.