How will AI companies make money?
What’s a fair price for artificial intelligence? That’s the question tech companies big and small are asking themselves, as the AI revolution enters the “how do we actually make money from this?” phase.
So far, some consumer-facing AI products are following the tried and true freemium model: You can use ChatGPT for free, but if you want the best version with the most powerful large language model behind it, it costs $20 a month.
So, what exactly are consumers willing to pay? And how will AI companies eventually make money?
The big money in generative AI isn’t in you asking ChatGPT to write a sonnet about Hot Pockets in iambic pentameter. The big money is in selling AI to big business (so then you can use your work computer to write a sonnet about Hot Pockets.)
“Most of the attention from users has been more on the consumer side, with ChatGPT and Bard,” said Andrew Marok, who covers the tech industry for the investment firm Raymond James. “We do think that the enterprise is the greater opportunity overall.”
Microsoft will be charging $30 per user per month for businesses to use Copilot, which can whip up PowerPoints and Excel formulas for you. That $30 figure is actually pretty high; the entire Microsoft Office package can be cheaper than that for some businesses.
“The promise of AI is a multiples increase in the productivity that a user can gain from these services,” Marok said.
Consumers are more price sensitive, and in that market, AI companies are luring customers with cheap pay-per-use models or discounted monthly subscriptions.
“As you have more and more other services being offered, I think customers might not just want to have too many subscriptions, just to keep it simple,” said Olivier Toubia at Columbia Business School.
Companies that offer a one-stop AI shop — text, audio, photo and videos — will have the advantage, Toubia added.
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