Comment by og_kalu

Comment by og_kalu 8 hours ago

>In 2024 (when customer mix was more favorable)

Okay, so still hundreds of millions of users

>They aren't pulling an Amazon snd balancing cash flow with costs.

Nobody said they were. I said having hundreds of millions of completely free users would suck the profitability of any business, and that the remedy would be simple, should the need for it arise.

>They're just incinerating money for a low value userbase.

If you don't see how implementing ads in a system designed for having natural conversations to users whose most common queries are for “Practical Guidance” and “Seeking Information” could be incredibly valuable then you have no foresight and I don't know what to tell you.

>Even at FB arpu the economics are still very poor.

No they aren't and I honestly have no idea what you're talking about. Inference is cheap and has been for some time.

mgh95 7 hours ago

I don't think you realize the issue. They aren't monetizing their SaaS product satisfactorily -- hence the Amazon cash flow imbalance statement. This indicates they must find new markets to survive. Despite this, however, they are gaining only in poorer markets, limiting the monetizability of a high cost product.

Implementing adds is a hail-mary. It puts them in a knife fight with google which will likely result in a race to the bottom which OpenAI cannot sustain and win.

FB global ARPU is about 50 USD. At 700M customers, they do 35B in revenue annually. This compares to a publicly stated expected cost of approximately 150B in computing alone over the next 5 years (see: https://fortune.com/2025/09/06/openai-spending-outlook-115-b...). This leaves a profit of 5B per year, with 90B expected r&d costs. Even if OpenAI develops a product and fires all employees, you are looking at a ROIC of about 18 years.

Fundamentally, OpenAI does not have the unit economics of a traditional SaaS. "Hundreds of millions of users" is hundreds of millions of people consuming expenses and not generating sufficient revenue to justify the line of business as a going concern. This, coupled with declining enterprise AI adoption (https://www.apolloacademy.com/ai-adoption-rate-trending-down...) paints an ugly picture.

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ares623 2 hours ago

Facebook users spend multiple hours per day doomscrolling. Operational costs of a doomscrolling user is minimal. Most of it will be served from a CDN.
Imagine 700M users “doomchatting” with GPT5 for several hours per day to justify the ROI of advertising.

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haijo2 6 hours ago

V nice post. As a corporate finance and valuation enthusiast - I approve.

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og_kalu 7 hours ago

>Despite this, however, they are gaining only in poorer markets
They are gaining everywhere. Some more than others, but to say they are only gaining in poorer markets is blatantly untrue.
>FB global ARPU is about 50 USD. At 700M customers, they do 35B in revenue annually.
Yeah, and that would make them healthily profitable.
>This compares to a publicly stated expected cost of approximately 150B in computing alone over the next 5 years
Yes, because they expect to serve hundreds of millions to potentially billions more users. 'This leaves a profit of 5B per year' makes some very bizarre assumptions. You’re conflating a future-scale spending projection with today’s economics. That number is a forward-looking projection tied to massive scale - it doesn’t prove current users alone justify that spend, and they clearly don't. There is no reality where they are spending that much if their userbase stalls at today's numbers, so it's just a moot point and '5B per year' a made up number.
>Fundamentally, OpenAI does not have the unit economics of a traditional SaaS.
Again, Everything points to their unit economics being perfectly fine.

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- mgh95 5 hours ago
  
  No, the economics are horrible. At current 30Y T-bond rates, your money doubles ever ~15 years. Your money grows faster in USD treasuries then OpenAI. That's disastrous.
  
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