OpenAI's H1 2025: $4.3B in income, $13.5B in loss
(techinasia.com)517 points by breadsniffer a day ago
517 points by breadsniffer a day ago
What is OpenAI's competitive moat? There's no product stickiness here.
What prevents people from just using Google, who can build AI stuff into their existing massive search/ads/video/email/browser infrastructure?
Normal, non-technical users can't tell the difference between these models at all, so their usage numbers are highly dependent on marketing. Google has massive distribution with world-wide brands that people already know, trust, and pay for, especially in enterprise.
Google doesn't have to go to the private markets to raise capital, they can spend as much of their own money as they like to market the living hell out of this stuff, just like they did with Chrome. The clock is running on OpenAI. At some point OpenAI's investors are going to want their money back.
I'm not saying Google is going to win, but if I had to bet on which company's money runs out faster, I'm not betting against Google.
Consumer brand quality is so massively underrated by tech people.
ChatGPT has a phenomenal brand. That's worth 100x more than "product stickiness". They have 700 million weekly users and growing much faster than Google.
I think your points on Google being well positioned are apt for capitalization reasons, but only one company has consumer mindshare on "AI" and its the one with "ai" in its name.
I’ve got “normie” friends who I’d bet don’t even know that what Google has at the top of their search results is “AI” results and instead assume it’s just some extension of the normal search results we’ve all gotten used to (knowledge graph)
Every one of them refers to using “ChatGPT” when talking about AI.
How likely is it to stay that way? No idea, but OpenAI has clearly captured a notable amount of mindshare in this new era.
> ChatGPT has a phenomenal brand.
My observation is different: ChatGPT may be well-known, but does not have a really good reputation anymore (I'd claim that it is in average of equal dubious reputation as Google) in particular in consideration of
- a lot of public statements and actions of Sam Altman (in particular his involvement into Worldcoin (iris scanning) makes him untolerable for being the CEO of a company that is concerned about its reputation)
- the attempts to overthrow Sam Altman's throne
- most people know that OpenAI at least in the past collaborated a lot with Microsoft (not a company that is well-regarded). But the really bad thing is that the A"I" features that Microsoft introduced into basically every product are hated by users. Since people know that these at least originated in ChatGPT products, this stained OpenAI's reputation a lot. Lesson: choose carefully who you collaborate with.
> They have 700 million weekly users and growing much faster than Google.
Years old company growing faster than decades old company!
2.5 billion people use Gmail. I assume people check their mail (and, more importantly, receive mail) much more often than weekly.
ChatGPT has a lot of growing to do to catch up, even if it's faster
They might be. Google has been getting mildly 'aggressive' in their emails pleading with me to use gemini and I have yet to try it ( and that is despite being mildly interested ). There is a reason first mover's advantage is a real thing. People stick with what they think they know.
> ChatGPT has a phenomenal brand.
If by "phenomenal" you mean "the premier slop and spam provider", then yes.
> ChatGPT has a phenomenal brand. That's worth 100x more than "product stickiness". They have 700 million weekly users
I don't think majority of those 700m people use the product because of the brand. Products are a non-trivial contributor to the brand.
Also, if it were phenomenal, they wouldn't be called ClosedAI ;)
Will people accept ads from their “computer friend”? Might feel like the Truman Show when your friend starts giving you promo codes in casual conversation
For consumer product, memory, the recent pulse one and _much awaited_ ai feed are the products that will build stickiness. I pay for both claude and openai currently and it is much more difficult to continue a chat on other platform as the context systems isn’t something i can cook up swiftly.
What is Google's competitive moat? There's no product stickiness here. What prevents people from just using Altavista/Yahoo/[any other search engine].
You vastly underestimate the power of habit and branding combined together. Just like then, the vast majority of people equate ChatGPT with AI chatbot, there is no concept of alternative AI chatbot. Sure people might have seen some AI looking thing called Copilot and some weird widget in the Google Search results but so far ChatGPT is winning the marketing game even if the offerings from rivals might be the same or even superior sometimes
Google's competitive moat 20-25 years ago was being a significantly better search engine than the alternatives. That remained true for decades.
You can't say the same about ChatGPT. And Google wasn't spending $4 to make $1 almost 10 years after its founding, which will become an issue at some point.
Google has defaults as their huge moat. They have Chrome and Android under their control and pay Apple and Mozilla to be the default search engine.
Here in Europe this is mitigated by them having to show a browser/search engine selection screen, but in the US you seem to be more accepting of the monopoly power. Or it seems the Judge in Calfornia seems to think that OpenAI actually has a change of winning this. It doesn't in my estimation.
On the other side Google has a monopoly on Ads. When OpenAI somehow starts displaying ads, they'd have to build their own Ad network and then entice companies and brands to use it. Good luck with that.
>non-technical users can't tell the difference between these models at all
My non-tech friend said she prefer ChatGPT more than Gemini, most due to its tone.
So non-tech people may not know the different in technical detail, but they sure can have bias.
I have a non-techy friend who used 4o for that exact reason. Compared to most readily available chatbots, 4o just provides more engaging answers to non-techy questions. He likes to have extended conversations about philosophy and consciousness with it. I showed him R1, and he was fascinated by the reasoning process. Makes sense, given the sorts of questions he likes to ask it.
I think OpenAI is pursuing a different market from Google right now. ChatGPT is a companion, Gemini is a tool. That's a totally arbitrary divide, though. Change out the system prompts and the web frontend. Ta-daa, you're in a different market segment now.
ChatGpt has won. I talk to all teens living nearby and they all use chatgpt and not Google.
The teens, they don't know what is OpenAI, they don't know what is Gemini. They sure know what is ChatGPT.
All of these teens use Google Docs instead of OpenAI Docs, Google Meet instead of OpenAI Meet, Gmail instead of OpenAI Mail, etc.
I'm sure that far fewer people to go gemini.google.com than to chatgpt.com, but Google has LLMs seamlessly integrated in each of these products, and it's a part of people's workflows at school and at work.
For a while, I was convinced that OpenAI had won and that Google won't be able to recover, but this lack of vertical integration is becoming a liability. It's probably why OpenAI is trying to branch into weird stuff, like running a walled-garden TikTok clone.
Also keep in mind that unlike OpenAI, Google isn't under pressure to monetize AI products any time soon. They can keep subsidizing them until OpenAI runs out of other people's money. I'm not saying OpenAI has no path forward, but it's not all that clear-cut.
ChatGPT (and all the competitors) are trivially sticky products: I have a lot of ongoing conversations in there, that I pick up all the time. Add more long term memory stuff — a direction I am sure they will keep pushing — and all of the sudden there is a lot of personal data that you rely on it having, that make the product better and that most people will never care to replicate/transfer. Just being the product that people use makes you the product that people will use. "the other app doesn't know me" is the moat. The data that people put in it is the moat.
This. I am not sure why or how this is missed, but because you cannot easily port context ( maybe yet ), the stickiness increases with every conversation assuming your questions are not encyclopedia type questions that don't need follow up.
As a counter, you can buy a hell of a lot of brand for $8 billion dollars though.
You can give your most active 50,000 users $160,000 each, for example.
You can run campaign ads in every billboard, radio, tv station and every facebook feed tarring and feathering ChatGPT
Hell, for only $200m you could just get the current admin to force ChatGPT to sell to Larry Ellison, and deport Sam Altman to Abu Dahbi like Nermal from Garfield.
So many options!
Users' chat history is the moat. The more you use it, the more it knows about you and can help you in ways that are customized to particular user. That makes it sticky, more so than web search. Also brand recognition, ChatGPT is the default general purpose LLM choice for most people. Everyone and their mom is using it.
As history showed us numerous times, it doesn't even have to be the best to win. It rarely is, really. See the most pervasive programming languages for that.
I'm saying Google is going to win. They're not beholden to their current architecture as much as other shovelmakers and can pivot their TPU to offer the best inference perf/$. They also hold about as much personal data as anyone else and have plenty of stuff to train on in-house. I work for a competitor and even I think there's a good chance google "wins"(there's never a winner because the race never ends).
The problem is that Google is horrible at product. They have been so spot on at search it's covered up all the other issues around products. YT is great, but they bought that. The Pixel should the Android phone, but they do a poor job marketing. They should be leading AI, but stumbled multiple times in the rollout. They normally get the tech right, and then fumble the productizing and marketing.
Pixel being undermarketed is deliberate, Android is an alliance and they don't want to compete against Samsung too hard.
But Google have other weaknesses. In the most valuable market (the USA) Google is very politically exposed. The left don't like them because they're big rich techbro capitalists, the Democrats tried to break them up. The right hate them because of their ongoing censorship, social engineering and cancellation of the right. They're rapidly running out of friends.
Just compare:
https://www.google.com/search?q=conservative+ai
https://www.bing.com/search?q=conservative+ai
The Google SERP is a trash fire, and it must be deliberate. It's almost like the search engine is broken. Not a single conservative chat bot ranks. On Bing the results are full of what the searcher is looking for. ChatGPT isn't perfect but it's a lot less biased than Google is. Its search results come from Bing which is more politically neutral. Also Altman is a fresh face who hasn't antagonized the right in the same way Google has. For ~half the population Gemini is still branded as "the bot that drew black nazis and popes", ChatGPT isn't. That's an own goal they didn't need.
I think we are all forgetting that Google is a massive bureaucracy that has to move out of its own way to get anything done. The younger companies have a distinct advantage here. Hence the cycle of company growth and collapse.I think openai and the like have a very good chance here.
yeah ... poly market and other makers seem to be betting that Google by year's end or sometime next year or so will have teh best gen ai models on the market ... but I've been using Claude sonnet 4.5 with GitHub Copilot and swear by it.
anyways would be nice to really see some apples-to-apples benchmarks of the TPU vs Nvidia hardware but how would that work given CUDA is not hardware agnostic?
What prevents people from just using Google, who can build AI stuff into their existing massive search/ads/video/email/browser infrastructure?
Google have never had a viable competitor. Their moat on Search and Ads has been so incredibly hard to beat that no one has even come close. That has given them an immense amount of money from search ads. That means they've appeared to be impossible to beat, but if you look at literally all their other products they aren't top in anything else despite essentially unlimited resources.
A company becoming a viable competitor to Google Search and/or Ads is not something we can easily predict the outcome of. Many companies in the past who have had a 'monopoly' have utterly fallen apart at the first sign of real competition. We even have a term for it that YC companies love to scatter around their pitch decks - 'disruption'. If OpenAI takes even just 5% of the market Google will need to either increase their revenue by $13bn (hard, or they'd have done that already) or they'll need to start cutting things. Or just make $13bn less profit I guess. I don't think that would go down well though.
It's a distinctive brand, pleasant user experience, and a trustworthy product, like every other commodified technology on the planet.
That's all that matters now. We've passed the "good enough" bar for llms for the majority of consumer use cases.
From here out it's like selling cellphones and laptops
Yeah, anyone saying "Normal, non-technical users can't tell the difference between these models at all" isn't talking to that many normal, non-technical users.
Yeah, for me, the biggest issue is, counter-intuitively given it's Google, I know Gemini is going to continue existing as a product for a long time; I feel comfortable storing data and building things out for it. Anthropic's putting out great models, but it's financially endangered, and OpenAI isn't doing great either; and I'm confident Gemini 3 release will put it right back at top-of-pack again as far as model output quality, so these little windows where I'm not using The Best are not a big deal.
Once the single-focus companies have to actually make a profit and flip the switch from poorly monetized to fully monetized, I think folks will be immediately jumping ship to mega-companies like Google who can indefinitely sustain the freemium model. The single-focus services are going to be Hell to use once the free rides end: price hikes, stingy limits, and ads everywhere.
.... but the field will change unpredictably. Amazon offers a lot of random junk with Prime -- hike price $50/year, slap on a subscription to high-grade AI chatbot 10% of users will actually use (say 2% are "heavy users"), and now Anthropic is financially sustainable. Maybe NYT goes from $400 to $500 per year, and now you get ChatGPT Pro, so everything's fine at OpenAI. There're a ton of financial ideas you'll come up with once you feel the fire at your feet; maybe the US government will take a stake and start shilling services when you file taxes. Do you want the $250 Patriot Package charged against your tax refund, or are we throwing this in the evidence pile containing your Casio F91-W purchase and tribal tattoos?
> There's no product stickiness here.
Very few of those 700,000,000 active users have ever heard of Claude or DeepSeek or ________. Gemini maybe.
>What is OpenAI's competitive moat?
The broken record's still running, someone please turn it off!
At this point I think people just suffer from some sort of borderline mental disorder.
700 MAUs in just a couple years? In a red(-pretty-much-pure-blood) ocean? Against companies who've been in the business for 20 years?
One would have to be quite dumb or obtuse not to see it.
> What is OpenAI's competitive moat? There's no product stickiness here.
20 years ago everyone said the exact same thing about Google Search.
I mean, how could you possibly build a $3T company off of a search input field, when users can just decide to visit a different search input field??
Surprise. Brand is the most powerful asset you can build in the consumer space. It turns out monetization possibilities become infinite once you capture the cultural zeitgeist, as you can build an ecosystem of products and eventually a walled garden monopoly.
I also wonder if this means that even paid tiers will get ads. Google's ad revenue is only ~$30 per user per year, yet there is no paid, ad-free Google Premium, even though lots of users would gladly pay way more than $30/year have an ad-free experience. There's no Google Premium because Google's ad revenue isn't uniformly distributed across users; it's heavily skewed towards the wealthiest users, exactly the users most likely to purchase an ad-free experience. In order to recoup the lost ad revenue from those wealthy users, Google would have to charge something exorbitant, which nobody would be willing to pay.
I fear the same will happen with chatbots. The users paying $20 or $200/month for premium tiers of ChatGPT are precisely the ones you don't want to exclude from generating ad revenue.
The average is $x. But that's global which means in some places like the US it is 10x. And in other less wealthy areas it is 0.1x.
There is also the strange paradox that the people who are willing to pay are actually the most desirable advertising targets (because they clearly have $ to spend). So my guess is that for that segment, the revenue is 100x.
"Lots of users would gladly pay way more than $30/year have an ad-free experience"? Outside of ads embedded in Google Maps, a free and simple install of Ublock Origin essentially eliminates ads in Search, YouTube, etc. I'd expect that just like Facebook, people would be very unwilling to pay for Google to eliminate ads, since right now they aren't even willing to add a browser extension.
Anecdata, but my nontechnical friends have never heard of uBlock origin. They all know about ad-free youtube.
It worked for YouTube, I don’t see why the assumption of paid gpt models will follow google and not YouTube, particularly when users are conditioned to pay for gpt already.
> ChatGPT has more consumer trust than Google at this point
That trust is gone the moment they start selling ad space. Where would they put the ads? In the answers? That would force more people to buy a subscription, just to avoid having the email to your boss contain a sponsored message. The numbers for Q2 looks promising, sells are going up. And speaking of sales, Jif peanut butter is on sale this week.
If OpenAI plan on making money with ads then all the investments made by Nvidia, Microsoft and Softbank starts to look incredibly stupid. Smartest AI in the world, but we can only make money by showing you gambling ads.
I'm afraid there's plenty of avenues for them to insert ads that probably won't be perceived as obnoxious by most people (I still find it incredibly obnoxious).
About half of AI queries are "Asking" (as opposed to Doing or Expressing) and those are the ones best suited for ads. User asking how to make pizza? Show ads for baking steels and premium passata. User asking for a three day sightseeing routine in Rome? I'm sure someone will pay you them to show their venue.
It seems unlikely that the ads will be embedded directly into the answer stream, unless they find a way to reliably label such portions as advertisements in a "clear and conspicuous" way, or convince law makers/regulators that chat bots don't need to be held to the same standards as other media.
> But as long as OpenAI remains the go-to for the average consumer, they be fine.
This is like the argument of a couple of years ago "as long as Tesla remains ahead of the Chinese technology...". OpenAI can definitely become a profitable company but I dont see anything to say they will have a moat and monopoly.
Huh? They're actively removing personality from current models as much as possible.
I think this is directionally right but to nitpick…Google has way more trust than OpenAI right now and it’s not close.
Acceleration is felt, not velocity.
Yeah, I agree with you.
Between Android, Chrome, YouTube, Gmail (including mx.google.com), Docs/Drive, Meet/Chat, and Google Search, claiming that Google "isn't more trusted" is just ludicrous. People may not be happy they have to trust Alphabet. But they certainly do.
And even when they insist they're Stallman, their friends do, their family does, their coworkers do, the businesses they interact with do, the schools they send their children to do.
Like it or not, Google has wormed their way into the fabric of modern life.
Chrome and Google Search are still the gateway to the internet outside China. Android has over 75% market share of all mobile(!). YouTube is somewhat uniquely the video internet with Instagram and Tiktok not really occupying the same mindshare for "search" and long form.
People can say they don't "trust" Google but the fact is that if the world didn't trust Google, it never would have gotten to where it is and it would quickly unravel from here.
Sent from my Android (begrudgingly)
> And even when they insist they're Stallman
Looking through the JS-code of this site I was happily surprised finding 153 lines of not minified but pretty JS. I anticipated at least some unfree code. So I guess there is a chance some user might rightfully claim this.
With search you dont fully trust Google. You trust Google to find good results most of the time them trust those results based on other factors.
But with AI you now have all trust in one place. For Google and OpenAI their AI bullshits. It will only be trusted by fools. Luckily for the corporations there is no end of fools to fool.
I agree with you, and my impression of the trust-level of Google is pretty much zero.
The only thing I trust google to do is abandon software and give me a terrible support experience
And to charge you for stuff you don't want and don't need as if you are using it every day through tied sales. Hm... wasn't that illegal?
The moment they start mixing ads into responses Ill stop using them. Open models are good enough, its just more convenient to use chatgpt right now, but that can change.
People said the same thing about so many other online services since the 90s. The issue is that you're imagining ChatGPT as it exists right now with your current use case but just with ads inserted into their product. That's not really how these things go... instead OpenAI will wait until their product becomes so ingrained in everyday usage that you can't just decide to stop using them. It is possible, although not certain, that their product becomes ubiquitous and using LLMs someway somehow just becomes a normal way of doing your job, or using your computer, or performing menial and ordinary tasks. Using an LLM will be like using email, or using Google maps, or some other common tool we don't think much of.
That's when services start to insert ads into their product.
> People said the same thing about so many other online services since the 90s.
And this leads to something I genuinely don't understand - because I don't see ads. I use adblocker, and don't bother with media with too many ads because there's other stuff to do. It's just too easy to switch off a show and start up a steam game or something. It's not the 90s anymore, people have so many options for things.
Idk, maybe I am wrong, but I really think there is something very broken in the ad world as a remenant from the era where google/facebook were brand new and the signal to noise ratio for advertisers was insanely high and interest rates were low. Like a bunch of this activity is either bots or kids, and the latter isn't that easy to monetize.
Except it's hard to imagine a world where chatgpt is heads and shoulders over the other llms in capability. Google has no problem keeping up and let's not forget that China has state-sponsored programs for AI development.
And if/when they reach that point, the average consumer will see the ad as an irksome fly. That's it.
Except that I have switched to Gemini and not missed anything from OpenAI
> moment they start mixing ads into responses Ill stop using them
Do you currently pay for it?
I do pay for openAi Api but its a top up, my main usage is on free tier.
I tried to pay for Claude but they didn't accept my credit card for some reason.
I have local models working well, but they are a bit slow, my laptop is 5 years old, but eventually when I buy a new one Ill make the switch.
> Open models are good enough
Are they though? I have the best consumer hardware and can run most open models, and they are all unusable beyond basic text generation. I'm talking 90%+ hallucination rate.
Why do people always think that just because you have a lot of users it automatically translates to ad revenue? Yahoo has been one of the most trafficked site for decades and could never generate any reasonable amount of ad revenue.
The other side of the coin is that running an LLM will never be as cheap as search engine.
Really? You think that they are going to discover some magical algorithm that reduces the complexity of an LLM to a search?
> ads in the future.
It boggles my mind that people still think advertising can be a major part of the economy.
If AI is propping up the economy right now [0] how is it possible that the rest of the economy can possibly fund AI through profit sharing? That's fundamentally what advertising is: I give you a share of my revenue (hopefully from profits) in order to help increase my market share. The limit of what advertising spend can be is percent of profits minus some epsilon (for a functioning economy at least).
Advertising cannot be the lions share of any economy because it derives it's value from the rest of the economy.
Advertising is also a major bubble because my one assumption there (that it's a share of profits) is generally not the case. Unprofitable companies giving away a share of their revenue to other companies making those companies profitable is not sustainable.
Advertising could save AI if AI was a relatively small part of the US (or world) economy and could benefit by extracting a share of the profits from other companies. But if most your GDP is from AI how can it possibly cannibalize other companies in a sustainable way?
0. https://www.techspot.com/news/109626-ai-bubble-only-thing-ke...
If advertising helps high-quality / innovative products spread faster, it can power growth. Indeed, the rate of adoption of innovations seems a fairly critical input for growth. Advertising can speed such adoption.
You've run a false equivalency in your argument. Growth is not representative of the entire economy. The economy is, in aggregate, much more than tech - they have the biggest public companies which skews how people think. No exclusive sector makes up "most" of the economy, in fact the highest sector, which is finance only makes up 21% of the US economy.
https://www.statista.com/statistics/248004/percentage-added-...
> Growth is not representative of the entire economy
Our entire economy is based on debt, it cannot function without growth. This is demonstrated by the fact that:
> in fact the highest sector, which is finance only makes up 21% of the US economy
Every cent earned by the finance sector boils down from being derived from debt (i.e. growth has to pay it off). You just pointed out the largest sector of our economy relies on rapid growth, and the majority of growth right now is coming from AI. AI, therefore, cannot derive the majority of it's value by cannibalizing the growth of other sectors because no other sector has sufficient growth the fund both AI, itself and the debt that needs to be repaid to make the entire thing make sense.
US GDP is 30T so that revenue is less than 1% of it. But 1% of GDP us still eye popping amount. But remember in the non Google world that is split up into Yellow Pages and TV ads and etc. and possibly many ventures that were not possible because of lack of targeted ads didnt come to fruition.
I think your argument isn't exactly right.
You can imagine a future world where producing real goods and services is ~free (AI compute infinite etc.)
In this world, the entire economy will be ~advertising only so you can charge people anything at all instead of giving it away for free.
If your revenue model is predicated on Star Trek-style communism, it's maybe not a very realistic model. I really don't think if producing things is essentially free that advertising will be a very big thing since it would be pointless.
There is also the IMO not exactly settled question of whether an advertiser is comfortable handing over its marketing to an AI.
Can any AI be sensibly and reliably instructed not to do product placement in inappropriate contexts?
They should be concerned with open weight models that don’t run on consumer hardware. The larger models from Qwen (Qwen Max) and ZLM (GLM and GLM air) perform not too far from Claude Sonnet 4 and GPT-5. ZLM offers a $3 plan that is decently generous. I can pretty much replace it over Sonnet 4 in Claude Code (I swear, Anthropic has been nerfing Sonnet 4 for people on the Pro plan).
You can run Qwen3-coder for free upto 1000 requests a day. Admittedly not state of the art but works as good of 5o-mini
I believe regular people will not change from chatGPT if it has some ads. I know people who use "alternative" wrappers that have ads because they aren't tech savvy, and I agree with the OP that this could be a significant amount of money We aren't 700 million people that use it.
Definitely don’t argue against that, once people get into a habit of using something, it takes quite a bit to get away from it. Just that an American startup can literally run ZLM models themselves (open weight with permissive license) as a competitor to ChatGPT is pretty wild to think about
One of the feature of ChatGPT is that because there are no ads and you got straight to the information you need. If you add ads again it is all over again. You still have traction but it will not be so extraordinary and Google could do the same. OpenAI must have a difference from Google.
Google is tightly integrated vertically. It is going to be very hard to dislodge that.
Right now Gemini gives a youtube link in every response. That means they have already monetised their product using ads.
If they overnight were able to capture as much revenue per user as Meta (about 50 bucks a year) they'd bring in a bucket of cash immediately.
But selling that much ad inventory overnight - especially if they want new formats vs "here's a video randomly inserted in your conversation" sorta stuff - is far from easy.
Their compute costs could easily go down as technology advances. That helps.
But can they ramp up the advertising fast enough to bring in sufficient profit before cheaper down-market alternatives become common?
They lack the social-network lock-in effect of Meta, or the content of ESPN, and it remains to be seen if they will have the "but Google has better results than Bing" stickiness of Google.
A lot of that money comes from search result ads. Sometimes I click on an ad to visit a site I search for instead of scrolling to the same link in the actual search results. Many companies bid on keywords for their own name to prevent others from taking a customer who is interested in you.
You use to be a useful site and be at the top of the search results for some keywords and now you have to pay.
It's a lot more complicated, but yes advertising works.
There is a saying in India, whats seen is what is sold.
Not the hidden best product.
I work/have worked ecom adjacent for a long time. Ads absolutely work and the continued bewilderment of HN users to this reality will never cease to amaze me.
Yes, they do. Advertising works. "Free with ads" isn't really free because on average you'll end up spending more money than you would otherwise. You're also paying more than if it was a subscription because the producer has to create both the product and also advertise it.
What is OpenAI's moat? There's plenty of competitors running their own models and tools. Sure, they have the ChatGPT name, but I don't see them massively out-competing the entire market unless the future model changes drastically improve over the 3->4->5 trajectory.
Google got a massive leg up on the rest be having a better service. When Bing first came out, I was not impressed with what I got, and never really bothered going back to it.
Search quality isn't what it used to be, but the inertia is still paying dividends. That same inertia also applied to Google ads.
I'm not nearly so convinced OpenAI has the same leg up with ChatGPT. ChatGPT hasn't become a verb quite like google or Kleenex, and it isn't an indispensable part of a product.
Google has always been much better than the competition. Even today with their enshittification, competitors still aren’t as good.
The only thing that has changed that status quo is the rise of audiovisual media and sites closing up so that Google can’t index them, which means web search lost a lot of relevance.
google's moat is a combination of it being free and either being equal to or outright better than competitors
This! The cost of training models inevitably goes down over time as FLOPS/$ and PB/$ increases relentlessly thanks to the exponential gains of Moore's law. Eventually we will end up with laptops and phones being Good Enough to run models locally. Once that happens, any competitor in the space that decides to actively support running locally will have operating costs that are a mere fraction of OpenAI's current business.
The pop of this bubble is going to be painful for a lot of people. Being too early to a market is just as bad as being too late, especially for something that can become a commodity due to a lack of moat.
Bad news on the Moore's Law front.
https://cap.csail.mit.edu/death-moores-law-what-it-means-and...
The number of transistors per unit area is still increasing, it's just a little slower than it was and more expensive than it was.
And there are innovations that will continue the scaling that Moore's law predicts. Take die stacking as an example. Even Intel had internal studies 20 years ago that showed there are significant performance and power improvements to be had in CPU cores by using 2 layers of transistors. AMD's X3D CPUs are now using technology that can stack extra dies onto a base die, but they're using it in the most basic of ways (only for cache). Going beyond cache to logic, die stacking allows reductions of wire length because more transisters with more layers of metal fit in a smaller space. That in turn improves performance and reduces power consumption.
The semiconductor industry isn't out of tricks just yet. There are still plenty of improvements coming in the next decade, and those improvements will benefit AI workloads far more than traditional CPUs.
> increases relentlessly thanks to the exponential gains of Moore's law
Moore's so-called "law" hasn't been true for years.
Chinese AI defeated American companies because they spent effort to optimize the software.
You just said that everyone will be able to run a powerful AI locally and then you said this would lead to a pop of the bubble.
Well, which is it? That AI is going to have huge demands for chips that it is going to get much bigger or is the bubble going to pop? You can’t have both.
My opinion is that local LLMs will do a bulk of the low value interference such as your personal life mundane tasks. But cloud AI will be reserved for work and for advanced research purposes.
Just because a bubble pops on the economic front doesn't mean the sector goes away. Pets.com went bust a mere 10 months after going public, yet we're buying all kinds of products online in 2025 that we weren't in 2000. A bubble popping is about the disconnect between the forward looking assumptions about profitability by the early adopters in the space versus the actual returns once the speculation settles down and is replaced by hard data.
It's Sam.
From what I understand he was the only one crazy enough to demand hundreds of GPUs for months to get ChatGPT going. Which at the time sounded crazy.
So yeah Sam is the guy with the guts and vision to stay ahead.
Past performance is no guarantee of future results.
You might see Sam as a Midas who can turn anything into gold. But history shows that very few people sustain that pattern.
I think affiliation is much more likely to be a relevant revenue stream for them in the future. Instant checkouts would be a game changer in my view. Especially for upcoming generations, that don't have the habit of scrolling the open web to get their stuff done, but are native to LLMs.
Its a completely optional purchase, and there's no clear way for ads to be included without it muddying up the actual answer.
"The most popular brand of bread in America is........BUTTERNUT (AD)"
Its a sinkhole that they are destroying our environment for. Its not sustainable on a massive scale, and I expect to see Sam Altman join his 30 under 30 cohorts SBF and such eventually.
> google.com, youtube, chrome, android, gmail, google map etc
Of those, it's 50/50. The acquisitions were YT, Android, Maps. Search was obviously Google's original product, Chrome was an in-house effort to rejuvenate the web after IE had caused years of stagnation, and Gmail famously started as a 20% project.
There are of course criticisms that Google has not really created any major (say, billion-user) in-house products in the past 15 years.
By this point I imagine it's a novelty to find any code from the original acquisition in those products.
>> ... underestimating the money they will come from ads in the future.
I would like AI to focus on helping consumers discover the right products for their stated needs as opposed to just being shown (personalized) ads. As of now, I frequently have a hard time finding the things I need via Amazon search, Google, as well as ChatGPT.
Good luck with that. Every supermarket I've been in has those stupid baskets or racks of stuff blocking the aisle and their data must show that it gets people to buy a little more of that stuff even though it makes me quite resolved to never buy the shit they're forcing me to look at in order to go get the five things I really need.
>ChatGPT has more consumer trust than Google at this point
"There are increasing reports of people having delusional conversations with chatbots. This suggests that, for some, the technology may be associated with episodes of mania or psychosis when the seemingly authoritative system validates their most off-the-wall thinking. Cases of conversations that preceded suicide and violent behavior, although rare, raise questions about the adequacy of safety mechanisms built into the technology."
https://www.nytimes.com/2025/08/26/technology/chatgpt-openai...
> ChatGPT has more consumer trust than Google at this point
This is just HackerNews bias.
Everyone that has used ChatGPT (or any other LLM really) has already been burnt by being provided a completely false answer. On the contrary everyone understands that Google never claimed to provide a true answer, just links to potential answers.
The problem with this is that I have moved to Gemini with zero loss in functionality, and I’m pretty sure that Google is 100x better at ads than OpenAI.
>"Look at how much companies overspend on cloud just to not have to do IT work."
I think they are doing it for a different reasons. Some are legit like renting this supercomputer for a day and some are like everybody else is doing it. I am friends with the small company owner and they have sysadmin who picks nose and does nothing and then they pay a fortune to Amazon
Ok, but there will be users using even more insanely powerful datacenter computers that will be able to our-AI the local AI users.
Nvidia/Apple (hardware companies) are the only winner in this case
> They generated $4.3B in revenue without any advertising program
Also, their press release said:
> $2 billion spent on sales and marketing
I think they mean OpenAI showing ads from other companies to users, not buying ads themselves.
I think people are massively underestimating the money they will come from ads in the future.
They generated $4.3B in revenue without any advertising program to monetise their 700 million weekly active users, most of whom use the free product.
Google earns essentially all of its revenue from ads, $264B in 2024. ChatGPT has more consumer trust than Google at this point, and numerous ways of inserting sponsored results, which they’re starting to experiment with with the recent announcement of direct checkout.
The biggest concern IMO is how good the open weight models coming out of China are, on consumer hardware. But as long as OpenAI remains the go-to for the average consumer, they’ll be fine.