Comment by bgirard

the problem with the YouTube analogy is that media platforms have significant network affects that NN providers don't. OpenAI can't command a premium because every year that goes by the cost to train an equivalent model to theirs decreases.

Minor difference : YT does not cost literally a human trip to Mars and back to operate

The network effects aren't the same. All the viewers watch youtube because it has all the content, and all the creators post on youtube because it has all the viewers.

How can a model achieve this kind of stickiness? By "knowing you"? I don't think that's the same at all. Personally, one of the reasons I prefer Claude is that it doesn't pretend to know me. I can control the context better.

I suspect some of the downvoters hate the idea of ads, which is understandable.

But a lot of HN users use gmail, which has the same model. And there are plenty of paid email providers which seem far less popular (I use one). Ads didn't end up being a problem for most people provided they were kept independent of the content itself.

Being an insane brand means literally nothing if people can trivially switch to competitors, which they can.

There isn't even a tenth of enough money if you group together all of advertising. Like, the entire industry. Ads is a bad, bad plan that wont work. Advertising is also extremely overvalued. And even at it's overvalued price tag, it's nowhere near enough.

The best way to drive inference cost down right now is to use TPUs. Either that or invest tons of additional money and manpower into silicon design like Google did, but they already have a 10 year lead there.

Altman's main interest is Altman. ChatGPT will be acquihired, most people will be let go, the brand will become a shadow of its former self, and Altman will emerge with a major payday and no obvious dent in his self-made reputation as a leading AGIthinkfluenceretc.

I don't think ads are that easy, because the hard part of ads isn't taking money and serving up ad slop, it's providing convincing tracking and analytics.

As soon as ad slop appears a lot of customers will run - not all, but enough to make monetisation problematic.

as long as the business model is:

- users want the best/smartest LLM

- the best performance for inference is found by spending more and more tokens (deep thinking)

- pricing is based on cost per token

Then the inference providers/hyperscalers will take all of the margin available to app makers (and then give it to Nvidia apparently). It is a bad business to be in, and not viable for OpenAI at their valuation.

> But ChatGPT is an insane brand

I mean, so was netscape.

Good question. Salesforce does well because they provide the application layer to the data.

The WWW in the 1990s was an explosion of data. To the casual observer, the web-browser appeared to be the internet. But it wasn't and in itself could never make money (See Netscape). The internet was the data.

The people who build the infrastructure for the WWW (Worldcom, Nortel, Cisco, etc.) found the whole enterprise to be an extremely loss-making activity. Many of them failed.

Google succeeded because it provided an application layer of search that helped people to navigate the WWW and ultimately helped people make sense of it. It helped people to connect with businesses. Selling subtle advertising along the way is what made them successful.

Facebook did the same with social media. It allowed people to connect with other people and monetized that.

Over time, as they became more dominant, the advertising got less subtle and then the income really started to flow.

Salesforce is similar in that it helps businesses connect with and do business with each other. They just use a subscription model, rather than advertising. This works because the businesses that use it can see a direct link to it and their profitability.

Because they lock you in. ChatGPT has no lock in, in fact none of the LLMs do just because of how they work.

Salesforce doesn't make a good product, and certainly not the best product. It doesn't matter, you don't need to if you can convince idiots with money to invest in you. And then the switching cost is too much, too late.

That business model is a dying one and all the software companies know it. That's why Microsoft has spent the last 15 years opening up their ecosystems. As automation increases, switching cost decreases. You cant rely on it.

Because they locked-in a ton of enterprise customers and have an army of certified consultants who build custom solutions for you.

If it was 'just' a database it would never have got off the ground. It is obviously not a database; there is an application around it.

This assumes your model is static and never needs to be improved or updated.

Inference is cheap because the final model, despite its size, is ridiculously less resource intensive to use than it is to produce.

ChatGPT in its latest form isn't bad by any means, but it is falling behind. And that requires significant overhead, both to train and to iterate on model architecture. It is often a variable cost as well.

It's not the open models that suck, it's the infrastructure around them. None of current "open weights providers" have:

   - good tools for agentic workflows
   - no tools for context management
   - infrastructure for input token caching

Right I am sure some find it is worth 5-10x the cost.

The challenge is that if the numbers are accurate they need 5-10x to break even on inference compute costs, before getting into training costs and all the other actual overhead of running a company like compensation.

Will everyone be willing to pay 5-10x? Probably no.

Will half of users pay 10-20x? Or a quarter pay 20x++?

Or we end up with ads … which already seem to be in motion

95% of ChatGPT users aren't paying customers, if they won't pay $10 per month, there's zero chance of them paying $100 or $500.

That's not to say that there aren't many, like you, for whom $500 is a perfectly good deal, there's just not nearly enough for OpenAI to ever turn a profit.

I mean Claude is good for business use-cases, other than that it's completely censored cuck garbage and the CEO is worse than the pope. With Grok you can actually roleplay without it wagging its finger at you. OH MY GOSH YOU SAID BOOB!

Normies literally see no difference between GPT and Claude, just that Claude is much more expensive and CEO is even more of a dummie than Altman.