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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 al

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.

ivan_gammel 10mo ago
>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 10mo ago
  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.
  - ivan_gammel 10mo ago
    Do Oracle, SAP or Walmart invest in their own models or they build integrations? There are lots of companies which don’t have other options but to work with 3rd party LLM vendors. OpenAI, Anthropic and Mistral are better positioned for this than others.
    - hobofan 10mo ago
      A large portion of those customers buy those models from their preexisting cloud vendors: AWS, Azure, GCP. The customers are also price sensitive and are for many use-cases largely fine with last-generation model performance if that means they are cheaper. With that, there is little moat for the model creators, forcing a race to the bottom for model licensing, and the biggest chunk of the profit being captured by the cloud providers.
    - throwway120385 10mo ago
      Oracle, SAP, and Walmart already have teams of people managing the data they have in-house. I find it hard to believe that those people can't pivot to working with an in-house LLM under the right leadership.
      - ivan_gammel 10mo ago
        Data landlords have no reason to invest in their own models when they can license their content to all vendors and offer integrations with them. Their business models are enhanced by AI, not threatened by it. For Google and Meta it’s different: they offer entry points to data and chat apps are direct competitors. So chat apps with good integrations can be as big as largest ERPs, for example.
vb-8448 10mo ago
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
- jimkleiber 10mo ago
  It's already shifting. I know someone who used to do SEO and is now marketing how to get in llm results.
- javier2 10mo ago
  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.
  - dboreham 10mo ago
    I use it for gift suggestions. So they could easily add affiliate links on the page.
- liamconnell 10mo ago
  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.
  - 10mo ago
kristianc 10mo ago
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 10mo ago
> - 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.
- mattmanser 10mo ago
  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 10mo ago
  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.
- liamconnell 10mo ago
  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.
9cb14c1ec0 10mo ago
> 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.
holden_nelson 10mo ago
> 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.
- aylmao 10mo ago
  > 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.
  - famouswaffles 10mo ago
    >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. IG reels never became as popular as Tiktok and did basically nothing nothing to peel users away from Tiktok. For a long time, it was a meme that IG reels were just copy pasted tiktok content. Similarly, Meta's LLMs are used so little they honestly don't even register, despite being stuffed into everything they own, apps with billions and billions of users. Gemini is doing well but it's still a very very distant 2nd, despite being automatically downloaded and nudged in android phones, a platform with billions of users. Microsoft is by far the biggest player in consumer laptops, with edge and bing being the default options. So why can't they come even close to chrome and google ? Time and time again, we've been shown. You can copy all you want, you can even shove it into the faces of your billions of users and find use for it. Doesn't mean you'll beat the market leader. You'll rarely beat market leaders just by copying them. ChatGPT is the 5th most visited site on the planet. No other Consumer LLM service is remotely close, regardless of how many billions of users the entrenched players are shoving their copies into.
danpalmer 10mo ago
> 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 10mo ago

>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 10mo ago
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.
- ivan_gammel 10mo ago
  Do Oracle, SAP or Walmart invest in their own models or they build integrations? There are lots of companies which don’t have other options but to work with 3rd party LLM vendors. OpenAI, Anthropic and Mistral are better positioned for this than others.
  - hobofan 10mo ago
    A large portion of those customers buy those models from their preexisting cloud vendors: AWS, Azure, GCP. The customers are also price sensitive and are for many use-cases largely fine with last-generation model performance if that means they are cheaper. With that, there is little moat for the model creators, forcing a race to the bottom for model licensing, and the biggest chunk of the profit being captured by the cloud providers.
  - throwway120385 10mo ago
    Oracle, SAP, and Walmart already have teams of people managing the data they have in-house. I find it hard to believe that those people can't pivot to working with an in-house LLM under the right leadership.
    - ivan_gammel 10mo ago
      Data landlords have no reason to invest in their own models when they can license their content to all vendors and offer integrations with them. Their business models are enhanced by AI, not threatened by it. For Google and Meta it’s different: they offer entry points to data and chat apps are direct competitors. So chat apps with good integrations can be as big as largest ERPs, for example.

vb-8448 10mo ago

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

jimkleiber 10mo ago
It's already shifting. I know someone who used to do SEO and is now marketing how to get in llm results.
javier2 10mo ago
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.
- dboreham 10mo ago
  I use it for gift suggestions. So they could easily add affiliate links on the page.
liamconnell 10mo ago
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.
- 10mo ago

kristianc 10mo ago

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 10mo ago

> - 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.

mattmanser 10mo ago
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 10mo ago
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.
liamconnell 10mo ago
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.

9cb14c1ec0 10mo ago

> 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.

holden_nelson 10mo ago

> 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.

aylmao 10mo ago
> 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.
- famouswaffles 10mo ago
  >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. IG reels never became as popular as Tiktok and did basically nothing nothing to peel users away from Tiktok. For a long time, it was a meme that IG reels were just copy pasted tiktok content. Similarly, Meta's LLMs are used so little they honestly don't even register, despite being stuffed into everything they own, apps with billions and billions of users. Gemini is doing well but it's still a very very distant 2nd, despite being automatically downloaded and nudged in android phones, a platform with billions of users. Microsoft is by far the biggest player in consumer laptops, with edge and bing being the default options. So why can't they come even close to chrome and google ? Time and time again, we've been shown. You can copy all you want, you can even shove it into the faces of your billions of users and find use for it. Doesn't mean you'll beat the market leader. You'll rarely beat market leaders just by copying them. ChatGPT is the 5th most visited site on the planet. No other Consumer LLM service is remotely close, regardless of how many billions of users the entrenched players are shoving their copies into.

danpalmer 10mo ago

> 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.