With ChatGPT, they have a significant advantage over the competition, but it might not be enough to compete with the likes of Google, Meta, and the others. Just recently, Google rolled out an update for Bard, their new artificial intelligence (AI) system for online searches and gathering information. This new version comes just two months after the last update, showing how fast Google is progressing in the AI sector, which is currently dominated by ChatGPT, the most famous and widely used system.
OpenAI, the company behind ChatGPT, has gained a considerable advantage over Google and other competitors, attracting interest and significant investments. For much of 2023, the talk in the technology world has been focused on ChatGPT and the success of OpenAI. There has been speculation about its rapid growth and the possibility of becoming a new “Big Tech” company, joining the ranks of Alphabet (Google’s parent company), Meta, Microsoft, and Amazon.
Predicting the success of companies in Silicon Valley can be relatively easy or extremely difficult depending on the period and economic cycles. Some companies achieve massive success quickly, only to fail just as fast, resulting in significant losses for investors. In other cases, startups start off slow but gradually emerge, finding better structure and resilience in a highly competitive environment. Establishing oneself in a sector dominated by enormous multi-domain companies is not an easy task, and it is one of the challenges facing OpenAI.
ChatGPT has been open to everyone for almost a year and is used by around 180 million people per month. While this number is slightly lower than the 210 million users it reached in May, it still exceeds the usage of competing systems like Bard, despite Google’s established presence and near monopoly in online searches in the Western world. Anyone can register and experience ChatGPT’s capabilities based on the GPT-3.5 system, but a subscription is required to access the version 4 (GPT stands for Generative Pre-trained Transformer, a distinct machine learning approach).
The development of GPT-4 cost OpenAI approximately $100 million, much more than the previous version. This raises questions about the sustainability of OpenAI’s current business model based on rapid system innovation. The field evolves rapidly, and OpenAI’s leaders do not want to risk falling behind. However, finding the right balance is not simple.
OpenAI is a relatively young company, founded in 2015 by a group of entrepreneurs, including Sam Altman, the current CEO, and billionaire Elon Musk. The project was initially a non-profit initiative to develop a general artificial intelligence system capable of reasoning, learning concepts, processing information, and performing any task like a human being. The idea of utilizing GPT models seemed promising, and the non-profit entity created a commercial company called OpenAI for investments, revenue, and business initiatives.
In a few years, OpenAI managed to secure significant investments, attracting attention from major companies in the tech industry, particularly due to the progress made with ChatGPT. The company has raised $14 billion in investments to date, with Microsoft’s investment estimated to be around $13 billion. OpenAI’s close ties with one of the largest computer companies globally have provided access to necessary cloud services for developing their AI systems. Simultaneously, Microsoft can integrate these new technologies into its core products such as Bing and Office productivity programs.
Recent information suggests that SoftBank, a major Japanese technology investment company, is also showing interest in OpenAI. This potential involvement could provide OpenAI with additional financial resources, but analysts believe the company needs to demonstrate a financially sustainable business model. Altman himself has referred to the commercial initiatives his company is pursuing on multiple occasions.
In addition to offering ChatGPT as is, OpenAI has started providing dedicated services tailored to specific companies’ needs. Restricted AI systems are better suited for tasks like financial analysis or workflow management in large enterprises. Furthermore, these companies can further customize the AI systems provided by OpenAI using the developer tools made available.
OpenAI recently announced its first developer conference, scheduled for November 6th in San Francisco, California. The conference will showcase the latest updates related to ChatGPT and introduce new developer tools for building new functionalities using OpenAI’s AI systems. This event will place OpenAI among the many leading technology companies that organize similar conferences, such as Microsoft, Apple, Google, and Facebook. November’s conference will be an important opportunity for OpenAI to demonstrate its plans to compete within the Big Tech landscape.
As reported by The Economist, OpenAI has also started taking costs and revenues more seriously. GPT-4 is developed with a different and more modular approach compared to the previous version. Instead of using a single massive model that requires more resources to operate, GPT-4 consists of 16 smaller models, using only the necessary ones for specific tasks. OpenAI’s systems consume a significant amount of processors and electricity, and the company is working to reduce these costs. The upcoming version, GPT-4.5, is expected to be even more optimized for lower consumption.
The substantial operating costs may deter potential competitors from emerging, as not all major tech companies can afford them. Limited competition means fewer opportunities for customers to switch providers, especially considering the risks associated with transferring sensitive data required to train AI-based services.
Thanks to these factors and the success of ChatGPT, OpenAI has been able to establish its pricing for enterprise customers without much competition. However, the arrival of alternative solutions offered by companies that already have a strong presence in enterprise services, such as Google with its Gemini model, could change the landscape. Microsoft’s investment in OpenAI positions them as both an investor and a competitor, as they have extensive access to OpenAI’s systems and can offer dedicated services in the enterprise market.
It is not guaranteed that OpenAI will achieve the same level of success as Google in online search, Meta in social networks, or Amazon in e-commerce. These companies have gradually grown over time, sometimes taking years before becoming profitable and reaping the benefits of their expansion. Whether OpenAI can replicate this remains uncertain, especially as being the foremost company in a sector…