STOCK PHOTO | Image by Gerd Altmann from Pixabay
ChatGPT, the new chatbot on everyone’s lips in Silicon Valley, can spit out haikus, crack jokes in Italian, and could soon be the scourge of teachers everywhere faced with fake essays created by AI-assisted technology to be generated.
But one question it can’t fully answer is this: How will OpenAI make money?
The research organization, co-founded by Elon Musk and investor Sam Altman and owned by Microsoft Corp. funded with $1 billion expects their business to grow.
Three sources briefed on OpenAI’s recent pitch to investors said the organization expects $200 million in revenue next year and $1 billion by 2024.
The forecast, first reported by Reuters, shows how some in Silicon Valley are betting that the underlying technology will go well beyond splashy and sometimes flawed public demos.
OpenAI was last valued at $20 billion in a secondary stock sale, one of the sources said. The startup has already inspired competitors and companies building applications on top of its generative AI software, which includes image maker DALL-E 2. OpenAI charges developers who license its technology about a cent or a little more to generate 20,000 words of text and about 2 cents to create an image from a written request, according to its website.
A spokesman for OpenAI declined to comment on its finances and strategy. The company, which began releasing commercial products in 2020, has said its mission remains to advance AI safely for mankind.
As a taste of what’s to come, startups like Synthesia and Jasper that have relied on OpenAI’s technology have persuaded Fortune 500 companies to use their tools for video creation or AI copywriting, according to their websites . OpenAI has also garnered attention as an AI provider and potential competitor to Google Search, with ChatGPT having answered queries for more than 1 million users to date.
Microsoft, which provides OpenAI capital and computing power for its software, is a beneficiary. When asked about ChatGPT and whether Microsoft sees such technology as experimental or strategic, its president Brad Smith told Reuters that AI has advanced faster than many predicted.
“We will see progress in 2023 that people would have expected in 2033 two years ago. This will be extremely important not only for the future of Microsoft, but for the future of everyone,” he said in an interview this week.
Some investors expressed skepticism. Certain big venture capital firms have continued to support OpenAI this year, wondering if it could warrant a higher valuation or compete with rivals like Google, which is owned by Alphabet Inc, sources familiar with its fundraising attempt and not investing said.
A capped profit structure that OpenAI created in 2019 also presented an unusual constraint on venture capital. OpenAI wanted to protect its mission by capping backers’ returns to 100x their investment or less in the future.
Others can double. Microsoft has been trying to increase its stake this year, two other sources told Reuters, and the Wall Street Journal had previously reported. His hope is to boost business with Microsoft’s cloud as more companies adopt AI.
ChatGPT is based on what is called a large language model, which is trained on text data so that it can answer prompts like a human. A similarly powerful technology that Google has been developing and testing closely with users led one of its engineers earlier this year to state that the software is sentient.
The reality is far from that, say many scientists. ChatGPT’s responses can sometimes be inaccurate or inappropriate, although it is designed to reject hateful requests and improve through feedback. OpenAI warns users ChatGPT “may occasionally produce harmful instructions or biased content”.
The potential to generate erroneous responses is one of the reasons a big player like Google has tightly monitored public access, fearing that chatbots could harm users and damage its reputation. Google declined to comment.
The caution has created a void that startups have tried to fill. A company called Cohere, which is partly run by ex-Googlers, is working on commercial products after a $125 million fundraiser led by Tiger Global in February. Another, Adept, announced a $65 million raise in April, and Stability AI announced $101 million in funding after releasing its text-to-image generator in August.
Among the applications built on top of OpenAI is Jasper, which claims to have attracted 80,000 marketers to design ads, emails, blogs or other content with its software. The fast-growing company is expected to double its revenue to about $80 million this year, a source familiar with the matter told Reuters. The CEO did not comment on the number.
Gil Elbaz, co-founder of TenOneTen Ventures, said marketing is one of the clearest lines of business for today’s chatbots. CarMax Inc., for example, has used OpenAI over Microsoft’s cloud to create thousands of summaries of customer reviews for used cars it markets, according to a case study on Microsoft’s website.
Victor Riparbelli, CEO of text-to-video startup Synthesia, said money has been “in a lot of the more boring use cases” so far.
His London-based company has more than 20,000 customers, including Amazon.com Inc., who use his software, which can create corporate training and product marketing videos, although the long-term goal is to produce Hollywood-quality AI content, he said. Amazon confirmed the use of the technology.
Such startups risk that OpenAI or Big Tech companies discover and copy lucrative applications, which is why Synthesia has developed its key software in-house. At the same time, application developers could gain financially if technology like OpenAI’s becomes a commodity, said Alan Cowen, chief executive of research startup Hume AI and a former Google researcher.
For now, OpenAI must determine how to sustain ChatGPT while bearing what its CEO Altman has described as “frightening” operational costs.
“I don’t think OpenAI intended to make a business out of ChatGPT. I think it acts as a demo… and a way to gather human feedback for free,” said Mr. Cowen. “Usage grew much faster than expected, so they are now considering monetization.” – Reuters