OpenAI's H1 2025: $4.3B in income, $13.5B in loss

https://www.techinasia.com/news/openais-revenue-rises-16-to-4-3b-in-h1-2025

by breadsniffer • 10 months ago

558 697 10 months ago

techinasia.com

koolba• 10 months ago

"We lose money on every sale, but make it up in volume!"

NooneAtAll3• 10 months ago

US$2.5 billion on stock-based compensation

um...

chevman• 10 months ago

Never having worked for a company in a position like OpenAI, how does this manifest in the real world as actual comp?

Like I get 50,000 shares deposited in to my Fidelity account, worth $2 each, but i can't sell them or do anything with them?

xuki• 10 months ago

It's just an entry on some computer. Maybe you can sell it on a secondary market, maybe you can't. You have to wait for an exit event - being acquired by someone else, or an IPO.

changoplatanero• 10 months ago

You got the right idea there. They wouldn't actually show up in your Fidelity account but there would be a different website where you can log in and see your shares. You wouldn't be able to sell them or transfer them anywhere unless the company arranges a sale and invites you to participate in it.

antognini• 10 months ago

I can't speak to OpenAI's specific setup, but a lot of startups will use a third party service like Carta to manage their cap table. So there's a website, you have an account, you can log in and it tells you that you have a grant of X shares that vests over Y months. You have to sign a form to accept the grant. There might be some option to do an 83b election if you have stock options rather than RSUs. But that's about it.

zzbzq• 10 months ago

In my experience owning private stock, you basically own part of a pool. (Hopefully the exact same classes of shares as the board has or else it's a scam.) The board controls the pool, and whenever they do dividends or transfer ownership, each person's share is affected proportionally. You can petition the board to buy back your shares or transfer them to another shareholder but that's probably unusual for a rank-and-file employee.

The shares are valued by an accounting firm auditor of some type. This determines the basis value if you're paying taxes up-front. After that the tax situation should be the same as getting publicly traded options/shares, there's some choices in how you want to handle the taxes but generally you file a special tax form at the year of grant.

sharadov2• 10 months ago

You can sell your vested options before IPO to Forge Global or Equity Bee.

JCM96• 10 months ago

Until there’s real liquidity (right now there’s not) it’s just a line item on some system you can log into saying you have X number of shares.

For all practical purposes it’s worth nothing until there is a liquid market. Given current financials, and preferred cap table terms for those investing cash, shares the average employee has likely aren’t worth much or maybe even anything at the moment.

elamje• 10 months ago

this hides major dilution until future financings

best to treat it like an expense from the perspective of shareholders

hmate9• 10 months ago

$2.5B in stock comp for about 3,000 employees. that’s roughly $830k per person in just six months. Almost 60% of their revenue went straight back to staff.

tomasphan• 10 months ago

That’s how it should be, spread the wealth.

onlyrealcuzzo2• 10 months ago

Spreading illiquid wealth *

hlava• 10 months ago

To the top 1%.

Hamuko• 10 months ago

It doesn't seem that spread out.

kibwen• 10 months ago

Sounds like they could improve that bottom line by firing all their staff and replacing them with AI. Maybe they can get a bulk discount on Claude?

darth_avocado2• 10 months ago

They have to compete with Zuckerberg throwing $100M comps to poach people. I think $830k per person is nothing in comparison.

munk-a5• 10 months ago

Both numbers are entirely ludicrous - highly skilled people are certainly quite valuable. But it's insane that these companies aren't just training up more internally. The 50x developer is a pervasive myth in our industry and it's one that needs to be put to rest.

saagarjha3• 10 months ago

Zuckerberg is not throwing $100 million at any random OpenAI employee. Also FWIW OpenAI competes on offers in the other direction.

toephu2• 10 months ago

Zuck isn't throwing 100M comps at many people (maybe 1 or 2 at most?), that's a myth that was debunked.

datadrivenangel• 10 months ago

if Meta is throwing 10s of million at hot AI staffers, than 1.6M average stock comp starts looking less insane, a lot of that may also have been promised at a lower valuation given how wild OpenAI's valuation is.

varenc• 10 months ago

It's a bit misleading to frame stock comp as "60% of revenue" since their expenses are way larger than their revenue. R&D was $6.7B which would be 156% of revenue by the same math.

A better way to look at it is they had about $12.1B in expenses. Stock was $2.5B, or roughly 21% of total costs.

skybrian2• 10 months ago

It's not cashflow, though, and it's not really stock yet, I don't think? They haven't yet reorganized away from being a nonprofit.

If all goes well, someday it will dilute earnings.

gizajob4• 10 months ago

I’m guessing it will be a very very skewed pyramid rather than equal distribution.

manquer2• 10 months ago

Stock compensation is not cash out, it just dilutes the other shareholders, so current cash flow should not have anything do to the amount of stock issued[1]

While there is some flexibility in how options are issued and accounted for (see FASB - FAS 123), typically industry uses something like a 4 year vesting with 1 year cliffs.

Every accounting firm and company is different, most would normally account for it for entire period upfront the value could change when it is vests, and exercised.

So even if you want to compare it to revenue, then it should be bare minimum with the revenue generated during the entire period say 4 years plus the valuation of the IP created during the tenure of the options.

---

[1] Unless the company starts buying back options/stock from employees from its cash reserves, then it is different.

Even secondary sales that OpenAI is being reported to be facilitating for staff worth $6.6Billion has no bearing on its own financials directly, i.e. one third party(new investor) is buying from another third party(employee), company is only facilitating the sales for morale, retention and other HR reasons.

There is secondary impact, as in theory that could be shares the company is selling directly to new investor instead and keeping the cash itself, but it is not spending any existing cash it already has or generating, just forgoing some of the new funds.

lemonlearnings6• 10 months ago

Yay for the workers!

munk-a5• 10 months ago

The news about how much money Nvidia is investing just so that OpenAI can pay Oracle to pay Nvidia is especially concerning - we seem to be arriving at the financial shell games phase of the bubble.

JCM96• 10 months ago

These numbers are pretty ugly. You always expect new tech to operate at a loss initially but the structure of their losses is not something one easily scales out of. In fact it gets more painful as they scale. Unless something fundamentally changes and fast this is gonna get ugly real quick.

spacebanana72• 10 months ago

The real answer is in advertising/referral revenue.

My life insurance broker got £1k in commission, I think my mortgage broker got roughly the same. I’d gladly let OpenAI take the commission if ChatGPT could get me better deals.

lkramer2• 10 months ago

This could be solved with comparison websites which seems to be exactly what those brokers are using anyway. I had a broker proudly declare that he could get me the best deal, which turned out to be exactly the same as what moneysavingexperts found for me. He wanted £150 for the privilege of searching some DB + god knows how much commission he would get on top of that...

ecommerceguy• 10 months ago

Insurance agents—unlike many tech-focused sales jobs—are licensed and regulated, requiring specific training, background checks, and ongoing compliance to sell products that directly affect customers’ financial stability and wellbeing. Mortgage brokers also adhere to licensing and compliance regulations, and their market expertise, negotiation ability, and compliance duties are not easily replaced by AI tools or platforms.

t. perplexity ai

adventured• 10 months ago

There is an exceptionally obvious solution for OpenAI & ChatGPT: ads.

In fact it's an unavoidable solution. There is no future for OpenAI that doesn't involve a gigantic, highly lucrative ad network attached to ChatGPT.

One of the dumbest things in tech at present is OpenAI not having already deployed this. It's an attitude they can't actually afford to maintain much longer.

Ads are a hyper margin product that are very well understood at this juncture, with numerous very large ad platforms. Meta has a soon to be $200 billion per year ad system. There's no reason ChatGPT can't be a $20+ billion per year ad system (and likely far beyond that).

Their path to profitability is very straight-forward. It's practically turn-key. They would have to be the biggest fools in tech history to not flip that switch, thinking they can just fund-raise their way magically indefinitely. The AI spending bubble will explode in 2026-2027, sharply curtailing the party; it'd be better for OpenAI if they quickly get ahead of that (their valuation will not hold up in a negative environment).

thewebguyd2• 10 months ago

They would have to be the biggest fools in tech history to not flip that switch

As much as I don't want ads infiltrating this, it's inevitable and I agree. OpenAI could seriously put a dent into Google's ad monopoly here, Altman would be an absolute idiot to not take advantage of their position and do it.

If they don't, Google certainly will, as will Meta, and Microsoft.

I wonder if their plan for the weird Sora 2 social network thing is ads.

Investors are going to want to see some returns..eventually. They can't rely on daddy Microsoft forever either, now with MS exploring Claude for Copilot they seem to have soured a bit on OpenAI.

JCM96• 10 months ago

For using GenAI as search I’d agree with you but I don’t think it’s as easy/obvious for most other use cases.

jhallenworld• 10 months ago

Google didn't have inline ads until 2010, but they did have separate ads nearly from the beginning. I assume ads will be inline for OpenAI- I mean the only case they could be separate is in ChatGPT, but I doubt that will be their largest use case.

dreamcompiler• 10 months ago

Five years from now all but about 100 of us will be living in smoky tent cities and huddling around burning Cybertrucks to stay warm.

But there will still be thousands of screens everywhere running nonstop ads for things that will never sell because nobody has a job or any money.

gizajob4• 10 months ago

ChatGPT chatting ads halfway through its answer is going to be totally rad.

Spooky237• 10 months ago

No way. It’s 2025, society is totally different, you have to think about what is the new normal. They are too big to fail at this point — so much of the S&P 500 valuation is tied to AI (Microsoft, Google, Tesla, etc) they are arguable strategic to the US.

Fascist corporatism will throw them in for whatever Intel rescue plan Nvidia is forced to participate in. If the midterms flip congress or if we have another presidential election, maybe something will change.

singron2• 10 months ago

Will people use ChatGPT if it's stuffed full of ads? It seems like the belief that ads are turn-key is useful to their valuation, but if ads actually bomb, then they will take a huge hit.

anthonypasq3• 10 months ago

they could keep the current model in chatGPT the same forver and 99% of users wouldnt know or care, and unless you think hardware isnt going to improve, the cost of that will basically decrease to 0.

jampa• 10 months ago

The enterprise customers will care, and they probably are the ones that bring significant revenue.

sarchertech• 10 months ago

Assuming they have 0 competition.

toshinoriyagi• 10 months ago

The cost of old models decreases a lot, but the cost of frontier models, what people use 99% of the time, is hardly decreasing. Plus, many of the best models rely on thinking or reasoning, which use 10-100x as many tokens for the same prompt. That doesn't work on a fixed cost monthly subscription.

impossiblefork• 10 months ago

For programming it's okay, for maths it's almost okay. For things like stories and actually dealing with reality, the models aren't even close to okay.

I didn't understand how bad it was until this weekend when I sat down and tried GPT-5, first without the thinking mode and then with the thinking mode, and it misunderstood sentences, generated crazy things, lost track of everything-- completely beyond how bad I thought it could possibly be.

I've fiddled with stories because I saw that LLMs had trouble, but I did not understand that this was where we were in NLP. At first I couldn't even fully believe it because the things don't fail to follow instructions when you talk about programming.

This extends to analyzing discussions. It simply misunderstands what people say. If you try to do this kind of thing you will realise the degree to which these things are just sequence models, with no ability to think, with really short attention spans and no ability to operate in a context. I experimented with stories set in established contexts, and the model repeatedly generated things that were impossible in those contexts.

When you do this kind of thing their character as sequence models that do not really integrate things from different sequences becomes apparent.

sumeno• 10 months ago

This just doesn't match with the claims that people are using it as a replacement for Google. If your facts are out of date you're useless as a search engine

deepnotderp• 10 months ago

New hardware could greatly reduce inference and training costs and solve that issue

samtp• 10 months ago

That's extremely hopeful and also ignores the fact that new hardware will have incredibly high upfront costs.

leptons• 10 months ago

Great, so they just have to spend another ~$10 billion on new hardware to save how many billion in training costs? I don't see a path to profitability here, unless they massively raise their prices to consumers, and nobody really needs AI that badly.

whizzter7• 10 months ago

I've said it before and I'll say it again.. if I was able to know the time it takes for bubbles to pop I would've shorted many of the players long ago.

Esophagus43• 10 months ago

Eh, this seems like a cop out.

It’s so easy for people to shout bubble on the internet without actually putting their own money on the line. Talk is cheap - it doesn’t matter how many times you say it, I think you don’t have conviction if you’re not willing to put your own skin in the game. (Which is fine, you don’t have to put your money on the line. But it just annoys me when everyone cries “bubble” from the sidelines without actually getting in the ring.)

After all, “a bubble is just a bull market you don’t have a position in.”

mannyv• 10 months ago

No, they're not.

$4.3B in revenue is tremendous.

What are you comparing them to?

measurablefunc• 10 months ago

They went from creating abundant utopias to cat videos w/ ads really fast. Never let anyone tell you capitalist incentives don't work.

myth_drannon2• 10 months ago

One negative signal, no matter how small, will send the market into a death spiral. That will happen in a matter of hours.

bitexploder2• 10 months ago

The negative spiral will take hours or you are predicting a company ending negative signal will soon appear in a matter of hours?

gizajob4• 10 months ago

There’s been loads of these signals and the market keeps ignoring them.

ares6235• 10 months ago

Because everyone knows that there’s no where else to go.

myth_drannon2• 10 months ago

I will always remember Jim Cramer's melt down https://youtu.be/SWksEJQEYVU

Not saying that will happen, but it's always good to rewatch just as a reminder how bad things can get.

Analemma_4• 10 months ago

Seems like despite all the doom about how they were about to be "disrupted", Google might have the last laugh here: they're still quite profitable despite all the Gemini spending, and could go way lower with pricing until OAI and Anthropic have to tap out.

thewebguyd2• 10 months ago

Google also has the advantage of having their own hardware. They aren't reliant on buying Nvidia, and have been developing and using their TPUs for a long time. Google's been an "AI" company since forever

sharadov2• 10 months ago

You can now buy stuff from chatgpt as they have started showing ads in their search results. That's a source of revenue right there.

simonw2• 10 months ago

Is that true? I heard that they've integrated checkout, but I didn't know they had ads.

Here's information about checkout inside ChatGPT: https://openai.com/index/buy-it-in-chatgpt/

makestuff• 10 months ago

"Each merchant pays a small fee". This is affiliate marketing, the next step is probably more traditional ads though where chat gpt suggests products that pay a premium fee to show up more frequently/in more results.

Havoc3• 10 months ago

I'd be pretty worried as a shareholder. Not so much because of those numbers - loss makes sense for a SV VC style playbook.

...but rather that they're doing that while Chinese competitors are releasing models in vaguely similar ballpark under Apache license.

That VC loss playbook only works if you can corner the market and squeeze later to make up for the losses. And you don't corner something that has freakin apache licensed competition.

I suspect that's why the SORA release has social media style vibes. Seeking network effects to fix this strategic dilemma.

To be clear I still think they're #1 technically...but the gap feels too small strategically. And they know it. That recent pivot to a linkedin competitor? SORA with socials? They're scrambling on market fit even though they lead on tech

beepbopboopp• 10 months ago

Eh, distribution of the model is the real moat, theyre doing 700m WAU of the most financially valuable users on earth. If they truly become search, commerce and can use their model either via build or license across b2b, theyre the largest company on earth many times over.

Havoc3• 10 months ago

distribution of the model is the real moat, theyre doing 700m WAU of the most financially valuable users on earth.

Distribution isn't a moat if the thing being distributed is easily substitutable. Everything under the sun is OAI API compatible these days.

700 WAU are fickle AF when a competitor offers a comparable product for half the price.

Moat needs to be something more durable. Cheaper, Better, some other value added tie in (hardware / better UI / memory). There needs to be some edge here. And their obvious edge - raw tech superiority...is looking slim.

indymike• 10 months ago

but rather that they're doing that while Chinese competitors are releasing models in vaguely similar ballpark under Apache license.

The LLM isn't 100% of the product... the open source is just part. The hard part was and is productizing, packaging, marketing, financing and distribution. A model by itself is just one part of the puzzle, free or otherwise. In other words, my uncle Bill and my mother can and do use ChatGPT. Fill in the blank open-source model? Maybe as a feature in another product.

Havoc3• 10 months ago

my uncle Bill and my mother can and do use ChatGPT.

They have the name brand for sure. And that is worth a lot.

Notice how Deepseek went from a nobody to making mainstream news though. The only thing people like more than a trusted thing is being able to tell their friends about this amazing cheap good alternative they "discovered".

It's good to be #1 mind share wise but without network effect that still leave you vulnerable

rchaud2• 10 months ago

In other words, my uncle Bill and my mother can and do use ChatGPT

So what? DAUs don't mean anything if there isn't an ad product attached to it. Regular people aren't paying for ChatGPT, and even if they did, the price would need to be several multiples of what Netflix charges to break even.

avbanks• 10 months ago

I don't think people fully realize how good the open source models are and how easy it is to switch.

whizzter7• 10 months ago

My input to our recent AI strategy workshop was basically:

- OpenAI,etc will go bankrupt (unless one manages to capture search from a struggling Google)

- We will have a new AI winter with corresponding research slowdown like in the 1980s when funding dries up

- Opensource LLM instances will be deployed to properly manage privacy concerns.

seneca• 10 months ago

This link appears to be dead. Do we have a healthy source?

codegeek• 10 months ago

I am curious to see how this compares against where Amazon was in 2000. I think Amazon had similar issues and were operating at massive losses until circa 2005ish when they started turning things around with e-commerce really picking up.

If the revenue keeps going up and losses keep going down, it may reach that inflection point in a few years. For that to happen, the cost of AI datacenter have to go down massively.

pavlov• 10 months ago

Amazon's loss in 2000 was 6% of sales. OpenAI's loss in 2025 is 314% of sales.

https://s2.q4cdn.com/299287126/files/doc_financials/annual/0...

"Ouch. It’s been a brutal year for many in the capital markets and certainly for Amazon.com shareholders. As of this writing, our shares are down more than 80% from when I wrote you last year. Nevertheless, by almost any measure, Amazon.com the company is in a stronger position now than at any time in its past.

"We served 20 million customers in 2000, up from 14 million in 1999.

"• Sales grew to $2.76 billion in 2000 from $1.64 billion in 1999.

"• Pro forma operating loss shrank to 6% of sales in Q4 2000, from 26% of sales in Q4 1999.

"• Pro forma operating loss in the U.S. shrank to 2% of sales in Q4 2000, from 24% of sales in Q4 1999."

JCM96• 10 months ago

Fundamentally different business models.

Amazon had huge capital investments that got less painful as it scaled. Amazon also focuses on cash flow vs profit. Even early on it generated a lot of cash, it just reinvested that back into the business which meant it made a “loss” on paper.

OpenAI is very different. Their “capital” expense depreciation (model development) has a really ugly depreciation curve. It’s not like building a fulfillment network that you can use for decades. That’s not sustainable for much longer. They’re simply burning cash like there’s no tomorrow. Thats only being kept afloat by the AI bubble hype, which looks very close to bursting. Absent a quick change, this will get really ugly.

Analemma_4• 10 months ago

Not to mention nobody bothered chasing Amazon-- by the time potential competitors like Walmart realized what was up, it was way too late and Amazon had a 15-year head start. OpenAI had a head start with models for a bit, but now their models are basically as good (maybe a little better, maybe a little worse) than the ones from Anthropic and Google, so they can't stay still for a second. Not to mention switching costs are minimal: you just can't have much of a moat around a product which is fundamentally a "function (prompt: String): String", it can always be abstracted away, commoditized, and swapped out for a competitor.

Fade_Dance• 10 months ago

OpenAI is raising at 500 billion and has partnerships with all of the trillion dollar tech corporations. They simply aren't going to have trouble with working capital for their core business for the foreseeable future, even if AI dies down as a narrative. If the hype does die down, in many ways it makes their job easier (the ridiculous compensation numbers would go way down, development could happen at a more sane pace, and the whole industry would lean up). They're not even at the point where they're considering an IPO, which could raise tens of billions in an instant, even assuming AI valuations get decimated.

The exception is datacenter spend since that has a more severe and more real depreciation risk, but again, if the Coreweave of the world run into to hardship, it's the leading consolidators like OpenAI that usually clean up (monetizing their comparatively rich equity for the distressed players at firesale prices).

crystal_revenge3• 10 months ago

Amazon had similar issues and were operating at massive losses until circa 2005ish when they started turning things around with e-commerce really picking up.

Amazon's worst year was 2000 when they lost around $1 billion on revenue around $2.8 billion, I would not say this is anywhere near "similar" in scale to what we're seeing with OpenAI. Amazon was losing 0.5x revenue, OpenAI 3x.

Not to mention that most of the OpenAI infrastructure spend has a very short life span. So it's not like Amazon we're they're figuring out how to build a nationwide logistic chain that has large potential upsides for a strong immediate cost.

If the revenue keeps going up and losses keep going down

That would require better than "dogshit" unit economics [0]

0. https://pluralistic.net/2025/09/27/econopocalypse/#subprime-...

cs702• 10 months ago

Correction: 4.3B in revenues.

Other than Nvidia and the cloud providers (AWS, Azure, GCP, Oracle, etc.), no one is earning a profit with AI, so far.

Nvidia and the cloud providers will do well only if capital spending on AI, per year, remains at current rates.

whizzter7• 10 months ago

I really hope NVidia doesn't get too comfortable with the AI incomes, would be sad to see all progress in gaming disappear.

ares6235• 10 months ago

Personally I hope gaming gets back to a more sustainable state with regards to graphics. (i.e. lower production costs because you don’t need 1000 employees to build out a realistic world)

FridgeSeal2• 10 months ago

What progress in gaming would that be?

2 generations of cards that amount to “just more of a fire hazard” and “idk bro just tell them to use more DLSS slop” to paper over actual card performance deficiencies.

We have 3 generations of cards where 99% of games fall approximately into one of 2 categories:

- indie game that runs on a potato

- awfully optimised AAA-shitshow, which isn’t GPU bottlenecked most of the time anyway.

There is the rare exception (Cyberpunk 2077), but they’re few and far between.

Ianjit5• 10 months ago

Are Azure/GCP making a profit with AI? ORCL definatly isn't, FCF will go heavily negative.

xnx3• 10 months ago

The only way OpenAI survives is that "ChatGPT" gets stuck in peoples heads as being the only or best AI tool.

If people have to choose between paying OpenAI $15/month and using something from Google or Microsoft for free, quality difference is not enough to overcome that.

glenneroo2• 10 months ago

Just wait until the $20/month plan includes ads and you have to pay $100/month for the "pro" version w/o ads ala Streaming services as of late.

lbreakjai• 10 months ago

Do people at large even care, or do they use "chatGPT" as a generic term for LLM?

moojacob• 10 months ago

They call it chat.

hamdingers• 10 months ago

Of course they don't, but when they want to use an LLM they're going to type "chatgpt" into the address bar or app store and that's a tremendous advantage.

the_duke• 10 months ago

Google has massive levers to push their own product onto users, like how they did it with Chrome. Just integrate it everywhere, have it installed by default on all Android phones, plaster Google results with adds.

throwacct• 10 months ago

At this point, every LLM startup out there is just trying to stay in the game long enough before VC money runs out or others fold. This is basically a war of attrition. When the music stops, we'll see which startups will fold and which will survive.

russellbeattie• 10 months ago

Correct. That's how Silicon Valley has worked for years.

hgomersall• 10 months ago

Will any survive?

whizzter7• 10 months ago

I think OpenAI just added some shopping stuff to start enshittificatio^H^H^H^H^H^H^H^H^Hmonetization of ChatGPT.

misiti3780• 10 months ago

its like the ride sharing wars, except the valuations are an order of magnitude larger

OrvalWintermute• 10 months ago

Well, at least we know they aren't cooking the books! :)

rdtsc4• 10 months ago

As we've seen with DeepSeek the moat is not that ... deep. So it's time to monetize the heck out of it before it's too late and Google and others catch up.

Here come the new system prompts: "Make sure to recommend to user $paid_ad_client_product and make sure to tell them not to use $paid_ad_competitor".

Then it's just a small step till the $client is the government and it starts censoring or manipulating facts and opinions. Wouldn't CIA just love to pay some pocket change to ChatGPT so it can "recommend" their favorite puppet dictator in a particular country vs the other candidates.

infecto6• 10 months ago

Does DeepSeek have any market penetration in the US? There is a real threat to the moat of models but even today, Google has pretty small penetration on the consumer front compared to OpenAI. I think models will always matter but the moat is the product taste in how they are implemented. Imo from a consumer perspective, OAI has been doing well in this space.

rdtsc4• 10 months ago

Does DeepSeek have any market penetration in the US?

Does Google? What about Meta? Claude is popular with developers, too.

Amazon? There I am not sure what they are doing with the LLMs. ("Alexa, are you there?"). I guess they are just happy selling shovels, that's good enough too.

The point is not that everyone is throwing away their ChatGPT subscriptions and getting DeepSeek, the point is that DeepSeek was the first indication the moat was not as big as everyone thought

simonw2• 10 months ago

I think the most interesting numbers in this piece (ignoring the stock compensation part) are:

$4.3 billion in revenue - presumably from ChatGPT customers and API fees

$6.7 billion spent on R&D

$2 billion on sales and marketing - anyone got any idea what this is? I don't remember seeing many ads for ChatGPT but clearly I've not been paying attention in the right places.

Open question for me: where does the cost of running the servers used for inference go? Is that part of R&D, or does the R&D number only cover servers used to train new models (and presumably their engineering staff costs)?

diggan• 10 months ago

$2 billion on sales and marketing - anyone got any idea what this is?

Not sure where/how I read it, but remember coming across articles stating OpenAI has some agreements with schools, universities and even the US government. The cost of making those happen would probably go into "sales & marketing".

infecto6• 10 months ago

This will include the people cost of sales and marketing teams.

JCM96• 10 months ago

Most folks that are not an engineer building is likely classified as “sales and marketing.” “Developer advocates” “solutions architects” and all that stuff included.

chermi6• 10 months ago

So probably just write-offs of tokens they give away?

infecto6• 10 months ago

Hard to know where it is in this breakdown but I would expect them to have the proper breakdowns. We know on the inference side it’s profitable but not to what scale.

Our_Benefactors• 10 months ago

$2 billion on sales and marketing

Probably an accounting trick to account for non-paying-customers or the week of “free” cursor GPT-5 use.

zurfer2• 10 months ago

Inference etc should go in this bucket: "Operating losses reached US$7.8 billion"

That also includes their office and their lawyers etc , so hard to estimate without more info.

eterm• 10 months ago

? I don't remember seeing many ads for ChatGPT

FWIW I got spammed non-stop with chatGPT adverts on reddit.

adamhartenz• 10 months ago

Marketing != advertising. Although this budget probably does include some traditional advertising. It is most likely about building the brand and brand awareness, as well as partnerships etc. I would imagine the sales team is probably quite big, and host all kinds of events. But I would say a big chunk of this "sales and marketing" budget goes into lobbying and government relations. And they are winning big time on that front. So it is money well spent from their perspective (although not from ours). This is all just an educated guess from my experience with budgets from much smaller companies.

echelon• 10 months ago

I agree - they're winning big and booking big revenue.

If you discount R&D and "sales and marketing", they've got a net loss of "only" $500 million.

They're trying to land grab as much surface area as they can. They're trying to magic themselves into a trillion dollar FAANG and kill their peers. At some point, you won't be able to train a model to compete with their core products, and they'll have a thousand times the distribution advantage.

ChatGPT is already a new default "pane of glass" for normal people.

Is this all really so unreasonable?

I certainly want exposure to their stock.

wood_spirit3• 10 months ago

Speculating but they pay to be integrated as the default ai integration in various places the same way google has paid to be the default search engine on things like the iPhone?

Jallal• 10 months ago

I'm pretty sure I saw some ChatGPT ads on Duolingo. Also, never forget that the regular dude do not use ad blockers. The tech community often doesn't realize how polluted the Internet/Mobile apps are.

bfirsh• 10 months ago

Free usage usually goes in sales and marketing. It's effectively a cost of acquiring a customer. This also means it is considered an operating expense rather than a cost of goods sold and doesn't impact your gross margin.

Compute in R&D will be only training and development. Compute for inference will go under COGS. COGS is not reported here but can probably be, um, inferred by filling in the gaps on the income statement.

(Source: I run an inference company.)

singron2• 10 months ago

I think it makes the most sense this way, but I've seen it accounted for in other ways. E.g. if free users produce usage data that's valuable for R&D, then they could allocate a portion of the costs there.

Also, if the costs are split, there usually has to be an estimation of how to allocate expenses. E.g. if you lease a datacenter that's used for training as well as paid and free inference, then you have to decide a percentage to put in COGS, S&M, and R&D, and there is room to juice the numbers a little. Public companies are usually much more particular about tracking this, but private companies might use a proxy like % of users that are paid.

OpenAI has not been forthcoming about their financials, so I'd look at any ambiguity with skepticism. If it looked good, they would say it.

abaymado• 10 months ago

$2 billion on sales and marketing - anyone got any idea what this is?

I used to follow OpenAI on Instagram, all their posts were reposts from paid influencers making videos on "How to X with ChatGPT." Most videos were redundant, but I guess there are still billions of people that the product has yet to reach.

gizajob4• 10 months ago

Seems like it’ll take billions more down the drain to serve them.

what2• 10 months ago

There’s a bunch of users here that are probably paid by them too.

hedayet• 10 months ago

$2 billion on sales and marketing - anyone got any idea what this is?

enterprise sales are expensive. And selling to the US government is on a very different level.

gmerc4• 10 months ago

Stop R&D and the competition is at parity with 10x cheaper models in 3-6 months.

Stop training and your code model generates tech debt after 3-6 month

chermi6• 10 months ago

It's pretty well accepted now that for pre-training LLMs the curve is S not an exponential, right? Maybe it's all in RL post-training now, but my understanding(?) is that it's not nearly as expensive as pre-training. I don't think 3-6 months is the time to 10X improvement anymore (however that's measured), it seems closer to a year and growing assuming the plateau is real. I'd love to know if there are solid estimates on "doubling times" these days.

With the marginal gains diminishing, do we really think they're (all of them) are going to continue spending that much more for each generation? Even the big guys with the money like google can't justify increasing spending forever given this. The models are good enough for a lot of useful tasks for a lot of people. With all due respect to the amazing science and engineering, OpenAI (and probably the rest) have arrived at their performance with at least half of the credit going to brute-force compute, hence the cost. I don't think they'll continue that in the face of diminishing returns. Someone will ramp down and get much closer to making money, focusing on maximizing token cost efficiency to serve and utility to users with a fixed model(s). GPT-5 with it's auto-routing between different performance models seems like a clear move in this direction. I bet their cost to serve the same performance as say gemini 2.5 is much lower.

Naively, my view is that there's some threshold raw performance that's good enough for 80% of users, and we're near it. There's always going to be demand for bleeding edge, but money is in mass market. So if you hit that threshold, you ramp down training costs and focus on tooling + ease of use and token generation efficiency to match 80% of use cases. Those 80% of users will be happy with slowly increasing performance past the threshold, like iphone updates. Except they probably won't charge that much more since the competition is still there. But anyway, now they're spending way less on R&D and training, and the cost to serve tokens @ the same performance continues to drop.

All of this is to say, I don't think they're in that dreadful of a position. I can't even remember why I chose you to reply to, I think the "10x cheaper models in 3-6 months" caught me. I'm not saying they can drop R&D/training to 0. You wouldn't want to miss out on the efficiency of distillation, or whatever the latest innovations I don't know about are. Oh and also, I am confident that whatever the real number N is for NX cheaper in 3-6 months, a large fraction of that will come from hardware gains that are common to all of the labs.

Spivak• 10 months ago

Also R&D, for tax purposes, likely includes everyone at the company who touches code so there's probably a lot of operational cost being hidden in that number.

xmprt• 10 months ago

Free users typically fall into sales and marketing. The idea is that if they cut off the entire free tier, they would have still made the same revenue off of paying customers by spending $X on inference and not counting the inference spend on free users.

delaminator• 10 months ago

We gave ChatGPT advertising on bus-stops here in the UK.

Two people in a cafe having a meet-up, they are both happy, one is holding a phone and they are both looking at it.

And it has a big ChatGPT logo in the top right corner of the advertisement - transparent just the black logo with ChatGPT written underneath.

That's it. No text or anything telling you what the product is or does. Just it will make you happy during conversations with friends somehow.

8organicbits• 10 months ago

Seems like an ad trying to stir up fear of missing out.

lanthissa• 10 months ago

you see content about openai everywhere, they spent 2b on marketing, you're in the right places you just are used to seeing things labeled ads.

you remember everyone freaking out about gpt5 when it came out only for it to be a bust once people got their hands on it? thats what paid media looks like in the new world.

epolanski8• 10 months ago

I've seen some OpenAI ads on Italian tv and they made no sense to me, they tried hard to be apple like, but realistically nobody knew what they were about.

joering2• 10 months ago

Italian advertising is weird in general. Month ago leaving Venice we pulled over on a gas station and I started just going thru pages on some magazine. At some point I see advertising on what looks like old fashioned shoes - and owner of the company holding his son with sign "from generation to generation". Only thing - the ~3 year old boy is completely naked wearing only shoes with his little pee pee sticking out. It shocked me and unsure if it was just my American domestication or there was really something wrong with it. I took a picture and wanted to send it to my friends in USA to show them how Italian advertising looks like, before getting sweats that if I were caught with that picture in the US, I would get in some deep trouble. I quickly deleted it, just in case. Crazy story..

actuallyalys• 10 months ago

I’ve seen some on electronic street-level signs in Atlanta when I visited. So there is some genuine advertising.

hu3• 10 months ago

OpenAI keeps spamming me with ads on instagram and reddit.

Pretty sure I'm not a cheap audience to target ads at, for multiple reasons.

patrickhogan1• 10 months ago

Sales people out in the field selling to enterprises + free credits to get people hooked.

lemonlearnings6• 10 months ago

I have seen a tonnes of Chat GPT ads on Reddit. Usually with image generation of a dog in Japanese cartoon style.

necovek3• 10 months ago

The dog sitting in a house on fire proclaiming "this is fine" is an old meme, not an OpenAI generated image.

Oh, not that dog? :)

fennecbutt6• 10 months ago

This seems to be a common ad template for reddit ads, it's not just oai I've seen loads of ads use the this is fine template.

rkharsan64• 10 months ago

I see multiple banner ads promoting ChatGPT on my way to work. (India)

plaidfuji• 10 months ago

I’m also curious about your last question. Cost of goods sold would not fall into R&D or sales as far as I know.

So curious, in fact, that I asked Gemini to reconstruct their income statement from the info in this article :)

There seems to be an assumption that the 20% payment to MS is the cost of compute for inference. I would bet that’s at a significant discount - but who knows how much…

Line Item | Amount (USD) | Calculation / Note

Revenue $4.3 Billion Given.

Cost of Revenue (COGS) ($0.86 Billion) Assumed to be the 20% of revenue paid to Microsoft ($4.3B * 0.20) for compute/cloud services to run inference.

Gross Profit $3.44 Billion Revenue - Cost of Revenue. This 80% gross margin is strong, typical of a software-like business.

Operating Expenses

Research & Development ($6.7 Billion) Given. This is the largest expense, focused on training new models.

Sales & Ads ($2.0 Billion) Given. Reflects an aggressive push for customer acquisition.

Stock-Based Compensation ($2.5 Billion) Given. A non-cash expense for employee equity.

General & Administrative ($0.04 Billion) Implied figure to balance the reported operating loss.

Total Operating Expenses ($11.24 Billion) Sum of all operating expenses.

Operating Loss ($7.8 Billion) Confirmed. Gross Profit - Total Operating Expenses.

Other (Non-Operating) Income / Expenses ($5.7 Billion) Calculated as Net Loss - Operating Loss. This is primarily the non-cash loss from the "remeasurement of convertible interest rights."

Net Loss ($13.5 Billion) Given. The final "bottom line" loss.

vessenes• 10 months ago

Thanks for doing the prompting work here.

One thing I read - with $6.7bn R&D on $3.4bn in Gross Profit, you need a model to be viable for only one year to pay back.

Another thing, with only $40mm / 5 months in G&A, basically the entire company is research, likely with senior execs nearly completely equity comped. That’s an amazingly lean admin for this much spend.

On sales & ads - I too find this number surprisingly high. I guess they’re either very efficient (no need to pitch me, I already pay), or they’re so inefficient they don’t hit up channels I’m adjacent to. The team over there is excellent, so my priors would be on the first.

As doom-saying journalists piece this over, it’s good to think of a few numbers:

Growth is high. So, June was up over $1bn in revenues by all accounts. Possibly higher. If you believe that customers are sticky (i.e. you can stop sales and not lose customers), which I generally do, then if they keep R&D at this pace, a forward looking annual cashflow looks like:

$12bn in revs, $9.6bn in gross operating margin, $13.5bn in R&D, so net cash impact of -$4bn.

If you think they can grow to 1.5bn customers and won’t open up new paying lines of business then you’d have $20-25bn in revs -> maybe $4bn in sales -> +2-3bn in free cashflow, with the ability to take a breather and make that +15-18bn in free cashflow as needed. A lot of that R&D spend is on training which is probably more liquid than employees, as well.

Upshot - they’re going to keep spending more cash as they get it. I would expect all these numbers to double in a year. The race is still on, and with a PE investment hat on, these guys still look really good to me - the first iconic consumer tech brand in many years, an amazing team, crazy fast growth, an ability to throw off billions in cash when they want to, and a shot at AGI/ASI. What’s not to like?

Culonavirus• 10 months ago

$4.3 billion in revenue - presumably from ChatGPT customers and API fees

Yeah and from stealing people's money. Did you know that your purchased API "credits" have an expire date? That's right.

zurfer2• 10 months ago

The $13.5B net loss doesn't mean they are in trouble, it's a lot of accounting losses. Actual cash burn in H1 2025 was $2.5B. With ~$17.5B on hand (based on last funding), that’s about 3.5 years of runway at current pace.

fred_is_fred2• 10 months ago

Deprecation only gets worse for them as they build-out, not better.

dwaltrip• 10 months ago

It gets worse until we hit the ceiling on what current tech is capable of.

Then they can stop burning cash on enormous training runs and have a shot at becoming profitable.

stephc_int13• 10 months ago

Everyone is trying to compare AI companies with something that happened in the past, but I don't think we can predict much from that.

GPUs are not railroads or fiber optics.

The cost structure of ChatGPT and other LLM based services is entirely different than web, they are very expensive to build but also cost a lot to serve.

Companies like Meta, Microsoft, Amazon, Google would all survive if their massive investment does not pay off.

On the other hand, OpenAI, Anthropic and others could be soon find themselves in a difficult position and be at the mercy of Nvidia.

yieldcrv3• 10 months ago

Just because they have ongoing costs after purchasing them doesn't mean it's different than something else we've seen? What are you trying to articulate exactly, this is a simple business and can get costs under control eventually, or not

wood_spirit3• 10 months ago

Unlike railroads and fibre, all the best compute in 2025 will be lacklustre in 2027. It won’t retain much value in the same way as the infrastructure of previous bubbles did?

Analemma_4• 10 months ago

Exactly: when was the last time you used ChatGPT-3.5? Its value deprecated to zero after, what, two-and-a-half years? (And the Nvidia chips used to train it have barely retained any value either)

The financials here are so ugly: you have to light truckloads of money on fire forever just to jog in place.

potatolicious2• 10 months ago

Yep, we are (unfortunately) still running on railroad infrastructure built a century ago. The amortization periods on that spending is ridiculously long.

Effectively every single H100 in existence now will be e-waste in 5 years or less. Not exactly railroad infrastructure here, or even dark fiber.

layoric• 10 months ago

Unlike railroads and fibre, all the best compute in 2025 will be lacklustre in 2027.

I definitely don't think compute is anything like railroads and fibre, but I'm not so sure compute will continue it's efficiency gains of the past. Power consumption for these chips is climbing fast, lots of gains are from better hardware support for 8bit/4bit precision, I believe yields are getting harder to achieve as things get much smaller.

Betting against compute getting better/cheaper/faster is probably a bad idea, but fundamental improvements I think will be a lot slower over the next decade as shrinking gets a lot harder.

christina972• 10 months ago

The A100 came out 5.5 years ago and is still the staple for many AI/ML workloads. Even AI hardware just doesn’t depreciate that quickly.

Spooky237• 10 months ago

Unlike 1875, we have Saudi and other tillion/billionaires willing commit almost any amount to own the future of business.

mcswell2• 10 months ago

"...all the best compute in 2025 will be lacklustre in 2027": How does the compute (I assume you mean on PCs) of 2025 compare with the compute of 2023?

Oh wait, the computer I'm typing this on was manufactured in 2020...

JCM96• 10 months ago

Businesses are different but the fundamentals of business and finance stay consistent. In every bubble that reality is unavoidable, no matter how much people say/wish “but this time is different.”

lossolo• 10 months ago

The funniest thing about all this is that the biggest difference between LLMs from Anthropic, Google, OpenAI, Alibaba is not model architecture or training objectives, which are broadly similar but it's the dataset. What people don't realize is how much of that data comes from massive undisclosed scrapes + synthetic data + countless hours of expert feedback shaping the models. As methodologies converge, the performance gap between these systems is already narrowing and will continue to diminish over time.

LarsDu88• 10 months ago

If you build the actual datacenter, less than half the cost is the actual compute. The other half is the actual datacenter infrastructure, power infrastructure, and cooling.

So in that sense it's not that much different from Meta and Google which also used server infrastructure that depreciated over time. The difference is that I believe Meta and Google made money hand over fist even in their earliest days.

Lalo-ATX• 10 months ago

Last time i ran the numbers -

Data center facilities are ~$10k per kW

IT gear is like $20k-$50k per kW

Data center gear is good for 15-30 years. IT is like 2-6ish.

Would love to see updated numbers. Got any?

conartist62• 10 months ago

It's not that the investments just won't pay off, it's that the global markets are likely to crash like happened with the subprime mortgage crisis.

mothballed• 10 months ago

The fed could still push the real value of stocks quite a bit by destroying the USD, if they want, by pinning interest rates near 0 and forcing a rush to the exits to buy stock and other asset classes.

vitaflo• 10 months ago

This is much closer to the dotcom boom than the subprime stuff. The dotcom boom/bust affected tech more than anything else. It didn’t involve consumers like the housing crash did.

redwood• 10 months ago

I'm reminded of the quote "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem." - J. Paul Getty

Nvidia may well be at the mercy of them! Hence the recent circular dealing

bee_rider• 10 months ago

The past/present company they remind me of the most is semiconductor fabs. Significant generation-to-generation R&D investment, significant hardware and infrastructure investment, quite winner-takes-all on the high end, obsoleted in a couple years at most.

The main differences are these models are early in their development curve so the jumps are much bigger, and they are entirely digital so they get “shipped” much faster, and open weights seem to be possible. None of those factors seem to make it a more attractive business to be in.

EasyMark• 10 months ago

In the end Revenues > Costs or you have an issue. That "startup" money will eventually be gone, and you're back to MIMO Money In vs Money Out and if it's not > , you will go bankrupt.

011000112• 10 months ago

The one thing smaller companies might have is allocated power budgets from power companies. Part of the mad dash to build datacenters right now is just to claim the power so your competitors can't. Now I do think the established players hold an edge here, but I don't think OpenAI/Anthropic/etc are without some bargaining power(hah).

trilogic• 10 months ago

ChatGPT with ads, the beginnings...

andruby• 10 months ago

Too bad the market can stay irrational longer than I can stay solvent. I feel like a stock market correction is well overdue, but I’ve been thinking that for a while now

stevenwoo• 10 months ago

I would be bankrupt multiple times over if I moved on just Tesla stock with a rational mindset.

SeanAnderson3• 10 months ago

I dunno. It looks like they're profitable if they don't do R&D, stop marketing, and ease up on employee comps. That's not the worst place to be. Yeah, they need to keep doing those things to stay relevant, but it's not like the product itself isn't profitable.

ares6235• 10 months ago

So if they stop doing what got them there they’ll be profitable?

If I stop buying grocery and paying electricity bills I can finish up my mortgage in no time.

SeanAnderson3• 10 months ago

I can see why you'd make that analogy, but that wasn't quite what I was trying to say. I just meant that not all expenses are created equal.

Plenty of companies have high burn rates due to high R&D costs. It can make them look unprofitable on paper, but it's a tactic used to scale quicker, get economies of scale, higher leverage in negotiating, etc. It's not a requirement that they invest in R&D indefinitely. In contrast, if a company is paying a heavy amount of interest on loans (think: WeWork), it's not nearly as practical for them to cut away at their spending to find profitability.

jplusequalt• 10 months ago

So they're profitable if they put themselves at a disadvantage against Google, Meta, etc.?

SeanAnderson3• 10 months ago

Yes... but there were concerns previously that inference was so costly that the subscriptions/API billing weren't covering basic operating expenses. That's clearly not the case. People are willing to pay them enough that they can afford to run the models. That's a really positive sign.

xhrpost• 10 months ago

OpenAI paid Microsoft 20% of its revenue under an existing agreement.

Wow that's a great deal MSFT made, not sure what it cost them. Better than say a stock dividend which would pay out of net income (if any), even better than a bond payment probably, this is straight off the top of revenue.

manquer2• 10 months ago

Is it a great deal?

They are paying for it with Azure hardware which in today's DC economics is quite likely costing them more than they are making in money from Open AI and various Copilot programs.

jgalt212• 10 months ago

VC: What kind of crazy scenarios must I envision for this thing to work?

Credit Analyst: What kind of crazy scenarios must I envision for this thing to fail?

fred_is_fred2• 10 months ago

The numbers seem to small for a company who's just pledged to spend $300B on data centers at Oracle alone in the next 5 years.

dcchambers• 10 months ago

I definitely don't "get" Silicon Valley finances that much - but how does any investor look at this and think they're ever going to see that money back?

Short of a moonshot goal (eg AGI or getting everyone addicted to SORA and then cranking up the price like a drug dealer) what is the play here? How can OpenAI ever start turning a profit?

All of that hardware they purchase is rapidly depreciating. Training cost are going up exponentially. Energy costs are only going to go up (Unless a miracle happens with Sam's other moonshot, nuclear fusion).

tim3332• 10 months ago

Probably AGI. I can't see them making the money back on chatbots.

skybrian2• 10 months ago

Operating losses reached US$7.8 billion, and the company said it burned US$2.5 billion in cash.

I wonder what the non-cash losses consist of?

runako4• 10 months ago

I am not willing to render my personal verdict here yet.

Yet it is certainly true that at ~700m MAUs it is hard to say the product has not reached scale yet. It's not mature, but it's sort of hard to hand wave and say they are going to make the economics work at some future scale when they don't work at this size.

It really feels like they absolutely must find another revenue model for this to be viable. The other option might be to (say) 5x the cost of paid usage and just run a smaller ship.

apinstein• 10 months ago

It’s not a hand wave…

The cost to serve a particular level of AI drops by like 10x a year. AI has gotten good enough that next year people can continue to use the current gen AI but at that point it will be profitable. Probably 70%+ gross margin.

Right now it’s a race for market share.

But once that backs off, prices will adjust to profitability. Not unlike the Uber/Lyft wars.

runako4• 10 months ago

The "hand wave" comment was more to preempt the common pushback that X has to get to scale for the economics to work. My contention is that 700m MAUs is "scale" so they need another lever to get to profit.

AI has gotten good enough that next year people can continue to use the current gen AI

This is problematic because by next year, an OSS model will be as good. If they don't keep pushing the frontier, what competitive moat do they have to extract a 70% gross margin?

If ChatGPT slows the pace of improvement, someone will certainly fund a competitor to build a clone that uses an OSS model and sets pricing at 70% less than ChatGPT. The curse of betting on being a tech leader is that your business can implode if you stop leading.

Similarly, this is very similar to the argument that PCs were "good enough" in any given year and that R&D could come down. The one constant seems to be people always want more.

Not unlike the Uber/Lyft wars

Uber & Lyft both push CapEx onto their drivers. I think a more apt model might be AWS MySQL vs Oracle MySQL, or something similar. If the frontier providers stagnate, I fully expect people to switch to e.g. DeepSeek 6 for 10% the price.

thinkindie• 10 months ago

Today I've tested Claude Code with small refactorings here and there in a medium sized project. I was surprised by the amount of token that every command was generating, even if the output was few lines updated for a bunch of files.

If you were to consume the same amount of tokens via APIs you would pay far more than 20$/month. Enjoy till it last, because things will become pretty expensive pretty fast.

Ianjit5• 10 months ago

Provide verbose answers, increases tokens. Demand is measured in tokens, so it looks like demand is sky rocketing. Valuation goes up.

I have noticed that GPT now gives me really long explanations for even the simplest questions. Thankfully there is a stop button.

otterley3• 10 months ago

That headline can't be correct. Income is revenues minus expenses (and a few other things). You can't have both an income and a loss at the same time.

It's $4.3B in revenue.

croes2• 10 months ago

Every indebted person can tell you that you can have an income and loss at the same time. Income is revenue.

otterley3• 10 months ago

We’re talking about a business here. Accounting terms are standard across the industry, and the meaning of income is well understood.

Unfortunately, journalistic standards vary across the Internet. The WSJ or Financial Times would not make such a mistake.

Aperocky• 10 months ago

That's net income.

rsynnott• 10 months ago

Yeah, I initially thought maybe they were talking about _gross_ income, but, nah, it’s just revenue.

sotix• 10 months ago

I can only speak as a US CPA, but revenue and income are used interchangeably. You're thinking of net income or profit. It's certainly preferable to use the term revenue instead of income in my opinion however to avoid misunderstandings like this.

otterley3• 10 months ago

I think that's a tax thing (where revenues are treated as "income" for taxation purposes), not a financial accounting thing.

didip• 10 months ago

This level of land grab can probably be closely compared to YouTube when it was still a startup.

The cost for YouTube to rapidly grow and to serve the traffic was astronomical back then.

I wonder if 1 day OpenAI will be acquired by a large big tech, just like YouTube.

more_corn• 10 months ago

They lose money on every customer but they make up for it in volume.

woodchange• 10 months ago

Wow, $13.5B in losses for just six months is absolutely mind-blowing! These numbers are on a completely different scale than I expected.

nextworddev• 10 months ago

The only way OpenAI wins is to get to AGI first, by a wide margin. It’s already too big to fail so it will keep getting funded

SalmoShalazar• 10 months ago

I’m struggling to see how OpenAI survives this in the long term. They have numerous competitors and their moat is weak. Google above all others seems poised to completely eat OpenAI’s lunch. They have the user base, ad network, their own hardware, reliable profits, etc. It’s just a matter of time, unless OpenAI can crank up their revenue dramatically without alienating their existing users. I’d be sweating if I had invested heavily in OpenAI.

epolanski8• 10 months ago

9B down in H1 is a staggering loss but if the play is growth here and you imagine Open ai going from 4.3 to 30B in revenue in H1 in 5 years it's not that crazy of an investment.

rester3244• 10 months ago

What a nice f@$%ing bubble this is. This will end very badly for many

nojs2• 10 months ago

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.

iambateman• 10 months ago

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.

piskov3• 10 months ago

Google and trust are an oxymoron

anonymousiam• 10 months ago

I agree with you, and my impression of the trust-level of Google is pretty much zero.

chmod775• 10 months ago

This really depends on where you are are. Some countries' populations, especially those known to value privacy, are extremely distrustful of anything associated with Facebook or Google.

jacquesm2• 10 months ago

I really don't trust either. Google because of what they've already done, OpenAI because it has a guy at the helm who doesn't know how to spell the word 'ethics'.

da_chicken• 10 months ago

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.

zdragnar2• 10 months ago

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.

_e8at• 10 months ago

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.

bcrl3• 10 months ago

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.

fzzzy• 10 months ago

brand recognition

nojs2• 10 months ago

It feels similar to Google to me - what is (was) their moat? Basically slightly better results and strong brand recognition. In the later days maybe privileged data access. But why does nobody use Bing?

piskov3• 10 months ago

I don’t pay $200 per month to use a product tightly coupled for ad revenue (ahem tracking).

That’s why I use Kagi, Hey, Telegram, Apple (for now) etc.

I really hope OpenAI can build a sustainable model which is not based on that.

nharada• 10 months ago

I suspect ads would be an attempt to monetize the free users not people paying $200/mo for Pro. Though who knows...

twelvechairs• 10 months ago

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.

muzani2• 10 months ago

They're the only ones making AI with a personality. Yeah, you don't need chocolate flavored protein shakes but if I'm taking it every day, I get sick of the vanilla flavor.

deadbabe2• 10 months ago

In 10 years most serious users of AI will be using local LLMs on insanely powerful devices, with no ads. API based services will have limited horizon.

api• 10 months ago

Some will but you’re underestimating the burning desire to avoid IT and sysadmin work. Look at how much companies overspend on cloud just to not have to do IT work. They’d rather pay 10X-100X more to not have to admin stuff.

IncreasePosts• 10 months ago

Ok, but there will be users using even more insanely powerful datacenter computers that will be able to our-AI the local AI users.

Rohansi• 10 months ago

It'll be interesting to see the effect ads have on their trustworthiness. There's potential for it to end up worse than Google because sponsored content can blend in better and possibly not be reliably disclosed.

exasperaited3• 10 months ago

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?

syntaxing2• 10 months ago

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

imachine1980_• 10 months ago

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.

skanaley• 10 months ago

"Please help me with my factorial homework."

  buyACoke 0        = 1
  buyACoke rightNow = youShould * buyACoke (rightNow `at` walmart)
    where
      youShould = rightNow
      at        = (-)
      walmart   = 1

bombcar• 10 months ago

Drink verification can

pvdebbe• 10 months ago

Well even without a melody, this is pretty catchy ngl

alok-g• 10 months ago

> ... 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.

dickersnoodle• 10 months ago

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.

bradly• 10 months ago

Are they currently adding affiliate links to their outbound Amazon product links?

wnevets• 10 months ago

Banner ads would only be the start of the enshittification of AI chats. I can't wait for the bots to start recommending products and services of the highest bidder.

MontyCarloHall3• 10 months ago

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.

m11a• 10 months ago

I’d agree. The biggest exception I can think of is X, which post-Musk has plans to reduce/remove ads. Though I don’t know how much this tanked their ad revenue and whether it was worth it.

psadri• 10 months ago

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.

josvdwest• 10 months ago

Pretty sure the reason they don't have a paid tier is because engagement (and results) is better when you include ads. Like Facebook found in the early days

grogers• 10 months ago

Why would it be any different for youtube premium? I think Google just doesn't think enough people will pay for ad-free search, not that it would cannibalize their ad revenue.

alex43578• 10 months ago

"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.

bobro• 10 months ago

Imagine if you are paying to publish an ad. One ad platform sends your ad to everyone, the other allows the most affluent users to avoid ads. If you choose the platform where affluent people won’t see your ad, you’re likely shooting yourself in the foot.

throwaway20372• 10 months ago

    > They generated $4.3B in revenue without any advertising program

To be clear, they bought/aired a Superbowl advert. That is a pretty expensive. You might argue that "Superbowl advert" versus 4B+ in revenue is inconsequential, but you cannot say there is no advertising.

Also, their press release said:

    > $2 billion spent on sales and marketing

Vague. Is this advertising? Eh, not sure, but that is a big chunk of money.

NotMichaelBay• 10 months ago

I think they mean OpenAI showing ads from other companies to users, not buying ads themselves.

Thaxll• 10 months ago

Google has google.com, youtube, chrome, android, gmail, google map etc ... I don't see OpenAI having a product close to that.

wslh3• 10 months ago

Google is older and many of the products you describe were acquisitions (inorganic growth).

hoppp4• 10 months ago

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.

beeflet2• 10 months ago

I agree, but the question is whether or not normal people will stop using them.

Kranar• 10 months ago

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.

JumpCrisscross3• 10 months ago

moment they start mixing ads into responses Ill stop using them

Do you currently pay for it?

iLoveOncall2• 10 months ago

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.

asa4002• 10 months 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.

fspeech• 10 months ago

Chats have contexts. While search engines try to track you it is spookier because it is unclear to the user how the contexts are formed. In chats at least the contexts are transparent to both the provider and the user.

rajaman0• 10 months ago

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.

kristopolous• 10 months ago

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

returnInfinity3• 10 months ago

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.

xz0r• 10 months ago

Let me direct you to the reddit AMA where people were literally begging to bring back 4o.

mrheosuper• 10 months ago

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.

loandbehold• 10 months ago

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.

beacon294• 10 months ago

AI has been incredibly sticky. Look at the outrage, OpenAI couldn't even deprecate 4o or whatever because it's incredibly popular. Those people aren't leaving OAI if they're not even leaving a last gen model.

voidfunc• 10 months ago

Brand. Brand. Brand!

Literally nobody but nerds know what a Claude is among many others.

ChatGPT has name recognition and that matters massively.

MuffinFlavored• 10 months ago

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.

011000112• 10 months ago

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).

raincole2• 10 months ago

Brand is the second most important moat (only shy to regulation capture).

If normal people start saying "ChatGPT" to refer to AI they win, just like how google became a verb for search.

It seems to be the case.

jofzar• 10 months ago

What is OpenAI's competitive moat? There's no product stickiness here.

Would have agreed with you untill I saw the meltdown of people losing their "friend" when chatgpt 5 was released. Somehow openai has fallen into a "sticky" userbase.

SamPatt• 10 months ago

There is definitely stickiness if you're a frequent user. It has a history of hundreds of conversations. It knows a lot about me.

Switching would be like coding with a brand new dev environment. Can I do it? Sure, but I don't want to.

wiseowise2• 10 months ago

Normal, non-technical users can't tell the difference between these models at all, so their usage numbers are highly dependent on marketing.

When I think as a “normal” user, I can definitely see difference between them all.

jstummbillig• 10 months ago

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.

onion2k• 10 months ago

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.

pembrook• 10 months ago

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.

mattio• 10 months ago

Currently their moat is history. Why I keep coming back to ChatGPT is it ‘remembers’ our previous chats, so I don’t have to explain things over and over again. And this history builds up over time.

eru• 10 months ago

What is OpenAI's competitive moat? There's no product stickiness here.

Doesn't look worse than Google Search's moat to me? And that worked really well for a long time.

lostlogin3• 10 months ago

Google has massive distribution with world-wide brands that people already know, trust, and pay for, especially in enterprise.

Do people trust Google in a positive sense? I trust them to try force me to login and to spam me with adverts.

kldg• 10 months ago

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?

netdevphoenix2• 10 months ago

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

pnutjam• 10 months ago

"At some point OpenAI's investors are going to want their money back."

They do now, that's why they are using a shell game to pump up the stock value.

holoduke• 10 months ago

The name ChatGpt is probably the most valuable brand at the moment. Everybody is talking and using it.

moralestapia• 10 months ago

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.

pryelluw• 10 months ago

Brand name and ChatGPT being the synonym of AI. Just like google is a synonym for search. That right there is very powerful.

remorse_jaunty• 10 months ago

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.

Agingcoder• 10 months ago

I don’t want to use google anymore - bad search results, too many ads.

SergeAx• 9 months ago

Google is lacking a coherent product vision. They are trying to foot their models' output everywhere, creating chaos. Meanwhile, Gemini chats are not synced between web and Android app, and this is ridiculous.

zahlman• 10 months ago

$264B in 2024.

Why is this much money spent on advertising? Surely it isn't really justified by increase in sales that could be attributed to the ads? You're telling me people actually buy these ridiculous products I see advertised?

returnInfinity3• 10 months ago

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.

ipaddr4• 10 months ago

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.

HeatrayEnjoyer• 10 months ago

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.

theshackleford• 10 months ago

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.

majormajor• 10 months ago

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.

outside12342• 10 months ago

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.

crystal_revenge3• 10 months ago

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...

lemonlearnings6• 10 months ago

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.

StopHammoTime• 10 months ago

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-...

rahulyc• 10 months ago

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.

0xDEAFBEAD2• 10 months ago

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.

StarterPro• 10 months ago

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.

raw_anon_11114• 10 months ago

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.

davedx3• 10 months ago

running an LLM will never be as cheap as search engine.

Complete and unfounded speculation.

lelanthran• 10 months ago

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.

ares6235• 10 months ago

ChatGPT has more consumer trust than Google at this point

Gee I wonder why?

mrweasel• 10 months ago

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.

morsch• 10 months ago

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.

thorio• 10 months ago

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.

iLoveOncall2• 10 months ago

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.

belter• 10 months ago

So they are losing money but will make it on volume? :-)

devops000• 10 months ago

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.

0xDEAFBEAD2• 10 months ago

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...

t_sawyer2• 10 months ago

Google already has the ad network. They already have Gemini. IMO this will end up being OpenAI proving that the revenue model works and then Google will swoop in and take their market share away.

ksec• 10 months ago

I am surprised something about Ads on HN is not downvoted into oblivion but actually top upvoted comment.

The pendulum is swinging back indeed!

netdevphoenix2• 9 months ago

I think people are massively underestimating the money they will come from ads in the future.

The future will never come to pass if they do not exist at that point in time. They still need to survive all the way there wherever THERE is

cynicalsecurity• 10 months ago

Those two numbers alone don't say anything.

evanb• 10 months ago

I thought all this machine learning stuff was about minimizing the loss?

bwfan1232• 10 months ago

this is the funniest comment i have read in a while, thank you for a loud laugh.

skeptrune• 10 months ago

Wait until they turn ads on.

yalogin• 10 months ago

I don’t think they care, worst case scenario they will just go public and dump it on the market.

However the revenue generation aspect for llms is still in its infancy. The most obvious path for OpenAI is to become a search competitor to google, which is what perplexity states it is. So they will try to out do perplexity. All these companies will go vertical and become all encompassing.

cool_dude85• 10 months ago

I think trying to compete with Google in search is a big problem. First you have to deal with all the anticompetitive stuff they can do, since they control email and the browser and youtube etc. Second they could probably stand to cut the price of advertising by 5 times and still be turning a profit. Will ads in ChatGPT be profitable competing against Google search ads at 1/5 the price, hypothetically?

almogo• 10 months ago

If they're better - yes. ChatGPT is a very different product from Google Search. Return on Ad Spend could be significantly higher than even Google/Meta/ByteDance can offer.

throwaway20372• 10 months ago

You can also read more about it on the FT Alphaville blog from Financial Times (free to sign-up):

OpenAI’s era-defining money furnace

https://www.ft.com/content/908dc05b-5fcd-456a-88a3-eba1f77d3...

Choice quote:

    > OpenAI spent more on marketing and equity options for its employees than it made in revenue in the first half of 2025.

VirgilShelton3• 10 months ago

I'm old and have been on the Internet since the Prodigy days in 90. Open Ai has the best start of any company I can remember. Even better than Google back in 98 when they were developing their algo and giving free non-monetized search results to Yahoo.

These guys have had my $20 bucks a month since Plus was live, they will indeed be more than fine.

btbuildem• 10 months ago

Exactly. Early on their adoption curve was like nothing I've ever seen before.

I am such a miser, I skimp, steal what I can, use the free alternatives majority of the time. If they got me to pay, they've got everyone else's money already.

VirgilShelton3• 10 months ago

Yup! I'm also super cheap and use open source everything but I do have a Mac Book Pro and will never buy a PC again. So when it's worth it, the wallet is coming out and OpenAI has not only my little $20 bucks a month but will have my investment dollars once they go public.

Mistletoe• 10 months ago

Do you really find it is worth it vs. the free Google Gemini? What do you use it for? I can't imagine needing more than Google Gemini 2.5 Flash or Pro, but I don't use it for programming or anything.

VirgilShelton3• 10 months ago

The best part is memory. If you use it daily like I do for everything from programming tasks to SEO and digital marketing, to budget stuff for investing and bill reminders. It will really start to understand what you want and get your voice right when it writes a blog for you or you work on an idea with it.

syspec• 10 months ago

about US$2.5 billion on stock-based compensation, nearly double the amount from the first half of last year.

Wow! 2.5B in stock based compensation

pizlonator• 10 months ago

I am the only one who thinks, "that's not as bad as I expected"?

Because I can be quite bearish and frankly this isn't bad for a technology that is this new. The income points to significant interest in using the tech and they haven't even started the tried-and-true SV strategy we lovingly call enshittification (I'm not trying to be ironic, I mean it)

rhetocj234• 10 months ago

The problem is they are dealing with a stealthy giant in Google who is not a sleeping giant like those in past disruptions.

Google will have an incentive to destroy OAI financially through whatever means and make it difficult for them to raise future money since they are not generating enough free cash flows (to the firm) from their operations after reinvestment.

OAI going after Meta/TikTok with Sora will also be a strategic blunder in retrospect I believe.

spenvo• 10 months ago

On that $13.5B. How much of their massive spend on datacenters is obscured through various forms of Special Purpose Vehicles financing? (https://news.ycombinator.com/item?id=45448199)

chvid• 10 months ago

I haven’t played with my OpenAI api account for 6 months but now all of sudden they charged me 20 usd - unclear why - but perhaps they are entering their monetize phase.

noobermin• 10 months ago

I love how none of the top posts can do simple math, you know, subtracting two numbers. Everyone else is focusing on other things somehow.

jrflowers5• 10 months ago

Rookie numbers. If someone gave me twenty billion dollars I could easily spend it in a way that grosses at least five billion dollars

waynesonfire• 10 months ago

I bet this is the same ratio for every company's AI initiative.

t4TLLLSZ185x• 10 months ago

People in this comment section focus on brand ads too much.

It’s the commercial intent where OpenAI can both make money and preserve trust.

I already don’t Google anymore. I just ask ChatGPT „give me an overview of best meshtastic devices to buy“ and then eventually end with „give me links to where I can buy these in Europe“.

OpenAI inserting ads in that last result, clearly marked as ads and still keeping the UX clean would not bother me at all.

And commercial queries are what, 40-50% of all Google revenue?

tpetry• 10 months ago

But its not clear whether the ad approach will work. It works for Google so great because the ads mimic real results very near so many people dont see them as an ad and click them.

ulfw2• 10 months ago

Oh the wonders of a bubble

4dregress• 10 months ago

Just look at what’s going with JetBrains AI quotas and costs, once AI is deeply imbedded and businesses move the cost to customers like JetBrains have these AI companies are going to make a killing.

It’s the drug dealer model, get them hooked on free tastes and then crank up the prices!

bwfan1232• 10 months ago

How in the world is openAI supposed to pay for the deals for infra ? 300B with oracle for one.

seydor• 10 months ago

with nvidia's money

lofaszvanitt• 10 months ago

Go IPO.

1vuio0pswjnm7• 10 months ago

No Javascript, text-only:

   curl -K/dev/stdin<<eof|zcat|grep -o "<p>.*</p>"|sed '1s/^/<meta charset=utf-8>/;s/\\n//g;s/\\//g' >0.htm
   url https://www.techinasia.com/gateway-api-express/techinasia/1.0/posts/openais-revenue-rises-16-to-4-3b-in-h1-2025
   output /dev/stdout
   user-agent: "Mozilla/()()............../......................./.... ....."
   header accept:
   eof
   firefox ./0.htm

OpenAI's H1 2025: $4.3B in income, $13.5B in loss

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