> OpenAI’s refusal to launch and iterate an ads product for ChatGPT — now three years old — is a dereliction of business duty, particularly as the company signs deals for over a trillion dollars of compute.
I think this is intentional by Altman. He’s a salesman, after all. When there is infinite possibility, he can sell any type of vision of future revenue and margins. When there are no concrete numbers, It’s your word against his.
Once they try to monetize, however, he’s boxed in. And the problem with OpenAI vs. Google in the earlier days is that he needs money and chips now. He needs hundreds of billions of dollars. Trillions of dollars.
Ad revenue numbers get in the way. It will take time to optimize; you’ll get public pushback and bad press (despite what Ben writes, ads will definitely not be a better product experience.)
It might be the case that real revenue is worse than hypothetical revenue.
> It might be the case that real revenue is worse than hypothetical revenue.
Because Altman is eying IPO, and controlling the valuation narrative.
It's a bit like keeping rents high and apartments empty to build average rents while hiding the vacancy rate to project a good multiple (and avoid rent control from user-facing businesses).
They'll never earn or borrow enough for their current spend; it has to come from equity sales.
> It's a bit like keeping rents high and apartments empty to build average rents
with very particular exceptions at the high end (like those 8-figure $ apartments by Central Park that are little more than international money laundering schemes) this doesn't really happen irl
This does not happen, if you forgo one month of rent you have to have kept prices up significantly to make up for the loss. The only reason this could happen is if your loan terms are pegged to rent roll (usually only on commercial properties).
an example: $5000/mo apartment generates $60,000 a year; forgoing one month of rent means you have to now generate $60,000 of revenue in 11 months, which in a bad market will likely not rent for $5450 if it didn't rent for $5000. Your mortgage still continues to pile up along with insurance and taxes, so you can't escape the hole.
Apparently they've declared a code red, because competition has got so hot. They're definitely going to do ads, but they may have to put it off. They can't afford ads at the moment ironically.
I feel like I've been hearing this same argument about unicorn startups for fifteen years now: they aren't monetizing yet because it's easier to sell the possibility than the reality. There's probably some truth to it, but I think here it misses the mark, because OpenAI is monetizing. They're likely to hit $20 billion in annualized revenue by year's end. I guess maybe he's holding off on ads because then he can say that'll be even bigger?
But honestly...he's not wrong. I think ads in ChatGPT, Gemini, and Claude are going to absolutely dwarf subscription revenue.
The only justifications for OpenAI’s valuation are either (1) AGI round the corner or (2) ads.
I don’t think we’re close to AGI, but I do think ChatGPT has the potential to be the most successful ad platform in history. And I think they’ll probably succeed in building it.
"If you show revenue, people will ask 'HOW MUCH?' and it will never be enough. The company that was the 100xer, the 1000xer is suddenly the 2x dog. But if you have NO revenue, you can say you're pre-revenue! You're a potential pure play... It's not about how much you earn, it's about how much you're worth. And who is worth the most? Companies that lose money!"
I think this is intentional by Altman. He’s a salesman, after all. When there is infinite possibility, he can sell any type of vision of future revenue and margins. When there are no concrete numbers, It’s your word against his.
Once they try to monetize, however, he’s boxed in. And the problem with OpenAI vs. Google in the earlier days is that he needs money and chips now. He needs hundreds of billions of dollars. Trillions of dollars.
Ad revenue numbers get in the way. It will take time to optimize; you’ll get public pushback and bad press (despite what Ben writes, ads will definitely not be a better product experience.)
It might be the case that real revenue is worse than hypothetical revenue.