AI: Chatbot monetization is next race

...OpenAI, Microsoft, Google et all ramping up

I’ve talked about before the key ways to price AI products and services, “to bundle and then unbundle”. Especially as we ramp up the AI Tech Wave. And how it’s being diligently applied by Microsoft currently in its Copilot AI product and services, leveraging its partnership with OpenAI. The underlying ways to monetize of course are the three basic legs of the online pricing stool: Advertising, Transactions, and Subscriptions.

Now that all the big and small AI companies are deploying billions to build the LLM AI infrastructure for AI products and services, the concurrent race is on to of course sell ads against it. As discussed before, all the major comnpanies are already offering premium subscriptions, and selling AI access to their models via API driven transactions.

As Axios highlights today in “Ads are coming to Chatbots”:

“The days of spending hours using AI chatbots uninterrupted by ads could soon end, as startups and big companies eye the nascent market as a big opportunity.”

“Why it matters: Creating and operating AI chatbots can be expensive and advertising is one idea for making them profitable.”

“What we're watching: OpenAI today has no rules on how advertising can be inserted into custom GPTs and doesn't get a cut of the revenue. But experts say that could change very quickly.”

• "Maybe they are just letting the smaller players experiment on their behalf," said Columbia University marketing professor Olivier Toubia. "It won't be hard for them to monetize if and when they decide."

“The big picture: Advertising tends to go where the eyes are. So if people spend lots of time using chatbots, ad dollars are likely to flow.”

• “For Google, it's a potentially existential threat, if searchers turn to others' chatbots rather than its search engine.”

• “The search leader is hoping to offer the best of both worlds. However, even if the company can dominate the chatbot industry the way it owns search, it could take a hit to revenue if chatbot advertising turns out to be less lucrative than the cash cow of search advertising.”

“Google and Microsoft have said they are exploring how advertising might work with their chatbots.”

Companies like Meta are already aggressively monetizing their short video services ike Reels on instagram, Facebook and others via increasingly AI driven algorithmic fees. They’re already at an annual run rate over ten billion dollars vs competitors like Bytedance’s TikTok.

But ads in the AI chatbots themselves are the next low-hanging monetization fruit. And Google/Alphabet is the one company that knows how to do that at scale. Especially as it leverages AI driven Search vs OpenAI and others. The AI chatbot monetization race has begun. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)