OpenAI, valued at $157 billion, isn't profitable. Should that be normal?
OpenAI, valued at $157 billion, isn't profitable. Should that be normal?
Maybe companies should be judged on their ability to effect change rather than hard dollars-and-cents.
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It shouldn't be, but it is. 20 years ago, in the far-off year of 2005, a lot of tech companies more or less followed the same path, where it took decades for them to actually be profitable, if they were at all.
YouTube ran at a deficit for something close to 15 years. AI companies are likely following this trend, and running mostly on investment money, rather than being self-sufficient.
Tech companies were in that boat in the late 90s as well.
The dot com bust deflated it somewhat, but somehow the industry got right back to it within a couple of years.
I don't know about now, but Amazon ran a deficit for pretty much its entire existence. Amazon is a bit different though since it was part of an R&D strategy and they could've stepped off the gas at almost any point and been profitable.
Pretty sure youtube still runs on deficit. Storage costs alone would probably bankrupt some small countries.
People don't realise how much the storage and bandwidth costs are for a site as big as YouTube, and it keeps going up due to the huge number of videos being uploaded. People think that Google are making huge amounts of money from YouTube. In reality, they're not breaking even and rely on other, profitable business units (like their Workspace and cloud services) to subsidize it.
There's no way the ads fully cover the cost, and more and more people are blocking ads. Advertisers don't pay for blocked ads, and YouTubers don't make any ad money from your views if you use an ad blocker. (this is the main reason YouTubers say they make less money from ads than they used to - ad blockers)
I guess the cost is worth it to Google just to entrench themselves and their products even further into the lives of most people.
Yeah it's part of their overall strategy to be seen as a core part of the internet / the web. Same as Yahoo in the 90s and early 2000s.
The more people that use their free services, the more appealing they are to advertisers compared to competing ad platforms (broader reach), and the more paid subscribers they get.
Products like Visual Studio, some Jetbrains IDEs, VMware ESXi, and a lot of SaaS products, are (or used to be) free for individuals or for open source usage for a similar reason - people get familiar with them at home, and end up recommending them and buying them at work. A few individuals liking the product can result in large companies signing paid contracts for tens of thousands of users.