Undoubtedly, Generative AI is causing structural changes to the digital world, revolutionizing it even as you read these lines. As billions worldwide gear up to embrace GenAI, the market is flooding with over 9,000 GenAI offerings to date.
GenAI holds immense economic potential, estimated between $6.1 and $7.9 trillion annually by McKinsey. However, employing Large Language Models (LLMs) for training and operating Generative AIs imposes significant costs, making revenue generation for consumer applications a necessary but challenging feat.
It is estimated that executing a search query using a GenAI service like Bard costs between 2x and 10x more than a traditional search, and it may take a while before costs come down and become insignificant.
Software can be developed once and then sold to a million people with almost zero marginal cost. It’s the same with a game or an article — you create them once but can sell them to millions (or a million times). With GenAI it’s different. ChatGPT cannot create an answer to one user query and then resell it to a million other people. Each answer or message or service is custom-made for that user only, and only for their intended purpose at that moment. This comes at high marginal costs that someone has to pay, and for now it’s the VCs financing spree as the main source of building out GenAI services.
So how will consumer-facing applications generate the revenue necessary to sustain AI-powered services?
- Ads don’t work all that well in GenAI — Search vs. Find
The promise of GenAI is precision. Precision means you ask a question and you get back what you want, so you don’t need to look further — limiting advertising opportunities as a consequence. This brief user journey provides little / scarce room for traditional online advertising (though the silver lining involves potentially more valuable, targeted ads).
2. Cosmin’s Law: 98% won’t subscribe
GenAI is an atomized market with many thousands of very specialized services. Since there are so many different AI services, people will only subscribe to the ones they use a lot. Most services will be used just once in a while, so people won’t want to subscribe to all of them.
Subscriptions can be likened to the dynamics on Tinder. People go to Tinder for dates, not marriage. Similarly, most users don’t want to commit to a long-term subscription but this doesn’t mean that they wouldn’t be willing to pay for GenAI services and products if the process is made simple.
And by the way, the currently most applauded and successful Generative AI company, Open AI, already seems to be facing the same challenges. According to The Information, it has surpassed $1B in revenues — which is a big success after such a short period of time. However, according to The Information’s sources, it seems that only 1–2% subscribe for $20 per month to OpenAI’s ChatGPT service. The remaining 98% are still generating expenses with every single prompt which they run through ChatGPT, and that costs a lot of money.
So, if you’ve recently developed an AI for Yoga, an AI for writing resumes, or even a virtual AI partner , you and your investors have reason for concern. The mix of high computational costs, subscription overload, and ineffective advertising is a serious threat to “financial sustainability”.
3. Bonus material: copyright challenges
To add to the mix, the GenAI wave also stirs the waters of the creative industries. The recent uproar from actors and writers highlights the looming apprehensions regarding fair compensation and ownership in the age of AI-scripted content and AI-generated likenesses. Disney will do everything in their powers to keep Mickey Mouse out of anything AI. Media companies, publishers and brands who own intellectual property will want to prevent their assets from being stripped of their identity in the context of GenAI — they are preparing to defend their copyrighted content. The ongoing struggle to ascertain ownership, especially for giants like Disney but also for New York Times and every major content creator, underscores the urgent need to redefine monetization in this novel era. How do you want to cope with or charge for this?
What users really want
Users crave choice, a say in every aspect of their transactions. This translates into four core necessities:
- Affordability: The services and products must be within reach for everyone, regardless of their other financial commitments or subscriptions.
- Speed: Users demand instant access; delay, and you lose their interest. Our attention spans are now on par with a goldfish’s — a mere seven seconds. That’s the tight window you have to transform a fleeting impulse into a transaction.
- Simplicity: Purchasing your product or service should be a breeze. A lengthy, eight-step signup? That’s a definite no-go.
- Privacy: Last, but certainly not least, users expect their privacy to be respected and protected.
These aren’t just nice additions; they’re non-negotiables. Fail to provide them, and your audience will take their business elsewhere, affirming that choice truly lies at the heart of revenue generation.
Bringing it all together
What does the ideal solution look like? The answer may be closer than you think, rooted in an experience we’re all familiar with. Picture this: you’re at your favorite bar, they start a tab for you, and all your orders are added to this running total. At the end of the night, you settle up and head home.
This is the essence of Supertab. It allows users to “add” a product or service to their tab, gain access within seconds, and only prompts for payment once the tab hits $5. The whole process is quick, straightforward, and accessible, ensuring a seamless user experience.
And it’s easy to imagine how it would work in practice.
Instead of pushing users towards a subscription for all your content, you offer them individual items or small bundles. A single picture, a video, a generated response, a yoga class — the choice is theirs, and they simply add it to their tab. This micro-transaction model turns the paid unit of one into your most potent marketing tool, establishing value, fostering trust, and laying the foundation for a paying audience.
Expanding from this, there’s a world of possibilities: Time Passes for varied access durations, Prompt Packages, Extra Prompts, and more. Supertab collates all transactions across websites, services, and products, prompting for payment via trusted methods like Apple Pay or Google Pay once the $5 threshold is reached.
The proposition of Supertab is simple: it empowers you to sell your GenAI products by offering users choice, and establishing value and trust.
An iTunes moment for AI and the Web!?
Remember how Apple changed the world when it allowed us to buy a single track for 99¢ instead of the whole CD? It was affordable, fast, simple, and it revolutionized the industry, paving the way for today’s streaming models. Without unbundling we wouldn’t have had 1000 songs in our pocket and we surely wouldn’t have Spotify today.
Unbundling may once again create an ‘iTunes moment’, a potential game-changer for the GenAI industry, placing it squarely in the user-centric zone. Supertab facilitates this world, ensuring users have real choices, while businesses and creators are making money. The focus shifts from the 2% who might subscribe (you got that covered) to the 98% who will never do so but are still willing to pay.
By establishing an industry best practice, we all stand to gain. Let’s not repeat the original sin of the Internet — no one really likes ads and no one needs additional subscriptions, but everybody wants real choice.
This isn’t theoretical. We’ve built Supertab, patented it, tested it, and are now in the process of rolling it out. Check it out here and join the movement.
Let us handle the monetization, so you can focus on crafting exceptional AIs and change the world.