OpenAI Expects to Generate $1 Billion in Revenue in 2024
ChatGPT may raise expectations further
Bloomberg reported that OpenAI is expected to generate $200 million in revenue in 2023 and $1 billion in 2024. The report also seemingly confirmed earlier rumors that the recent fundraising round valued the company at $20 billion.
These figures appear to be from before the ChatGPT phenomenon gripped communities ranging from technophiles and writers to college students. ChatGPT has all of the hallmarks of a viral hit. The popularity is certainly rooted in the quality of the AI-generated text and the easy-to-use interface. It also helps that it is free!
ChatGPT, GPT-3.5, and GPT-4
While ChatGTP is a great demonstration product, it doesn’t have the features most users would expect from a writing assistant application. For example, it didn’t launch with chat history. That is expected to roll out soon, but you still won’t have folders to organize your past work or version control, and so on.
Solutions like Jasper AI have focused on the user interface and features that marketers and other writers require. There are templates to help users get started faster, training videos, easy access to different writing formats, and organization and collaboration features. That repackaging of GPT-3 combined with an aggressive marketing budget helped Jasper AI generate around $40 million in revenue in 2021 and $80 million this year.
Jasper did that on top of GPT-3.0 and its Davinci-002 model. ChatGPT is far better and employs GPT-3.5 which is now available via API for the Davinci-003 model. That means Jasper, Copy AI, and other applications have access to a similar model as ChatGPT.
Though it appears that ChatGPT has other fine-tuning and customizations that make it slightly more erudite than the standard GPT-3.5 model, the Davinci-003 model is a big step up from the earlier iteration. It likely will enable third-party software companies to provide even higher quality solutions for their customers. More on this topic will be available in Synthedia’s upcoming report on large language models.
But wait! There’s more! Until ChatGPT and the 3.5 Davinci-003 model arrived, there was rampant speculation about GPT-4. Some think it will have more parameters and a bigger model; some say smaller. Everyone expects it to be better and to arrive in 2023. That means we may have another wave of start-ups using the API for new use cases.
OpenAI Monetization
While ChatGPT introduced a lot of new costs when over a million users joined in the first five days, it is not as if OpenAI lacks monetization. Microsoft invested $1 billion in OpenAI in 2019 and is apparently paying for access to GPT-3 and Codex, which is the technology behind the software code generator GitHub Copilot.
Then there are all of those writing assistants using GPT-3 and some new DALL-E API users. The company even dropped prices earlier this year by one-half to two-thirds depending on the product. That suggests OpenAI is both responding to competition and is committed to expanding or securing its market share lead. It also suggests there is meaningful revenue today. Some portion of Jasper AI’s $80 million in revenue is flowing directly into OpenAIs bank account.
It is unclear how much revenue the company generated in 2022, but $200 million in 2023 and a 5x increase for 2024 for the seven-year-old company is an impressive ramp rate. There is a lot of demand for the technology because it is closely tied to clear business benefits. That means a billion-dollar revenue year seems plausible.
In addition, ChatGPT provided two other valuable benefits for OpenAI. First, it was so easily accessible in a text chat format that many millions gave it a try and witnessed its quality firsthand. This built interest in using the solution as well as higher awareness. Second, ChatGPT helped many people envision for the first time how a large language model could help them perform important tasks. This factor generated enthusiasm.