OpenAI's Revenue Climbs to $133M Per Month, Likely From 1 Million New ChatGPT Paid Users
A 23% revenue rise in 2 months, GPTs Fuel Growth
The Information reported that OpenAI closed the year with a $1.6 billion annual revenue run rate. This translates into about $133 million per month and a $25 million per month rise since the last rumors of about $108 million in November. What happened between November and the end of December to cause such a late-year surge?
GPTs Drive Surge in Paid Subscribers
OpenAI’s most notable news during that period was the management debacle that resulted in the firing and re-hiring of CEO Sam Altman, the departure and return of several top executives, the threat of over 700 employees to quit, and a newly reconstituted board. That news cycle was so intense that it is easy to forget that OpenAI stopped allowing users to sign up for the paid ChatGPT Plus subscription three days prior.
After OpenAI’s first DevDay and the introduction of GPTs, a surge of free users attempted to sign up for the world’s favorite generative AI chatbot. GPTs are custom versions of ChatGPT that users can create for themselves or share with others. OpenAI originally said it would introduce a GPTs marketplace by the end of November, where users could free browse GPTs and creators could monetize their custom bots by selling access to other users. OpenAI subsequently delayed the marketplace launch until early 2024.
The catch is that only paying ChatGPT Plus subscribers have GPTs access. This created a new incentive for free users to upgrade to paid status. The demand was so overwhelming that Sam Altman eventually posted on X that the company had to pause accepting new subscribers until it could absorb the influx of new users into its premium ChatGPT user group.
From November 13 to December 12, OpenAI was not accepting new paid subscriptions for ChatGPT Plus. So, OpenAI had about a week before the pause and about two weeks afterward to sign up new ChatGPT Plus subscribers. The $25 million rise in monthly revenue for the company is likely driven by more than a million paying ChatGPT users.
OpenAI’s Revenue Breakdown
ChatGPT is not OpenAI’s only revenue source. OpenAI receives revenue from users of its API and fees from Microsoft for users of GPT-3.5 and GPT-4 through the Azure cloud services. However, Synthedia estimated that ChatGPT Plus subscribers represented well over half of the company’s monthly revenue in the third quarter of 2023. The management debacle at the company likely caused some pause in investment in API use or commitments toward the end of the year, but we estimate there was some Q4 2023 growth in API use and through Azure OpenAI Service.
Still, it is likely that more than 80% of the revenue surge was driven by new ChatGPT Plus subscriptions. Enterprises expressed concern about OpenAI and the risks of committing fully to the company. Consumers had no such concerns. They just wanted access to GPTs. In addition, there was no other catalyst during that period to drive such a strong rise in revenue. The analysis suggests OpenAI added about one million new subscribers to the generative AI chat service in the last two months of 2023.
A Generative AI ATM
ChatGPT has quickly become a cash machine that OpenAI can use to fuel its growth and fund activities that drive more innovation and enterprise adoption. The revenue rise is also the type of metric that will help OpenAI secure the $100 billion valuation it has targeted for the current round of fundraising.
In addition, ChatGPT offers OpenAI benefits beyond revenue. It is a playground for testing new technology with a large user base, gives the company direct relationships with hundreds of millions of consumers who are also business users, and helps OpenAI stay top of mind in nearly every generative AI conversation.
Copilot from Microsoft (formerly Bing Chat) and Bard from Google don’t seem to have much momentum as ChatGPT alternatives. I am a fan of Perplexity, but its user base is very small compared to ChatGPT. A wild card is Anthropic’s Claude chatbot. It is very capable, but the company has focused much more on its large language models (LLM) than the chatbot. If Anthropic locks down the rumored $750 million in new funding, you can expect a big push to drive Claude chatbot adoption.
OpenAI has shown how valuable having the one-two punch of consumer application and enterprise platform can be for winning generative AI mindshare and market share. This will be a key battlefront in the generative AI wars in 2024.
