Apple and OpenAI announced a landmark partnership this week to ingrain ChatGPT into every new iPhone, iPad, and Mac. The agreement has obvious benefits for Apple, giving it the best AI chatbot on the market. However, Apple will not pay OpenAI to use ChatGPT on its products, Bloomberg’s Mark Gurman reports on Wednesday, offering Sam Altman’s startup exposure to its lucrative user base instead of cash.
Apple is reportedly getting ChatGPT for free, and so will its users, leaving OpenAI to foot the expensive compute costs that come with providing AI inferencing to millions more users. This previously undisclosed detail about Apple and OpenAI’s deal reveals a key part of this partnership: who the hell is paying for all of this? For now, OpenAI is, but eventually, you and the advertisers will. OpenAI is betting this increased exposure will yield more subscribers to ChatGPT Plus, which starts at $US20 a month, and offers users priority during busy times, data analysis, and increased image generation capabilities.
Bloomberg reports Apple’s AI partners could eventually monetize the results in chatbots on Apple platforms. While Bloomberg didn’t report how it would monetize chatbot results, it’s likely through ads, potentially offering Apple and AI partners a path to serious revenue. This sounds a lot like Google and Apple’s partnership, where the search engine pays Apple roughly $US18 billion every year in ad revenue for its priority placement. Apple believes AI chatbots could chip away at its deal with Google because users could favor AI instead of search, according to Bloomberg. Ads in AI may become a necessity for Apple so it doesn’t lose billions in revenue.
ChatGPT already offers a free version you can use on a website and app, and that’s essentially what every Apple user is getting. During WWDC, Apple noted that its users can connect their Apple Account (not Apple ID anymore!) to a ChatGPT subscription. But will more exposure lead to more subscribers? So far, OpenAI’s subscription business seems to be doing quite well. Altman told his staff on Wednesday that OpenAI’s annualized revenue is now $US3.4 billion, largely driven by its subscriber business, according to The Information.
Notably, Apple’s deal with OpenAI is not exclusive. Apple’s Senior Vice President Craig Federighi told reporters this week that the company is looking to integrate different models, naming Google Gemini, in the future. While OpenAI, Google, and Anthropic offer premium AI subscriptions, this may not be the only way tech companies monetize AI.
Running AI chatbots presents new, complicated problems for tech companies. However, the ways to pay for the technology are far from innovative. Just like streaming, subscriptions have proven a good way to pay for technologies in the short term, but ads are still the real way to drive revenue for Big Tech.