The Business behind AI

Hey guys!

Today, we’re introducing a techy topic… the fascinating business world behind Artificial Intelligence! We’ll explore why so many AI services are free, how companies monetize these technologies, and why businesses still pay for "free" services. This post is an introduction to a series of brief tech-focused posts that I’ll post on my blog, I hope you enjoy it!

We’ve all grown accustomed to using AI tools like ChatGPT in our daily routines, often without giving much thought to the data we provide or questioning how such sophisticated and costly services can be offered at no charge. But here’s the real question: how do AI companies sustain themselves while giving away access to these powerful tools?

Many AI companies adopt a "freemium" model, just like your favorite social media platforms. This strategy provides basic services for free while turning You into the product. But if AI companies follow the same playbook, why do I find this business model particularly interesting?

Even though the foundation of the freemium model is similar, the end goal is quite different. Companies like OpenAI provide free access to models like ChatGPT to attract a large user base. However, unlike social media platforms that leverage data for targeted advertising, AI companies use this giant pool of user interactions to refine and improve their models. These enhanced AI models are then made available to premium subscribers or packaged into specialized enterprise solutions.

When using free AI tools, users agree to unclear data usage policies that allow AI providers to collect and analyze input data. While individuals may accept this trade-off for free access, businesses handling sensitive information can't afford the same risks. They need assurances that their data remains private and isn't repurposed beyond their intended applications.

To meet these demands, AI companies offer enterprise solutions with enhanced privacy and security measures. These premium services allow businesses to leverage AI without exposing confidential data, this shift towards enterprise-focused AI not only provides a significant revenue stream but also creates an entire ecosystem around it.

This is where the real $$$ opportunities come from. The existence of business-specific AI tools doesn’t just benefit AI providers, it creates an entire industry. This is creating a market where both large consulting firms and agile student led AI startups are jumping in to develop custom, company-focused AI-powered solutions at a level playing field.

A great example of this is how companies often require AI models tailored to their unique operational contexts. Customization can sometimes be effortless, yet some firms are capitalizing on the fast-moving AI landscape (and the pressure to deploy AI solutions) by charging hundreds of thousands of dollars for what ultimately amounts to fewer than 200 lines of code. In my next post, we’ll dive deeper into this…

This dynamic shift is what excites me most about today’s world. Market disruption is creating opportunities where tiny startups can challenge industry giants that once held a monopoly on advanced tech solutions. While some may see this fast-changing landscape as a threat, I view it as an opportunity. The key is staying ahead of the curve.

I can’t wait to see how this unfolds and what role we all play in shaping the future of AI. Let’s embrace the change and make the most of it!

Have an amazing week!

Next blogs: The two AI business lines, Options to build a context-specific chatbot, and How to stay ahead of the curve.

PS: Check out this cool LLM leaderboard: https://lmarena.ai/