Big Tech is searching for AI profits. They haven't found it yet.

Big tech titans like Microsoft and Google are pouring billions into developing artificial intelligence. But it ain’t free. The companies are scrambling to turn AI hype into actual profits. They are fiddling with new ways to produce, market and charge for AI tools to capitalize on the technology's promise while avoiding losses.

What's going on here?

Tech giants are losing money or uncertain how to profit from generative AI despite massive investments.

What does this mean?

The costs of computation, infrastructure, and energy make it difficult to generate profits from AI products and assistants even with high subscription fees. Case in point is Github Copilot. Even though Copilot is a paid product at $10/month, the rumour is Microsoft lost an additional $20 per user monthly on average.

Update: Nat Friedman (ex-CEO Github) says the claim is false. [Source]

Now, Microsoft 365 with AI copilot will have a jacked up price point of $30. Google will also charge $30 on top of normal fees for its new AI-powered software features. Adobe uses a credit system to cap the usage of its AI image generator. Zoom uses cheap, knock-off AIs for most of their work to avoid premium pricing.

Why should I care?

There is still uncertainty around optimal business models. Valuations have soared based on AI hype, not proven revenue generation. The pricing models from Big Tech and VC-funded startups might influence how you price your startup’s AI products. Just keep in mind that these companies have other sources of funds that can subsidize acquiring these users at a loss.

Though, don’t let it stop ya. There are plenty of users who are ready to pay premium prices for the AI boost to their life and work.