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How Does ChatGPT Make Money?

 

By Reel Coverage May 27, 2024

 

So you've heard of ChatGPT and have possibly used it and at some point wondered how it makes money offering so much value for “free”, well, here lies answers to your questions on how ChatGPT makes money.

 

 

 

Understanding ChatGPT’s Revenue Sources

 

ChatGPT strikes the public as a highly intelligent assistant due to its ability to process and solve basic and complex problems or queries.

 

Dominating the artificial intelligence market for generative chatbots assistants by its advanced functionalities heavily studied and reported by various tech platforms and individuals. From answering basic questions like “Is The Sky Really Blue?” to writing complex codes for building applications, ChatGPT offered a vast array of value for free until February 2023 when it introduced “ChatGPT Plus”, commonly referred to as “its most powerful model”.

 

● ChatGPT Plus Subscription

 

ChatGPT makes money via its subscription service, the ChatGPT Plus which offers users access it's most powerful model, the GPT 4, GPT 4o, DALL-E image generation, advanced data analysis and ability to create and use custom GPTs. 

 

ChatGPT Plus is currently priced at $20 per month and has reportedly attracted over $3.2 billion as of September 2023.

 

Originally, OpenAI, the company behind the development of ChatGPT, envisioned a “non-profit” AI business as it launched in 2015, hence its name but sooner discovered that keeping these products totally free was limiting to developments as the cost to maintain them grew and donations from the public was no longer a viable way to scale up. 

 

OpenAI created a “for-profit” business overseen by the nonprofit's board of directors in 2019. The ChatGPT Plus, released in February 2023, provides users with benefits such as general access even during peak times, faster response times, and priority access to new features and improvements for $20 a month as previously stated. However, it was not its first nor the only form of monetization of ChatGPT.

 

● OpenAI API Monetization

 

OpenAI API Monetization involves the selling of access tokens to OpenAI's application programming interface - API, for a fee, primarily based on usage. OpenAI's API access enables individuals or enterprises to leverage the underlying tech of ChatGPT to power various types of services or applications on third party interfaces. 

 

A prominent example of such use-cases includes the Bing Chat by Microsoft, which leverages OpenAI's API to enhance Bing search and improve user experience, that, in addition to OpenAI's advanced models are also used in other Microsoft products and services, such as Azure and Microsoft 365.

 

That said, other enterprises also use the OpenAI API for services such as customer service bots, content generation, coding assistance, and more.

 

The OpenAI API pricing structure is based on the model used and the number of tokens processed. Tokens are chunks of text; for example, a token can be as short as one character or as long as one word (average English word is around 4 characters). 

 

The main pricing tiers as of the latest update are:

 

GPT-4:

 

8K context length: $0.03 per 1,000 prompt tokens and $0.06 per 1,000 completion tokens.

 

32K context length: $0.06 per 1,000 prompt tokens and $0.12 per 1,000 completion tokens.

 

GPT-3.5:

 

Davinci, the most powerful and capable model in the GPT-3 series has its pricing as $0.02 per 1,000 tokens.

 

Curie, a strong middle-ground model, balancing performance and cost pricing begins at $0.002 per 1,000 tokens.

 

Babbage, the most efficient model capable of handling straightforward tasks has its pricing as $0.0005 per 1,000 tokens.

 

While Ada, the fastest and most efficient model with the lowest cost is priced at $0.0004 per 1,000 tokens.

 

OpenAI also offers pricing plans that provide flexibility for businesses including a “Pay-as-you-go” model charging users based on usage with no upfront cost and monthly billing: suitable for consistent usage patterns.

 

 

Revenue Generation

 

As of the time of writing, specific figures when it comes to the revenue generated by the OpenAI API have not been publicly disclosed. However, as of early 2023, OpenAI projected that its API business would generate hundreds of millions of dollars annually. This projection reflects a significant commercial uptake and integration of OpenAI's language models in various applications across industries.

 

How Does ChatGPT Make Money?

 

ChatGPT makes money via its $20 a month subscription to users for advanced features and by selling OpenAI API access tokens. 

 

Is OpenAI A Unicorn Company ? 

 

Yes, OpenAI, the AI research and development company behind ChatGPT is a unicorn company as its current valuation is over $80 billion.

 

Additionally, OpenAI's CEO, Sam Altman, has proposed an ambitious funding request ranging between $5 to $7 trillion. This funding sum is supposedly aimed at developing a large-scale network of semiconductor fabrication plants (fabs) specifically for AI chips. The venture, of which has drawn significant media attention with vast criticism, reflects Altman’s vision to significantly bolster AI infrastructure, including energy supplies and data centers, to meet the increasing demand for AI processing capabilities. 

 

The $5 to $7 trillion funding request is unprecedented and far exceeds the current revenue of the global semiconductor market, which was approximately $527 billion in 2023 and is projected to grow to $1 trillion by 2030 according to reports. If Altman succeeds in securing this amount, it would position OpenAI's valuation at a level that could be comparable to significant fractions of global GDP.