> If they don't find a way to make LLMs do significantly more than they do thus far...
They only need two things, really: A large user base and a way to include advertising in the responses. The market willing to pay hundreds of billions of dollars will soon follow.
The businesses are currently in the user base building stage. Hemorrhaging money to get them is simply the cost of doing business. Once they feel that is stable, adding advertising is relatively easy.
> and some kind of "moat" to prevent DeepSeek and the like from undercutting them*
Once users are accustomed to using a service, you have to do some pretty horrendous things to get them to leave. "Give me your best hamburger recipe" -> "Sure, here is my best burger recipe [...] However, if you don't feel like cooking tonight, give the Big Mac a try!". wouldn't be enough to see any meaningful loss of users.
That's nothing new. The question is, will those users be willing and able to pay ten times as much or more for those same services they get for a significant discount now.
Will they pay ten times more for a Big Mac? Probably not, but why would they need to? Hundreds of billions is Facebook's revenue. The businesses in this space are there if they can take those customers alone, never mind all the other places where advertising takes place. The market exists, is sufficiently large, and willing to spend. All these "AI" businesses need to do is show that the users are spending time on their services instead, which is exactly what they are working on right now.
The question is really only: Will users actually want to continue to use these services once the novelty wears off? The assumption is that they are useful enough to become an integral part of our lives, but time will tell...
The world is not a zero-sum game, but I don't think it's likely that companies will double their advertising. So either Google, Meta, etc. will lose the AI game and most of the advertising revenue will shift to different companies or Google, Meta, etc. win and they get to keep their advertising income.
I don't see how suddenly hundreds of billions of additional ad revenue will appear.
I think some of AI companies truly wanted to make a fortune replacing all white collar workers through model exclusivity, but that open models (initially Llama and then a sequence of really good Chinese models) threw a wrench in the cogs. There is not as much you can make anymore if everyone can host their own 'workers' near cost price.
> So either Google, Meta, etc. will lose the AI game
They might lose entirely (search, social media, etc.) if users are more likely to direct their eyeballs to "AI" services. And that isn't an impossible scenario. What do you need traditional web search, stupid internet comments, etc. for when an LLM will generate all that and more immediately at your behest? The newspaper companies lost when other forms of media came along. "AI" could easily push things the same way.
But the businesses are still trying to prove that. It is still early days. Only time will tell if they will actually get the aforementioned user base.
They might lose entirely (search, social media, etc.) if users are more likely to direct their eyeballs to "AI" services.
Sorry that I wasn't clear enough. That was what I was trying to imply - in that case the ad purchases that currently go to Google etc. will go to a new AI company. This is why both Google is investing so heavily in LLMs, they know that LLMs can kill search + website visits and thus cause them to lose their ad income.
But either way, it's questionable if it will increase all ad spending. So either AI companies collapse and a lot of VC money is burned or Google et al. collapse and a lot capital is burned (pension funds and whatnot).
This is why Google has android and chrome, and why Facebook bought WhatsApp and Instagram. It isn’t so much about spending billions on growth, it is about hedging their bets and protecting their monopolistic cash cows.
> The question is really only: Will users actually want to continue to use these services once the novelty wears off? The assumption is that they are useful enough to become an integral part of our lives, but time will tell...
But LLMs do have some niche, stable applications already. For example, they replaced Stack Overflow to a large extent, because you can get the answer you need faster, and it's often better adapted to your situation. So you could argue the novelty of SO wore off a long time ago but people were still using it when LLMs appeared. ChatGPT is no more en vogue, people are ashamed to (and shamed for) using it, but it still has some uses, helping people in their jobs and lives in general.
Stack Overflow wasn't bringing in hundreds of billions in revenue and never could have hoped to. A niche won't cut it.
I mean, should it all come crashing down and once the dust settles there is no doubt room for a niche service to rise from the ashes. Many have predicted exactly that AI will have its own "dark fibre" moment. But the current crop of providers seeking "world domination" won't survive if they can only carve out a SO-style niche.
Not yet. Of course, if you had read the thread you'd know that LLM businesses are trying to see if they can capture Facebook-scale/beyond user bases in order to serve ads to them at Facebook-scale/beyond.
> Whether those investments can ever be recovered is still an unanswered question.
Yes, that's the question we are discussing. Welcome to many comments ago.
I don’t see how advertising is going to work with agents, especially if they’re being used by companies to replace or supplement jobs. Am I going to have comments in my code with ads for McDonalds? Will the AI support agent start trying to sell me a VPN?
I don’t think any of these AI companies can justify their expenses without meaningfully automating a significant amount of white collar work, which is yet to happen.
> I don’t think any of these AI companies can justify their expenses without meaningfully automating a significant amount of white collar work
The businesses in question are building chatbots, not trying to automate jobs. Their primary goal at this stage is to get legions of people hooked on chatting with their service on a regular basis. Once (if) they have succeeded with that, then they can move on to step two.
> Am I going to have comments in my code with ads for McDonalds?
"Give me a function which stores a supplied string to a file in $HOME." -> "I have updated your code with said function. It [...] Have you considered storing the file on Amazon S3 for additional robustness and reliability?"
They only need two things, really: A large user base and a way to include advertising in the responses. The market willing to pay hundreds of billions of dollars will soon follow.
The businesses are currently in the user base building stage. Hemorrhaging money to get them is simply the cost of doing business. Once they feel that is stable, adding advertising is relatively easy.
> and some kind of "moat" to prevent DeepSeek and the like from undercutting them*
Once users are accustomed to using a service, you have to do some pretty horrendous things to get them to leave. "Give me your best hamburger recipe" -> "Sure, here is my best burger recipe [...] However, if you don't feel like cooking tonight, give the Big Mac a try!". wouldn't be enough to see any meaningful loss of users.