TL;DR
Final week OpenAI introduced adverts in ChatGPT’s free tier. Inside hours, Claude launched a “No Advertisements, Ever” marketing campaign. Twitter changed into a roast session. Tech influencers dunked. Customers threatened to modify.
“ChatGPT bought out.” “Claude is the great guys now.” “That is the start of the top.”
The thread I saved seeing: OpenAI betrayed customers for revenue whereas Claude stayed true to their values.
Besides I’ve watched this precise film play out twice earlier than.
Let’s Discuss Numbers
ChatGPT has 900 million weekly lively customers. 58% are on the free tier. That is 520 million individuals utilizing ChatGPT with out paying something. Claude has about 20-30 million month-to-month lively customers.
ChatGPT serves 30x extra individuals. Completely different scale solely.
This is the place it will get attention-grabbing: OpenAI is burning round $9 billion in 2025, with projected losses of $14 billion in 2026. They will not hit profitability till 2029.
In the meantime, Claude can also be unprofitable. They’ve raised over $37 billion whole and are in search of one other $20 billion at a $350 billion valuation.
Completely different consumer bases although.
Consumer Base Comparability
| Metric | ChatGPT Customers | Claude Customers |
|---|---|---|
| Private use (homework, recipes, questions) |
70% | 16% |
| Work-related | 30% | 17% (outdoors coding) |
| Coding & mathematical work | Minority | 34% of all duties |
| Demographics | Ages 25-34 largest group Gender cut up ~50/50 |
77% male, 52% ages 18-24 |
| Income supply | Blended shopper + enterprise | 80% from enterprise APIs |
| Consumer profile | Mainstream: your mother, school college students | Builders who learn API docs for enjoyable |
Two corporations at wildly totally different scales with totally different enterprise fashions.
The Product Adoption Curve
There is a framework that explains this sample.
When a brand new know-how launches, adoption occurs in phases:
Innovators and Early Adopters make up about 16% of the whole market. These are tech fans. Individuals who’ll pay premium costs to strive new issues. They need the leading edge.
Early Majority and Late Majority make up about 68% of the market. These are mainstream customers. Value delicate. They need it to work reliably they usually need it low-cost or free.
💡 Important Perception
You’ll be able to monetize the 16% with premium subscriptions. They will pay $20-100/month with out pondering twice. However the 68%? They need it free. And in case you attempt to cost them, they will simply depart for whoever gives it free.
This creates a basic cut up in enterprise fashions:
Serving the 16%: Premium subscriptions work. Enterprise contracts work. Your prices are manageable since you’re not serving a whole lot of hundreds of thousands of customers. Examples: Superhuman ($30/month electronic mail), Roam Analysis ($15/month notes), most developer instruments.
Serving the 68%: You want freemium with adverts. Free tier to accumulate customers, adverts to monetize them, premium tier to transform those keen to pay. Your prices are huge since you’re serving a whole lot of hundreds of thousands. Examples: Spotify, YouTube, Instagram, Reddit.
The transition from 16% to 68% is the place each platform makes The Alternative. And the mathematics does not care about your advertising and marketing guarantees.
Claude proper now serves the 16%. Their consumer base is 77% male, 52% ages 18-24, closely developer-focused. 34% of all duties are coding and mathematical work. Solely 16% use it for private duties.
ChatGPT hit the mainstream. 900 million weekly customers means they’re deep into the 68%. 70% use it for private duties. Your mother makes use of it. Faculty college students use it for homework. Random individuals who’ve by no means thought of AI of their lives are utilizing it.
The 68% will not pay $20/month for an AI chatbot. They need it free or they will simply not use it.
Instagram’s Journey
April 2012: Fb acquires Instagram for $1 billion. The app has 30 million customers. Zero income.
Mark Zuckerberg posts publicly: “We have to be conscious about retaining and constructing on Instagram’s strengths and options quite than simply attempting to combine every thing into Fb.”
Translation: we can’t break this with adverts instantly. Everybody relaxes. Instagram stays ad-free for over a 12 months.
November 2013: Instagram proclaims adverts will begin showing in feeds.
The backlash is rapid and loud. Customers flood tech blogs with feedback about how Instagram bought out. Articles predict mass exodus. Twitter fills with individuals threatening to delete the app.
Instagram proceeds anyway. They roll out “rigorously curated model posts” from a handful of main manufacturers. They promise to do adverts in a different way than Fb.
Customers are nonetheless mad. However one thing attention-grabbing occurred:
By Q1 2016 (simply 2.5 years after introducing adverts): Instagram generates $572 million in income in a single quarter. That is 10% of Fb’s complete income on the time.
By the top of 2016: $3.2 billion in whole income for the 12 months.
2024: Instagram generates over $66 billion in annual income. The platform has an estimated potential worth of $200 billion. That is 200 occasions what Fb paid for it.
Present consumer rely: Over 2 billion month-to-month lively customers.
⚠️ The Sample
The customers who threatened to go away stayed. The anticipated mass exodus by no means truly occurred. And Instagram right now is simply Instagram. With adverts. And most of the people beneath 30 do not even bear in mind the controversy.
Reddit’s Anti-Company Identification
Reddit’s story hits totally different as a result of being anti-corporate was core to their id. The group took pleasure on this. Redditors would mock Digg for promoting out. The ethos was: we’re totally different, we’re community-driven, we’ll by no means be like these different platforms.
November 2009: Reddit launches sponsored hyperlinks.
The announcement tries to make it community-friendly: “Now for as little as $20, you should purchase sponsored hyperlinks on reddit: promoting by redditors, for redditors!”
The group’s response: hostile. Many customers felt Reddit violated the social contract. Remark threads full of accusations of promoting out.
2010: Reddit launches Reddit Gold as a compromise. Premium subscription, ad-free expertise, group options. The concept: give customers a method to help the location with out adverts. It generates lower than $1 million in income. Primarily a tip jar.
The positioning is bleeding cash. Server prices are climbing. Consumer base is rising. Income is not protecting infrastructure for 200+ million month-to-month customers.
2015: Reddit launches native adverts (sponsored posts that seem like common Reddit posts). Income doubles.
Then watch what occurs to income:
2018: $94 million
2019: $132 million
2020: $198 million
2021: $375 million
2022: $510 million
2023: $789 million
2024: $1.3 billion
Present stats: 97 million every day lively customers. The group is extra engaged than ever. Advertisements account for over 90% of income. And no one talks about Reddit promoting out anymore. The “anti-corporate” platform runs on adverts and no one appears to care.
OpenAI’s Precise Choices
OpenAI is burning round $9 billion in 2025, with projected losses of $14 billion in 2026. The corporate initiatives cumulative losses of over $100 billion earlier than profitability. They will not be worthwhile till 2029 on the earliest.
Given these numbers, they’ve three precise choices:
Choice 1: Destroy the free tier
Restrict everybody to five messages per day. Use older, cheaper fashions. Make the free expertise barely practical.
This drives customers to opponents. Google Gemini grew 30% year-over-year in 2025. Claude grew 190%. Perplexity grew 370%. You lose market place. You lose the utilization knowledge that makes fashions higher. You finally lose every thing.
Choice 2: Preserve burning
Keep present high quality and utilization limits. Hope you possibly can increase more cash. Cross fingers that 2029 profitability truly occurs. This results in huge cumulative losses. Finally traders cease displaying up.
Choice 3: Add adverts
Add adverts to free tier. Generate $1-3 billion in new annual income. Preserve free tier high quality excessive. Keep aggressive.
For context on why this works: Spotify has 423 million customers on ad-supported free tier. Generates $1.85 billion from adverts yearly. That is solely 11.8% of whole income, however critically, 60% of premium subscribers began on the free tier.
Greater than a price centre, they made free tier its high of the conversion funnel.
OpenAI picked choice 3.
From OpenAI’s Announcement
- The mannequin does not know adverts exist
- Delicate conversations (well being, politics, violence) get zero adverts
- Conversations aren’t shared with advertisers
- Professional ($200/month) and Enterprise tiers see zero adverts
- Their said hierarchy: Consumer Belief > Consumer Worth > Advertiser Worth > Income
Might they break these guarantees later? Positive. However the framework is definitely extra restrictive than most advert platforms.
Claude’s Place Proper Now
Claude can say “no adverts” as a result of they’re the place Instagram was in 2012. 20-30 million month-to-month customers. Serving builders and enterprises. 80% of income from API and enterprise clients, not shopper subscriptions.
They’ve raised over $37 billion whole and are in search of one other $20 billion. They’re burning money too, simply at a smaller scale with a distinct consumer combine.
They’re additionally intentionally avoiding costly compute duties. No video technology (which prices considerably greater than textual content). Characteristic restrictions that maintain prices manageable.
This works at 20-30 million customers serving the 16% of early adopters. And if Claude ever scales to 300+ million customers serving mainstream customers (not simply builders), they will face similar economics.
The VC funding will not stretch endlessly. Enterprise income will not cowl shopper infrastructure at that scale. When Instagram hit 100+ million customers, they wanted adverts. When Reddit hit 200+ million customers, they wanted adverts.
If Claude hits these numbers serving mainstream customers, they will want adverts too.
Closing Ideas
AI compute scales linearly with utilization. Once you’re serving 900 million customers who count on it free, the mathematics solves itself. Platforms survive by fixing unit economics, not by working higher advertising and marketing campaigns about staying pure.
Give it three years, no one will bear in mind being upset.
