TL;DR
Final week OpenAI introduced advertisements in ChatGPT’s free tier. Inside hours, Claude launched a “No Advertisements, Ever” marketing campaign. Twitter was a roast session. Tech influencers dunked. Customers threatened to modify.
“ChatGPT bought out.” “Claude is the nice guys now.” “That is the start of the tip.”
The thread I stored seeing: OpenAI betrayed customers for revenue whereas Claude stayed true to their values.
Besides I’ve watched this actual 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 folks utilizing ChatGPT with out paying something. Claude has about 20-30 million month-to-month lively customers.
ChatGPT serves 30x extra folks. Totally different scale solely.
This is the place it will get fascinating: 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 complete and are searching for one other $20 billion at a $350 billion valuation.
Totally different person bases although.
Person Base Comparability
| Metric | ChatGPT Customers | Claude Customers |
|---|---|---|
| Private use (homework, recipes, questions) |
70% | 16% |
| Work-related | 30% | 17% (exterior coding) |
| Coding & mathematical work | Minority | 34% of all duties |
| Demographics | Ages 25-34 greatest group Gender break up ~50/50 |
77% male, 52% ages 18-24 |
| Income supply | Blended shopper + enterprise | 80% from enterprise APIs |
| Person profile | Mainstream: your mother, school college students | Builders who learn API docs for enjoyable |
Two firms at wildly completely different scales with completely 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 levels:
Innovators and Early Adopters make up about 16% of the full market. These are tech lovers. Individuals who’ll pay premium costs to strive new issues. They need the innovative.
Early Majority and Late Majority make up about 68% of the market. These are mainstream customers. Worth delicate. They need it to work reliably they usually need it low cost or free.
💡 Essential Perception
You may monetize the 16% with premium subscriptions. They’re going to pay $20-100/month with out pondering twice. However the 68%? They need it free. And when you attempt to cost them, they’re going to simply depart for whoever affords it free.
This creates a basic break up in enterprise fashions:
Serving the 16%: Premium subscriptions work. Enterprise contracts work. Your prices are manageable since you’re not serving a whole bunch of thousands and thousands of customers. Examples: Superhuman ($30/month e-mail), Roam Analysis ($15/month notes), most developer instruments.
Serving the 68%: You want freemium with advertisements. Free tier to amass customers, advertisements to monetize them, premium tier to transform those prepared to pay. Your prices are huge since you’re serving a whole bunch of thousands and thousands. Examples: Spotify, YouTube, Instagram, Reddit.
The transition from 16% to 68% is the place each platform makes The Selection. And the maths does not care about your advertising guarantees.
Claude proper now serves the 16%. Their person 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. School 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’re going to 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 aware about preserving and constructing on Instagram’s strengths and options reasonably than simply attempting to combine every little thing into Fb.”
Translation: we can’t spoil this with advertisements instantly. Everybody relaxes. Instagram stays ad-free for over a yr.
November 2013: Instagram declares advertisements will begin showing in feeds.
The backlash is fast and loud. Customers flood tech blogs with feedback about how Instagram bought out. Articles predict mass exodus. Twitter fills with folks threatening to delete the app.
Instagram proceeds anyway. They roll out “fastidiously curated model posts” from a handful of main manufacturers. They promise to do advertisements in a different way than Fb.
Customers are nonetheless mad. However one thing fascinating occurred:
By Q1 2016 (simply 2.5 years after introducing advertisements): Instagram generates $572 million in income in a single quarter. That is 10% of Fb’s total income on the time.
By the tip of 2016: $3.2 billion in complete income for the yr.
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 person rely: Over 2 billion month-to-month lively customers.
⚠️ The Sample
The customers who threatened to depart stayed. The anticipated mass exodus by no means really occurred. And Instagram in the present day is simply Instagram. With advertisements. And most of the people underneath 30 do not even bear in mind the controversy.
Reddit’s Anti-Company Identification
Reddit’s story hits completely different as a result of being anti-corporate was core to their id. The neighborhood took pleasure on this. Redditors would mock Digg for promoting out. The ethos was: we’re completely 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 buy sponsored hyperlinks on reddit: promoting by redditors, for redditors!”
The neighborhood’s response: hostile. Many customers felt Reddit violated the social contract. Remark threads crammed with accusations of promoting out.
2010: Reddit launches Reddit Gold as a compromise. Premium subscription, ad-free expertise, neighborhood options. The concept: give customers a technique to assist the location with out advertisements. It generates lower than $1 million in income. Basically a tip jar.
The location is bleeding cash. Server prices are climbing. Person base is rising. Income is not protecting infrastructure for 200+ million month-to-month customers.
2015: Reddit launches native advertisements (sponsored posts that appear to be 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 neighborhood 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 advertisements 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 tasks 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 purposeful.
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 information that makes fashions higher. You finally lose every little thing.
Choice 2: Preserve burning
Keep present high quality and utilization limits. Hope you’ll be able to elevate more cash. Cross fingers that 2029 profitability really occurs. This results in huge cumulative losses. Ultimately traders cease displaying up.
Choice 3: Add advertisements
Add advertisements 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 advertisements yearly. That is solely 11.8% of complete 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 possibility 3.
From OpenAI’s Announcement
- The mannequin does not know advertisements exist
- Delicate conversations (well being, politics, violence) get zero advertisements
- Conversations aren’t shared with advertisers
- Professional ($200/month) and Enterprise tiers see zero advertisements
- Their said hierarchy: Person Belief > Person Worth > Advertiser Worth > Income
Might they break these guarantees later? Certain. However the framework is definitely extra restrictive than most advert platforms.
Claude’s Place Proper Now
Claude can say “no advertisements” 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 prospects, not shopper subscriptions.
They’ve raised over $37 billion complete and are searching for one other $20 billion. They’re burning money too, simply at a smaller scale with a special person combine.
They’re additionally intentionally avoiding costly compute duties. No video era (which prices considerably greater than textual content). Function 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 shoppers (not simply builders), they’re going to face equivalent economics.
The VC funding will not stretch ceaselessly. Enterprise income will not cowl shopper infrastructure at that scale. When Instagram hit 100+ million customers, they wanted advertisements. When Reddit hit 200+ million customers, they wanted advertisements.
If Claude hits these numbers serving mainstream customers, they’re going to want advertisements too.
Last Ideas
AI compute scales linearly with utilization. While you’re serving 900 million customers who count on it free, the maths solves itself. Platforms survive by fixing unit economics, not by operating higher advertising campaigns about staying pure.
Give it three years, no one will bear in mind being upset.
