TL;DR
Final week OpenAI introduced advertisements 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 nice guys now.” “That is the start of the top.”
The thread I stored 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 energetic 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 energetic customers.
ChatGPT serves 30x extra folks. Totally different scale fully.
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 be unprofitable. They’ve raised over $37 billion complete and are looking for one other $20 billion at a $350 billion valuation.
Totally different consumer bases although.
Person 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 greatest group Gender break up ~50/50 |
77% male, 52% ages 18-24 |
| Income supply | Combined shopper + enterprise | 80% from enterprise APIs |
| Person profile | Mainstream: your mother, faculty 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 expertise launches, adoption occurs in phases:
Innovators and Early Adopters make up about 16% of the entire market. These are tech lovers. Individuals who’ll pay premium costs to attempt 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 and so they need it low-cost or free.
💡 Essential Perception
You may monetize the 16% with premium subscriptions. They will pay $20-100/month with out pondering twice. However the 68%? They need it free. And for those who attempt to cost them, they’re going to simply depart for whoever gives 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 tens of millions 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 keen to pay. Your prices are huge since you’re serving a whole bunch of tens of millions. Examples: Spotify, YouTube, Instagram, Reddit.
The transition from 16% to 68% is the place each platform makes The Selection. And the mathematics does not care about your advertising 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. School college students use it for homework. Random individuals who’ve by no means considered 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 conscious about holding and constructing on Instagram’s strengths and options moderately than simply attempting to combine the whole lot into Fb.”
Translation: we cannot smash this with advertisements instantly. Everybody relaxes. Instagram stays ad-free for over a yr.
November 2013: Instagram pronounces 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 another 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 top 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 consumer rely: Over 2 billion month-to-month energetic customers.
⚠️ The Sample
The customers who threatened to depart stayed. The anticipated mass exodus by no means truly occurred. And Instagram as we speak is simply Instagram. With advertisements. And most of the people underneath 30 do not even keep 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 identification. The neighborhood 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 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 stuffed 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 option to help the location with out advertisements. It generates lower than $1 million in income. Primarily a tip jar.
The positioning 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 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 energetic customers. The neighborhood is extra engaged than ever. Advertisements account for over 90% of income. And no person talks about Reddit promoting out anymore. The “anti-corporate” platform runs on advertisements and no person 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 useful.
This drives customers to rivals. 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 ultimately lose the whole lot.
Choice 2: Hold burning
Keep present high quality and utilization limits. Hope you may elevate more cash. Cross fingers that 2029 profitability truly occurs. This results in huge cumulative losses. Ultimately buyers cease displaying up.
Choice 3: Add advertisements
Add advertisements to free tier. Generate $1-3 billion in new annual income. Hold 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 acknowledged hierarchy: Person Belief > Person Worth > Advertiser Worth > Income
May 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 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 clients, not shopper subscriptions.
They’ve raised over $37 billion complete and are looking for 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 hold 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’re going to face an identical economics.
The VC funding will not stretch eternally. 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.
Remaining Ideas
AI compute scales linearly with utilization. If you’re serving 900 million customers who anticipate it free, the mathematics solves itself. Platforms survive by fixing unit economics, not by operating higher advertising campaigns about staying pure.
Give it three years, no person will keep in mind being upset.
