OpenAI Acquired A Digital Products Company But What About Their Financial Woes?

OpenAI this! OpenAI that! Everything seems to be OpenAI at the moment. #OpenAI

An aptly named company, OpenAI really did open the doors for the AI (Artificial Intelligence) sector with their revolutionary tool, ChatGPT, which amassed over a million users within 5 days of launching and 100 million in a couple of months. Essentially, its user base grew by 9,900% in just 60 days!

At present, it has over 173 million users, while its website generates over a billion hits per month, reaching a record of 1.8 billion in April, according to a report. These include individual users, businesses and startups that are using the company’s tools and API (Application Programming Interface).

It’s safe to say that the company is a dominant force in the industry and has become synonymous with terms such as Generative AI, Large Language Models and AI itself.

Now, OpenAI is venturing out by buying other companies and its first acquisition is Global Illumination, a New-York based digital products company.

While the financial details of the deal weren’t revealed, OpenAI said that the entire team of Global Illumination “has joined OpenAI to work on our core products including ChatGPT.”

As per a report, the Global Illumination’s founders, Thomas Dimson, Taylor Gordon and Joey Flynn have previously worked at Instagram, while the company itself recently worked on open-source technology for online game production.

According to a release by OpenAI on its website, “Global Illumination is a company that has been leveraging AI to build creative tools, infrastructure, and digital experiences. The team previously designed and built products early on at Instagram and Facebook and have also made significant contributions at YouTube, Google, Pixar, Riot Games, and other notable companies. We’re very excited for the impact they’ll have here at OpenAI.”

TechDogs-"A Screenshot Of The Global Illumination Website"

Source

However, while the company is out spending money acquiring other businesses, there seems to be a bigger problem with finances at home base!

A recent report is sounding alarm bells regarding the company’s financial status.

What’s the problem? Let’s explore:

What’s The Problem?

Reportedly, OpenAI spends a whopping $700,000 per day on ChatGPT alone!

This figure doesn’t include products like GPT-4 and DALL-E2.

OpenAI already faces competition from Google and Meta, however, recent months have presented Elon Musk’s xAI as a new rival (with Musk even purchasing the domain AI.com from OpenAI).

Despite renouncing its non-profit status to monetize its GPT-3.5 and GPT-4 models, OpenAI isn’t breaking even and going at this rate, OpenAI might have to declare bankruptcy by 2024 end.

Why Has It Come About?

As per the report, ChatGPT’s user base saw a decline in June. One of the reasons mentioned for this was school students were on holiday, while another centered around the company releasing its API for users to build their own chatbots.

A user on X (formerly Twitter) believes that companies that restrict their employees from using the platform for work are allowing them to use the API in internal models used for workflows.

In July, the number fell from 1.7 billion users to 1.5 billion users, without including API usage.

Another cited reason is the availability of numerous open-source LLMs (Large Language Models), like Meta’s Llama 2 (in partnership with Microsoft), which allows usage for commercial purposes, instead of paid, restricted and proprietary offerings.

Regarding the same, Santiago, an AI developer, raised a question, “I’ve talked to two startups migrating from proprietary models into Llama 2.”

Source

What's In Store For The Future?

While OpenAI is forecasted to have an annual revenue of $200 million in 2023 and $1 billion by 2024, it could be facing an uphill battle considering its losses doubled in amount, reaching $540 million as of May 2023.

At present, the company is pulling through courtesy of Microsoft’s $10 billion funding.

Microsoft itself is tied-up with other AI projects that rival those of OpenAI, like Meta’s Llama 2 Large Language Model.

Additionally, this week it was reported that Microsoft has plans to sell a new version of Databricks software that would allow customers to make AI applications for their business from scratch or make use of open-source models instead of proprietary ones.

Do you think OpenAI will pull through the financial woes or will we witness a major upset in the AI industry? Let us know in the comments below!

First published on Fri, Aug 18, 2023

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