ChatGPT User Growth Booms But Monetization Hits a Wall

The $500 Billion Paradox

OpenAI, the pioneering company behind the revolutionary AI chatbot ChatGPT, has reportedly achieved a staggering $500 billion valuation following a recent employee share sale. However, fresh data from Deutsche Bank suggests a potential roadblock on its path to dominance, as Europe's financial enthusiasm for the technology appears to be cooling.

Users vs. Subscribers: A Tale of Two Metrics

According to the report, while the number of people using ChatGPT continues to surge, climbing from 500 million weekly users in March to over 800 million today, spending on the service in Europe has stalled since May 2024. This follows a period of rapid financial growth throughout 2023 and early 2024. The data points to a critical challenge: a growing gap between the massive user base and the much smaller pool of customers willing to pay for premium features.

A Reality Check from Wall Street

This trend is particularly significant given OpenAI's sky-high valuation. Deutsche Bank's Jim Reid puts this into perspective by comparing OpenAI to established subscription giants. Netflix, for example, has a similar valuation but boasts nearly 300 million subscribers and generates about $45 billion in annual revenue. Spotify, with 276 million subscribers and $17 billion in revenue, is valued at $144 billion. OpenAI's valuation implies a far higher price-to-sales multiple, reflecting massive investor expectations for future monetization that have not yet been realized. As of April, the company had only 20 million paying subscribers.

The Great AI Monetization Puzzle

For analysts like Reid, the ability to convert its vast audience of free users into paying customers is the ultimate test for the AI industry. "[This] may ultimately tell us almost everything we need to know about the monetisation of AI," he states. While Reid acknowledges that AI "will change the world and improve productivity," he cautions that "the profitability outlook is more uncertain." The current plateau in European spending serves as a crucial case study on whether the revolutionary potential of generative AI can be translated into a sustainable and profitable business model.