Since its launch late last year, ChatGPT has enthralled the world and made generative AI the hottest technology. The excitement is turning into an unexpected revenue boon for its maker OpenAI, which expects to hit $1 billion in annual revenue in the next year.

This unicorn number translates into about $80 million a month, reports The Information. Before that 30 November 2022 release, OpenAI pulled in a not-embarrassing $28 million.

Now, with users paying $20 (R380) a month for it, ChatGPT is flourishing at bringing home the bacon. There were between 1 million and 2 million paying customers by March, The Information reported.

OpenAI itself is worth 27 unicorns, having been valued at $27 billion – with a sizable investment from Microsoft, which is including the generative AI in its Microsoft 365 offering. Called Copilot, this AI component appears to be a significant upgrade.

Demonstrations of Copilot show it compiling information from your own documents or emails – as opposed to the open web. Instructions like compiling an agenda for a meeting, drafting a business plan, or cleaning up existing proposals and documents seem like a more focused, more useful way to do it.

OpenAI is seemingly very happy with direct use. “Since ChatGPT’s launch just nine months ago, we’ve seen teams adopt it in over 80% of Fortune 500 companies,” it wrote on its blog. “We’ve heard from business leaders that they’d like a simple and safe way of deploying it in their organisation. Early users of ChatGPT Enterprise . . . are redefining how they operate and are using ChatGPT to craft clearer communications, accelerate coding tasks, rapidly explore answers to complex business questions, assist with creative work, and much more.”

But, the computing costs are “eye-watering” OpenAI CEO Sam Altman tweeted.

we will have to monetize it somehow at some point; the compute costs are eye-watering

— Sam Altman (@sama) December 5, 2022

OpenAI is a unicorn that can make more unicorns

The good news for Microsoft is that its $13 billion investment will reportedly give it 75% of OpenAI’s profits – which obviously depends on how expensive those “compute costs” are.

In June OpenAI had 1.8 billion users, while Microsoft’s ChatGPT-enabled Bing search engine saw 1.25 billion visitors, according to research at Similar Web. Although ChatGPT has stopped “defying gravity” it is still the 22nd most visited site on the web, behind Reddit (19), Linkedin (20) and Netflix (21). Not bad, given it’s only been in the public eye for nine months.

The top five are still Google, YouTube, Facebook, Instagram, and Twitter.

But big revenues don’t necessarily translate into big profits – because those “compute costs” are very high. Last year, while still developing GPT-4, OpenAI reportedly lost $540 million.

Who else do you ask, but ChatGPT itself, via Bing?

“The cost of ChatGPT per query can differ depending on the specific circumstances and pricing tiers. According to a report by Dylan Patel, a chief analyst at SemiAnalysis, keeping ChatGPT up and running costs approximately $700,000 (R13.2 million) per day, which translates to 36 cents per query,” was the first response; while the second states “ChatGPT is likely to cost $365M in operating costs alone in 2023”.

If it’s making $1 billion, there does seem to be a healthy profit margin, before other expenses.

I went through both sites and read the quotes directly, but let’s give generative AI search its moment – especially as it compiled it so nicely for us.

So, 36 US cents a search query is many orders of magnitude higher than the 2 US cents a Google search costs, again via Bing.

The invariable supply-and-demand economics should drive that down – unless those “compute costs” can’t be optimized and made cheaper. Let’s check back in on ChatGPT’s first anniversary at the end of November and see how this game-changing startup is going.